HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

Becoming a CFD Trader: A Comprehensive Guide


Tom Tragett   Written by Tom Tragett

What is a trader? A trader is one of the most used words in the financial vocabulary. It seems straightforward: if you trade an asset, you can be called a trader. Still, not everyone who has ever tried market trading can be called a trader. The term has many hidden aspects. Let's figure them out. What is a trader? A trader is one of the most used words in the financial vocabulary. It seems straightforward: if you trade an asset, you can be called a trader. Still, not everyone who has ever tried market trading can be called a trader. The term has many hidden aspects. Let's figure them out.

Who a Trader Is: Definition

Before we teach you how to become a trader, you should understand that there are two terms often used simultaneously: investor and trader. Where does the difference lie? An investor puts their money in an asset for an extended period and waits for the price to increase. Usually, investors open positions in one direction. If they own the security, they sell it. If not, they buy it and wait until the asset goes up to sell at its peak price.

A trader is a person who speculates on the asset's price.

A trader speculates on the asset's price. It's possible to both buy and sell an asset at once without owning it. The idea is to catch the market direction and trade according to it. The trader can open as many positions as their funds allow. There are many classifications of traders. We'll start with independence.

Level of Independence

Independence shows whether the trader operates on behalf of others or for a personal result. Trading on behalf of others. Some traders work on behalf of a client. They trade with the client's funds and take a commission for their service. Although they don't risk their money, they risk their reputation. Such traders should have solid experience and a high rate of well-executed trades. Usually, they work for an institution or company that owns enough money to enter the real market. Let us remind you that one standard lot equals €100,000.

Trading on behalf of others is the second step in your trading career that requires professional education, long-term experience and confirmed skills.

Independent trader. Some people trade on their own, only using the services of a broker that provides an online platform. In such a case, traders risk their own money, while anything their positions generate belongs to them. It can be your first step in a trading journey, where you gain enough experience before working for an institution. Still, many traders don't work for others - instead, they want to be in charge of their own funds and positions. In this article, we'll talk about them.

Trading Style

The next classification is the trading style. Traders use various timeframes, open and close trades differently. Their approaches to trading vary according to their purpose.

Analysis

Traders use various types of market analysis to predict the price direction.

Tools to Become a Trader in Financial Markets

Many beginners ask how to become a trader. Fortunately, you don't need specific certifications, qualifications or equipment. But the situation might be different if you aren't going to work for a financial institution and present other people's interests.

Generally, all you need is:

A multiplier is the kind of fund support the broker offers to a trader to open more significant trades. It's not a loan, so the trader doesn't have to return the money.

What to Know About Becoming a Trader

Becoming a trader is just one step - the actual trading journey is much harder. Let’s go through the steps you’ll need to take.

Trader Psychology: Tips

Another crucial point we should talk about is trader psychology. You won't learn how to become a trader if you don't figure out the psychological factors that may affect your trades. It seems unnecessary, but many traders make mistakes because of the wrong psychological approach. There are many resources available that give tips on mastering your emotions while trading: for instance, “Trading Psychology: The Bible for Traders.” We’ve compiled some tips from trading psychology authors on which characteristics you should avoid when trading:

Only professional traders can use trailing Stop-Loss and Take-Profit orders. If you're a beginner, you may be too confident in your forecast and miss the moment when the market passes the return point.

What Is the Potential Return for a Trader?

No one can answer this question as trading isn't a job with a fixed salary. Your potential income depends on many factors. These include deposits, the asset you trade, the trading approach and the moment you enter and exit the market. However, your deposit affects the final results. For calculation purposes, we'll consider 0.01 lot size as the standard lot is €100,000, and this sum is too big for newbies.

If you want to start small, it's totally up to you - assess how much you can afford to lose and what your goals are.

Being a Trader: Benefits and Limitations

Knowing what a trader is isn't enough to understand what pitfalls this role hides. If you're still unsure whether you're ready to be a trader, check the limitations and benefits first.

Benefits

Limitations

Win-win strategy. You can place sell and buy orders without owning the asset. It gives you much more flexibility.

Time. Markets fluctuate significantly. If you don't monitor the price for a long time, you could lose most of your funds.

Small funds. If we compare investing with trading, the latter requires smaller funds. No matter whether you trade currencies, cryptocurrencies, stocks (CFDs) or metals (CFDs), you can enter the market having only several dollars as online brokers provide multiplication.

Smaller gains. If you trade daily, you have a chance to earn the amount that will satisfy your expectations. However, profits may be followed by losses due to market volatility. Investing may provide higher rewards, but risks still exist.

Knowledge. If you want to be a trader, you need to constantly acquire new knowledge and analyze the market.

Please remember that if you want to place your trades efficiently, you should continually work on your skills.

