What is trading? Different types and profit-making strategies you need to know

Traders and Trading: The Basic Differences

In the financial world, trader refers to an individual who continuously engages in buying and selling financial assets to generate income. Trading is the activity of buying and selling itself, which may involve stocks, bonds, currencies, commodities, or derivatives.

The clear difference between a trader and an investor is the holding period of assets. Traders focus on short-term trading to capitalize on price movements over brief periods, while investors typically hold assets long-term to wait for future returns.

The Development of Modern Trading

In the past, being a trader required visiting a brokerage office directly to open an account and execute trades. However, with the advent of the internet and digital technology, trading has become much more accessible. Nowadays, interested individuals can trade via online platforms from home using just a mobile phone or computer.

Types of Trading Used by Traders

Day Trading

Day trading involves buying and selling within the same day, aiming to profit from price changes during that period. Traders close their positions before the market closes. However, this type of trading can be highly risky, especially when using excessive leverage.

Scalping

Scalping is a fast-paced trading style that aims to make small profits from minor price movements. This method requires a deep understanding of technical analysis, market knowledge, and the ability to read trends quickly.

Swing Trading

Swing trading takes advantage of short-term market trends and patterns that may last 2-3 days. Traders in this category study technical analysis and chart patterns to make buy or sell decisions.

Momentum Trading

Momentum trading involves trading in the direction of the trend. When momentum is upward, traders want to buy expecting higher prices; when momentum is downward, they consider selling.

Position Trading

Position trading is a buy-and-hold strategy where traders open positions and hold them for a long period, ignoring short-term market fluctuations, until reaching their profit targets.

Fundamental Trading

This method uses fundamental analysis, such as news, economic conditions, and historical prices, to decide when to enter or exit positions.

Technical Trading

Technical trading emphasizes analyzing price charts, technical indicators, and patterns. Traders using this approach need skills in reading charts and proficiently using analytical tools.

The True Goal of Traders

The main objective of traders is to generate profit by buying low and selling high. Achieving this goal requires multi-dimensional analysis, including fundamental, technical, and quantitative methods.

Trading does not have to be a full-time profession. Many people trade as a side income. Equally important are risk management and careful financial planning before starting.

Common Misconceptions About Trading

Get Rich Quickly Is in Your Hands

Many advertisements claim that a few trades can make you rich, but the truth is that trading requires patience, continuous market study, trial, and learning from mistakes before consistently making profits.

Short-Term Trading Only

Forex or other asset trading can be done in various ways, both short-term and long-term, depending on each trader’s style and preferences.

More Trades, More Profit

Profit or loss is not determined by the number of trades but by understanding the market, news, and using trading tools correctly.

Anyone Can Know the Future for Sure

In trading, nothing is certain. News and indicators are merely analyses of the past used to predict the future.

Legendary Global Traders

George Soros (George Soros)

One of the most famous traders, who made over $1 billion through deep data analysis and risk avoidance by holding cash until confident in decisions.

Andy Krieger (แอนดี้ ครีเกอร์)

Utilizes confident decision-making, knows the right timing to buy and sell, and has exceptional emotional control.

Bill Lipschutz (บิล ลิปชอตซ์)

Follows market trends and exploits volatility. Also dedicates significant time to detailed data analysis to ensure confidence before each trade.

Jim Simmons (จิม ไซมอน)

Applies mathematical knowledge excellently to trading, using algorithms and computer programs to achieve optimal results.

Bruce Kovner (บรูซ โคฟเนอร์)

Expert in risk management and emotional control, aware of how much to trade to prevent excessive losses.

Who Can Become a Trader

Anyone can become a trader, but it’s essential to have a certain level of knowledge and skills, including:

• Understanding of markets, financial instruments, and how they work
• A solid trading plan and risk management strategy
• Ability to process large amounts of data quickly
• Emotional management skills, especially in stressful situations
• Willingness to learn continuously, as markets are always changing

Beginner vs. Professional Traders

Beginner Traders

Beginners are often unfamiliar with trading. Key qualities for beginners include:

• Willingness to learn: The forex market always offers lessons. Even professional traders learn daily. Beginners can start by learning basics, tools, analysis, and practicing via demo accounts.

• Time planning: Since they are not fully engaged in the market yet, they need to know when to trade, as different currencies have different trading hours.

• General planning: Without proper planning, success is difficult. This includes trading plans, money management, and learning strategies.

Professional Traders

Professional traders spend most of their time trading, often full-time. Their qualities include:

• Deep learning: Focused on expanding knowledge through online resources, books, and advanced courses.

• Developing their own strategies: Not only studying various methods but also tailoring them to their style and assets they specialize in, including studying chart patterns, indicators, trends, and how to use them for successful trading.

• Strict risk management: Effectively using Stop Loss and Take Profit orders.

Profit Strategies in Trading

1. Define Your Trading Style

Everyone has a trading style that suits them. Practice and experiment until you find what fits best, aiming for high profits with lower risks.

2. Learn and Apply Various Strategies

Diversifying risk, using Stop Loss and Take Profit orders—both Trailing and Fixed—helps make your trading more valuable.

3. For Beginners

Proceed slowly, monitor profits and losses every 30 trades to avoid hasty decisions.

4. Emotional Management

Equally important as trading skills is managing fear, greed, and impatience. The best strategies are useless if emotions control you.

Risks to Watch Out For

Trading involves high risk, especially:

• Excessive leverage
• Lack of risk management
• Emotional decision-making instead of analysis
• No clear trading plan

Summary

Trading is an art and science requiring study, skills, and discipline. Becoming a successful trader takes time, effort, and careful preparation.

For beginners, it’s recommended to learn the basics, practice with demo accounts, develop personal strategies, and start real trading with small amounts until gaining sufficient experience. Most importantly, manage risks and maintain discipline in following your plan.