CandleFocus Glossary Editor
Traders are financial professionals who engage in the buying and selling of stocks, bonds and other financial instruments to make profits in the short run. This process is also known as “day trading” because the expectation of profit often takes place within the same day or several days.
Traders need to have an in-depth understanding of the stock market, financial instruments and regulations in the stock exchanges. They should also possess strong quantitative and financial analysis skills. Successful traders are able to evaluate the risk to return ratio of potential trades and make appropriate decisions for their strategies.
Traders typically operate with a “buy and sell” mentality, where they purchase stocks and other assets with an expectation of making quick, short-term profits. This means that traders must remain engaged in researching, analyzing and evaluating the securities they intend to trade. They must also be prepared to purchase assets at a particular price and plan on selling them soon afterwards, often within a few milliseconds of execution.
Although the prospect of making quick money is attractive, trading can be an expensive endeavor and come with its own set of risks. Any profits made on the sale of securities are subject to the capital gains tax, which can be substantial. Moreover, traders must pay multiple commissions to different brokers when trading through different exchanges, adding more costs to the overall transaction.
Traders should also be aware of the disadvantages of being invested in too many financial products at once. Being too heavily invested can introduce unnecessary risk into the portfolio, leading to losses. Therefore, trading should only be undertaken as a complementary strategy to an investing portfolio of long-term assets.
In conclusion, trading is an attractive option for those seeking to make quick, short-term gains in the financial markets. However, before trading, individuals must educate themselves on the complexities of the markets, understand the associated risks and costs, and be aware of the different asset classes that they can adopt as part of their portfolio. Doing so will enable them to make better-informed decisions and possibly generate profits in the short-term.
Traders need to have an in-depth understanding of the stock market, financial instruments and regulations in the stock exchanges. They should also possess strong quantitative and financial analysis skills. Successful traders are able to evaluate the risk to return ratio of potential trades and make appropriate decisions for their strategies.
Traders typically operate with a “buy and sell” mentality, where they purchase stocks and other assets with an expectation of making quick, short-term profits. This means that traders must remain engaged in researching, analyzing and evaluating the securities they intend to trade. They must also be prepared to purchase assets at a particular price and plan on selling them soon afterwards, often within a few milliseconds of execution.
Although the prospect of making quick money is attractive, trading can be an expensive endeavor and come with its own set of risks. Any profits made on the sale of securities are subject to the capital gains tax, which can be substantial. Moreover, traders must pay multiple commissions to different brokers when trading through different exchanges, adding more costs to the overall transaction.
Traders should also be aware of the disadvantages of being invested in too many financial products at once. Being too heavily invested can introduce unnecessary risk into the portfolio, leading to losses. Therefore, trading should only be undertaken as a complementary strategy to an investing portfolio of long-term assets.
In conclusion, trading is an attractive option for those seeking to make quick, short-term gains in the financial markets. However, before trading, individuals must educate themselves on the complexities of the markets, understand the associated risks and costs, and be aware of the different asset classes that they can adopt as part of their portfolio. Doing so will enable them to make better-informed decisions and possibly generate profits in the short-term.