How to Become a Trader as a Beginner in 2026

How did the Wall Street trader become an online trader? While becoming a professional trader requires a master’s-level degree, the internet has made home trading possible for individuals, self-employed people and amateurs. Are you a beginner who wants to know how to become a trader? Read on to find out everything you need to know!

9 Steps to Become a Trader in the Financial Markets

While you can become a trader from your computer, becoming a pro takes a lot of practice. Apart from formal training, here are the steps to become a self-taught trader:

1. Learn trading theory
2. Identify your trader profile

Choose a trading strategy
Practice on paper trading platforms
Open a trading account
Practice with a demo account
Try simulated trading with paper trading
Place your first live trade
Become a better trader!

If this topic interests you, also read “Trader Definition” and “Pivot Point“.

What Is a Trader?

Historically, becoming a trader from home meant buying and selling securities on stock exchanges. On the Paris, New York, London or Tokyo exchanges, traders became the people who set the pace of the world’s financial markets. But who are they really?

Stock exchanges are not places where you can walk in freely to buy or sell your shares. Only authorized people can trade directly in the financial markets. To trade, you have to go through a broker or a bank, or become a trader.

Investors around the world therefore go through these business professionals.

Self-Employed, Professional, Amateur: What’s the Difference?

Becoming a broker-trader means being a professional trader. So-called amateur traders are in fact individuals who trade.
A professional trader is a broker-trader. To become one, you need at least a master’s-level degree (five years of higher education). The path goes through degrees in economics and management, and the master’s is where everything is decided. Two master’s programs are recommended for becoming a trader: Banking and Finance, and Financial Products/Markets. However, these are not the surest routes. Once again, the royal road into this finance career is an engineering school or business school.

Whatever happens, candidates will need to have completed many internships and training programs during their studies, because it is on this experience and on their network that a career may or may not start.

Once you have cleared these long and difficult steps, you will be a trader. You will be entitled to a starting salary of €2,500 gross per month, not counting bonuses and commissions, which make up the bulk of this type of pay.

Independent Traders

However, you can make a lot of money and big profits by trading for yourself. In fact, many professional traders go independent at 40. Others create investment funds in which they pool their capital with that of other wealthy individuals to carry out trading on a completely different scale.
The difference between the two types of traders is that some are independent while others work for companies.
Becoming a trader at 35 is possible. You just need time, a job alongside, or savings to pay your rent and your learning. Time is generally the scarcest resource. To become a trader at home, you will need to spend your whole day studying. Becoming a trader also means avoiding scams and reading other traders’ reviews.

Becoming an Independent Trader: What Legal Status?

Independent traders in France are at best considered micro-entrepreneurs (auto-entrepreneurs). Tax on trading profits is 30% without any business status. It is 22% for services under the micro-enterprise regime. But it is an asset management service that must be declared.

The Qualities of a Trader

How do you become a trader and learn the stock market? Trading requires logic, rigor and learning. You need to become good in each of these areas. But more than that, you need to be consistent. Then you can hope to become a real trader, and talking about millions is not far-fetched.

However, because this path is unconventional, becoming a trader straight after leaving school can make trading look like a lightweight field. Be aware that becoming a good trader takes a lot of:

Work

Patience

Perseverance

Willpower
Nerves of steel

How do you become a trader and make a living from the markets in 6 months? You need to master the following areas:

Technical analysis

Fundamental analysis

Chart patterns

Algorithmic trading

It is impossible to become brilliant in an unfamiliar field in such a short time. You have to be realistic. How do you become a trader? Start with the basics of the stock market. Becoming a trader will be a long learning process. Start by learning the basics so that one day you can become a trader who makes a living from it. How do you become a commodity trader? Same thing: you need to practice in the commodity market. Every trader specializes in a market. Each market is specific. The commodity market even more so, because in reality each commodity is a separate market.

