From Zero to Trader: What You Need to Know Before Starting in the Financial Markets

Raw Data: Do You Really Make Money Trading?

Let’s be clear from the start. Only 13% of traders who trade daily manage to achieve consistent profits over six months. That number drops dramatically: just 1% continue generating income after five years. Almost 40% quit in the first month, and only 13% persist after three years. These figures come from serious academic studies, not promotional promises from commercial platforms.

Does this mean trading is impossible? No. It means it requires more than curiosity and initial capital.

What Is a Trader Really?

A trader is any person or entity that buys and sells financial instruments seeking short-term gains. It’s not the same as an investor, although many confuse the two terms.

Key differences:

A trader operates with a limited time focus, executes multiple transactions, seeks to capitalize on volatility, requires high risk tolerance, and depends on constant market analysis.

An investor acquires assets to hold them long-term, makes fewer trades, aims for long-term growth, has moderate risk tolerance, and bases decisions on a company’s financial health.

A broker is an intermediary that facilitates these transactions on behalf of third parties. It requires formal academic training, regulation, and licensing.

The Journey: How to Become a Trader from Zero

Step 1: Build Theoretical Foundations

Trading is not a game of chance. You need to understand how markets really work: what moves prices, why they react to economic news, how political events or central bank decisions impact them. Reading market studies, following economic analysis, and studying historical patterns is mandatory, not optional.

Step 2: Choose Your Assets

Available instruments are diverse:

• Stocks: fractions of company ownership, price fluctuates with performance
• Bonds: debt instruments, offer fixed income
• Forex: the most liquid market in the world, based on exchange rates
• Commodities: gold, oil, natural gas
• Stock indices: represent the performance of groups of stocks
• CFDs (Contracts for Difference): allow speculation on price movements without owning the asset, with leverage access

CFDs are popular because they offer flexibility, access to multiple markets, and the ability to open short (benefit from declines) or long (upward movements).

( Step 3: Master Analysis

Technical analysis: examines charts, price patterns, indicators. Aims to predict future movements based on past behavior.

Fundamental analysis: studies economic data, company reports, macroeconomic conditions. Tries to determine the “real” value of an asset.

Both are complementary. Ignoring either is risky.

) Step 4: Design Your Own Strategy

Your approach should align with your available time, risk tolerance, and initial capital.

Trading Styles: Find Your Rhythm

Day Traders: execute multiple trades within a session, closing all before the market closes. Requires constant attention. Common assets: stocks, Forex, CFDs. Advantage: quick potential gains. Disadvantage: high commissions due to volume.

Scalpers: perform frequent trades aiming for small but consistent profits. Benefit from liquidity and volatility. Ideal: CFDs and Forex. Requires extreme concentration—small errors, multiplied by the number of trades, can lead to significant losses.

Momentum Traders: capture gains from market “impulse,” trading assets showing strong directional moves. Assets: CFDs, stocks, Forex. Challenge: accurately identifying trends and timing.

Swing Traders: hold positions for days or weeks, exploiting oscillations. Assets: CFDs, stocks, commodities. Requires less time than day trading, but exposure to overnight and weekend changes increases risk.

Technical/Fundamental Traders: base decisions on in-depth analysis. Can be profitable but require advanced financial knowledge and precise interpretation.

Risk Management: Your Safety Net

Without this, sustainable trading is impossible. Essential tools:

Stop Loss: order that closes a position at an acceptable maximum loss price. Protects capital.

Take Profit: closes a position at the target profit level. Secures results.

Trailing Stop: dynamic stop loss that adjusts as the price moves favorably, capturing gains while protecting against reversals.

Margin Call: alert when available margin drops dangerously, indicating position closure or additional funds needed.

Diversification: spreading capital across assets reduces the impact of poor performance in any single one.

The golden rule: never invest more than you are willing to lose entirely.

Real Case: Momentum Trading in Action

Imagine you observe the S&P 500 index traded via CFDs. The Federal Reserve announces an interest rate hike. Historically, this pressures stocks (debt becomes more expensive, limiting corporate expansion).

As a momentum trader, you see the market reacting: the S&P 500 begins a downward trend. You anticipate short-term continuation. You decide to sell ###short position### in S&P 500 CFDs.

For risk management: set a stop loss above the current price (if recovery, exit with limited loss) and a take profit below (if decline, secure gains).

Numerical example: sell 10 S&P 500 contracts at 4,000. Stop loss: 4,100 (maximum loss). Take profit: 3,800 (target gain). If S&P 500 drops to 3,800, profit is realized. If it rises to 4,100, loss is contained.

The Reality of Modern Trading

The market is transforming. Algorithmic trading—automated via algorithms—already accounts for 60-75% of volume in developed markets. This means competition is not only against other humans but against sophisticated machines.

For individual traders without access to advanced technology, this means: tighter profit margins, potentially higher volatility, and a need to differentiate.

Uncomfortable Truths

Trading can generate income. But:

• It requires serious education, not YouTube tutorials
• Demands emotional discipline—fear and greed are enemies
• Involves real risk of capital loss
• Is not a reliable substitute for stable employment
• Requires dedication even “part-time”

Many start viewing trading as a secondary activity while maintaining a primary job. That’s fine. But if you invest time and money into this, treat it as what it is: a discipline that demands professionalism.

Frequently Asked Questions

How exactly do I start? Educate yourself first about markets, choose assets that interest you, develop an initial strategy, open an account with a regulated broker, practice on simulators, start with small capital.

What is a trading broker? A company that provides access to financial markets. Selection criteria: competitive commissions, reliable platform, customer service, verifiable regulation.

Can I trade part-time? Yes. Many start this way. But it still requires serious dedication: analysis, monitoring, continuous study.

How much capital do I need? Depends on chosen assets, available leverage, risk tolerance. Recommendation: start with what you can lose without affecting your financial stability.

Final Reflection

Trading offers flexibility and income potential. But it’s not an automatic money machine. The numbers speak: most fail. Those who succeed do so because they treated this activity with the rigor it deserves, kept learning, managed risk obsessively, and maintained emotional discipline even during downturns.

If you’re considering entering the markets, do so with open eyes. Trading is possible. Consistent profits are also possible. But they are not guaranteed, nor easy, nor quick.