Losses.Although market direction can be seen on the chart without special tools, many traders fail because of several factors. First, the market is highly volatile. If you trade within a short period, there are risks the market turns against you. 

Second, many traders undervalue the importance of knowledge. Only by practising and learning daily can you achieve the desired results. Some traders choose to do so by practicing in a demo account.

Rapid rewards.Unlike investing, trading doesn’t take years. You can trade on minute timeframes and even see results within a day.

 

Conclusion

So, you've learned what a trader is. To become a trader, you don't need specific skills or equipment. Everyone who wants to trade can do so. However, it's not a game; it's a job that requires knowledge and a willingness to improve daily. Many good traders spend plenty of time reading educational materials and practicing in a demo account to gain knowledge and skills in a controlled environment.

Please note that trading CFDs with the multiplier can be risky and can lead to losing all of your invested capital. A Libertex demo account is the most comfortable way to begin your trading path. As soon as you feel confident enough, you can move to the real account. Libertex provides a wide range of assets, trading indicators, tight spreads.

FAQ

Let's answer the most common questions about traders and trading.

#source


RELATED

Top 5 Trading Books to Read in 2022

Just a guess: you’re new to trading and you think that trading is all about luck and intuition, right? Not really. In fact, being an efficient trader means more than just buying or selling assets

Bitcoin For Beginners: How To Get Started With Cryptocurrency

Bitcoin is the talk of the finance world once again, beating stocks, gold, oil, and more in ROI over the last decade and more of its history. But the cryptocurrency...

What is stock split and stock split reverse?

Apple, Amazon and Tesla have all split their stocks in the past in order to make their shares more accessible to retail investors. In the following article you will learn what a stock split is...

Real Forex Trading: Find Out What All the Fuss is About

The market for trading forex or foreign currencies is known as foreign exchange trading, or forex trading or FX. The largest market in the world, forex, and what happens in it, influence real, everyday life...

Everything You Need to Know About Margin Trading

Margin trading is a popular method used by traders all over the world. It can offer attractive opportunities, but as with any form of trading there are no guarantees and the level of risk must be taken...

Stock Trading Guide: How to Trade Stocks

Stocks, also known as shares or equities, represent ownership or equity interest in a company. Owning stocks can entitle shareholders to dividend payments or voting rights on corporate policies...

How to be a value investor

Value investing is an investment strategy that focuses on stocks that are underappreciated by investors and the market at large. The stocks that value investors seek typically look cheap compared...

Can Brokers Really Manipulate Market Prices?

The trading realm is rife with tales of broker manipulations causing devastating losses. With a plethora of platforms available, how can traders discern between genuine...

Q2 2022 Earnings Season Explained

Earnings season is a few weeks when most public companies share their quarterly performance in their earnings reports. It takes place every three months...

Tips for Selecting a Forex Broker

The online world has grown rapidly, providing a diverse range of financial opportunities that were previously limited to traditional marketplaces.

Risk management in financial markets: principles, objectives, strategies

How to protect your savings and investments in a financial crisis? How to create a trading strategy capable of generating profits even in non-standard...

Reasons To Keep a Trading Journal

Why does a trader need a trading journal? It may seem like a simple question. Everyone knows: a trading journal is a tool that shows how many trades were placed...

Is MetaTrader 4 good for beginners?

MetaTrader 4 (MT4) is one of the world’s most popular trading platforms, suitable for all types of traders, regardless of expertise. MT4 has become wildly popular for many reasons...

A Beginners Guide To Pairs Trading

The ideal strategy is the one that allows a trader to make money in any market, regardless of whether the price is falling or rising. Such trading systems are called arbitrage trading systems...

Forex Market Structure

The Forex market is close to being a textbook example of a perfect market that humanity created. Namely, a market is any place where buyers and sellers meet...

How to Trade in Forex? A Useful Guide

All currencies are typically exchanged in pairs when trading forex. A currency pair quotation is made up of two currencies. The Euro and the US dollar, for instance...

Ultimate guide to trading Cardano for beginners

Cardano has been making waves in the crypto markets since its cryptocurrency, ADA, moved into the top ten largest crypto assets by market capitalisation...

A Guide to Interest Rates and How It Affects the Economy

A central bank’s mission is generally to keep the economy humming along – that means not too hot, not too cold, but just right. When the economy starts accelerating...

Why Trade Indices

Indices trading describes the buying and selling of a specific stock market index. An index shows the performance of a group of stocks. When the price of a group of stocks go up...

Biggest Mistakes to Avoid as a Beginner Trader

One of the things learned on the trading floor is that the most crucial part of the success formula is to accept a loss. It’s how traders gain an additional profit and an edge against others...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.