The Psychology of a Profitable Trader

If you want to become a trader who makes money, whatever your age or level of education, you need a strong mindset. Personal discipline is essential, as we saw with money management. And it goes further: you also need to learn to control your emotions at all times, for several reasons.

Let’s go back to the example:

You invest €1,000 with 100x leverage. Your actual position is €100,000.

The position gains 1%, which makes you €1,000.

If the opposite happens, you lose €1,000.

First, when people watch prices live, they tend never to be satisfied. You have just seen a fortune fall into your hands, so why not wait and take 2%, which would make €2,000? It’s completely normal. It’s psychological: it is very hard to resist.

What Is FOMO?

Sometimes you watch the market even without having invested. And you will always be tempted when you see that a stock has gained value. A stock that rises 15% in a day can turn your head. In some cases, we see what is called FOMO: Fear Of Missing Out. If you see a stock take off, you will want to jump on the bandwagon. And every second, as you watch the numbers climb, you will imagine your fortune if you had got in, with 100x leverage, why not?

It goes without saying that this kind of trade is pure madness. Never jump on a moving train, ever. You may win, by luck. But the losses outweigh the gains:

You often risk losing much more than you gain in an upward move, because you spotted the rise too late

If you chase moves, it means you can’t discipline yourself. If you can’t discipline yourself, you will sell in a panic in the same way. And you will never make money; instead, you will be paying the traders who succeed.

Worst of all, you give up your discipline and composure, and even if this particular trade turns out profitable, it is a mindset that always loses in the long run.

A Trader Must Control Their Emotions

That is why emotions must be controlled. You have to leave your feelings at the door when you trade. It’s your head that should do the talking, not your gut. Instead of thinking with a racing heart, calm down. Orders should always be automated and set in advance, when your mind is rested and euphoria is far away. This is the best way to separate yourself from your emotions; not only do you avoid ruin, but you can hope to get rich.

How Do You Become a Professional Trader?

Becoming a trader means being a player in the world of finance. As intermediaries, traders earn a commission on every transaction. You can see that if all global transactions have to go through these people, their commissions explode. And they do. That is what shaped the image of traders. Everyone pictures traders as they appear in The Wolf of Wall Street, which tells the story of Jordan Belfort, one of the most notorious businessmen in the United States.

Today, the internet offers all kinds of online courses and trading solutions. There is a huge amount of information: you need to sort through it and identify what is valuable to you. All content is interesting, but some of it is of no use to you for now, and some does not concern your type of trading. Becoming a trader online, for free, is now possible: you can learn the basics of trading using the best trading app, learn trading for beginners and access the knowledge of Forex professionals with a simple Google search. You can change careers at 30 or 40 and switch to trading. For young people, Onisep (the French careers information agency) offers training paths for becoming a trader, and there are also many forums and courses available online.

Trading in Big Banks

Contrary to popular belief, an economics and social sciences background very rarely leads to becoming a trader. Trading has always been about numbers. It is a business activity, but a strictly mathematical one. It originated in accounting, which made it possible to publish prices every day and create stock charts. Today, trading has become the domain of computer engineers who program algorithms for high-frequency trading.

Today, traders at major banks such as Goldman Sachs, JP Morgan or BNP Paribas are being replaced by computers. Computer programs now play the role of traders for the banks. The advantage of computers is that they are much faster than humans: a program executes an order at lightning speed, the second it detects a buy or sell signal.

However, even with these new kinds of resources, banks do not always make guaranteed gains. Human error is always present, and there can be problems with how the algorithms, which are ultimately built by humans, are set up.

Traders are not really salespeople but mathematicians and computer scientists. If you have always been good with numbers but are not very academic and don’t like school, there is a good chance you can become a trader from home, first as an amateur and then as a professional.

How to Become a Stock Market Trader

How do you become a proprietary trader in France in 2025? There are different ways to become a trader in France. For example, you can become a sports trader or a commodities trader. Would you rather be a profitable trader? You can try to become an excellent trader or a great trader, or you can simply aim to become a winning trader. There are 2 types of traders, including those who started becoming traders at 18 and are professional traders.

Professional traders work at banks such as Boursorama, or at companies such as Total. They know trading from A to Z. This type of trader did not become a trader in a year. They already dreamed of becoming a trader as a teenager and have always worked toward it. Becoming a trader requires going through university in some cases, and engineering or business schools in others. Can you become a trader with an economics-focused baccalauréat (bac ES)? Probably. In any case, you can’t become a trader with just a high school diploma.

The baccalauréat is too low a level to determine whether someone can work as a trader, especially after the 6 years of higher education they will need to complete afterward. What is certain is that a trader must have a scientific mind and be particularly comfortable with mathematics to be a professional trader. The work of traders and finance employees is far more complex than the trading offered by online brokers.
So don’t panic if you don’t like math: you can still be an independent trader in France, which is no ordinary status.

How Do You Become a Profitable Day Trader?

How do you become a day trader? There are several types of trading. To start, let’s talk about day traders. Day traders are traders who don’t keep their positions open for more than a day. At the end of the day, trading stops on the exchanges and markets, and traders don’t keep their positions open from one day to the next. Keeping a position open overnight is called an overnight position.

Day traders therefore use very short positions for their trading. This technique is mainly used by professional traders, as well as by banks and investment funds. It requires being in front of stock charts all the time and constantly checking market prices.

Other types of traders exist. For example, there is what is called buy and hold. This technique involves buying assets and holding them for a long time. You can only do this by actually buying the asset, such as an apartment, shares or physical gold. When you use ETFs or CFDs, you are necessarily day trading. This type of trading is the one that makes the most money.

How to Become Profitable in Trading

Placing sell orders at a safety threshold is called a stop loss.

Placing sell orders to lock in profits is called a take profit. This is the language of professional traders!

If you combine stop losses with take profits, you can create a dynamic that limits losses to a certain level and imposes discipline on you. Too many traders lose and never become pros because they trade haphazardly from their computers, without bothering to apply discipline and rigor. Money management can turn your amateur trading into a full-time job, even without a high school diploma. But you need a mindset of steel.

Automatic, predefined positions are therefore the ultimate weapon for avoiding losses caused by volatility.

Finding the best broker and selecting your assets carefully helps you limit fees
Money management lets you generate regular gains

With these weapons, you only need one more thing to become a profitable trader: open an account! Opening an account with a broker generally takes no more than 10 steps:

Create your client area

Choose your account type

Verify your identity

Confirm your phone number

Choose your currency: euro, dollar, pound, etc.

Validate your identity and account

Once your account is approved, you have different ways to fund it so you can start trading.

Pay by bank card

Pay by bank transfer

Validate your payment methods

By following these steps, you can start trading from home within a few days.

What Qualifications Do You Need to Be a Trader?

How many years of study does it take to become a trader? Professional selection is very tough. The best traders work for the world’s largest banks, such as Goldman Sachs, BNP Paribas or Société Générale. How do you become a trader for the top banks? By completing advanced scientific studies.

In general, how long does it take to become a trader? Typical paths involve at least 6 years of higher education. It takes 6 years to become a trader. How long does it take to become an independent trader? Probably just as many years of practice.
How do you become a trader or portfolio manager? Here is the education path to become a trader:

A science baccalauréat,

Preparatory classes in mathematics (math sup, math spé)

A top engineering or business school (grande école)

According to Onisep, university can also lead to a trading career. The university path to becoming a trader is management and economics, followed by a master’s in financial products. The best training for becoming a trader remains engineering school and scientific preparatory classes. Paris Dauphine University offers an elite path into finance.

How to Learn Online Trading

Business schools do not prepare students for a trading career. Finance today is a scientific and mathematical field, even though it is a discipline that belongs to the humanities. Today, business schools train traveling sales reps and salespeople for specialist retail stores. A few of the best French business schools, such as HEC, ESSEC and ESCP, or Dauphine, to name just a few, have a program specializing in finance. But only a small minority of students go in that direction. These schools mainly train managers, salespeople, CEOs and, to a lesser extent, entrepreneurs.

How do you become an online trader? To become an online trader, all you need is an internet connection. From your computer, you can open a trading account in a few clicks. But you can also use your tablet or phone! With the apps developed in recent years, trading from your phone is child’s play. Literally, since in the United States it is all the rage among 18- to 20-year-olds: trading futures contracts with leverage. Quite a risk for young people with no training!

What Is the Best Online Trading Course?

There are many online trading courses, and it is hard to sort through them all. Trader Francophone has gathered the essential information on trading courses for you. Reviews of courses are essential, because becoming an online trader means looking for reviews: it’s always about seeking information.

Trading Vocabulary: Key Terms

Margin

Margin in trading is the money you have in your trading account. Available margin ensures your solvency: it is the money that guarantees you can pay what you owe if you make a loss. If you don’t have enough margin, your positions will be frozen until you add money. But if you can’t add money, your positions will be closed.

Margin Call

The term margin call is a metaphor. In the days of open-outcry trading, clients were called to tell them they had exceeded their margin. Today, only an email remains of this practice, at least for retail investors. A margin call happens when you no longer have enough margin to cover your position.

A margin call is a request from your broker for additional margin. Either you have enough cash set aside to meet the margin call and cover your positions, or you will have to close your positions. If you can’t respond in time, your broker will be forced to close your positions arbitrarily. This means that some of your winning positions, which you would have liked to keep, could be closed, without you having any recourse. The margin call is the ultimate sentence for a trader.

Leverage

Leverage is the name of the mechanism that increases your trading capacity. Thanks to leverage, you can multiply your gains, but it is a double-edged sword: leverage also increases your losses if the market moves against you. The level of leverage you choose determines the margin needed to cover your position.

Example

When you trade with leverage of 1, you must put up the full value of the position as margin. This means no leverage: your capital is simply worth its face value. With leverage of 200, you can invest €200,000 with just €1,000. Your €1,000 is then worth not its face value but 200 times that value.

The margin is therefore €1,000, or 0.5% of the value of your trade. Thanks to leverage, your diversification can be much more effective. Suppose you only have €1,000 to invest. You could put €200 into 5 different positions, and thanks to leverage you could increase the actual size of these positions. Depending on your trading plan, you could reach much higher targets than if you traded with your capital alone.

Money management is necessary to avoid taking too much risk with leverage. For example, you should set yourself a limit on risk-taking: you should not open €100,000 positions with only €100 of margin. At the slightest move, you are sure to be liquidated. These are suicidal positions. Leverage opens up great opportunities; don’t waste them foolishly on absurd positions.

Broker

Also called “courtiers” in France, brokers are the platforms for buying and selling shares and financial products. There are two ways to buy shares and invest in the markets: either you go through a bank, with certain highly regulated products such as the PEA or the Livret Jeune, or you go through a broker.

Brokers are particularly used to access products not found in traditional markets, such as CFDs or ETFs, or foreign markets. A broker also offers more attractive leverage and favorable fees on certain products.

Each broker has its own specialty and offers leverage and fees for particular markets. Some brokers specialize in Forex, others in commodities.
Exchange: another English term used for broker.

Which Broker Should You Choose for Trading?

Asset

The term “asset” refers to the financial products you can hold in your portfolio. It is a term borrowed from accounting: assets appear on companies’ balance sheets. They are holdings that are not cash but have value and that you can use, for example, to apply for a bank loan.

Position

The term position refers either to an asset in general or to the positions you currently have open on trading platforms. A trade is a financial transaction that lasts from a few hours to several days. For the duration of the trade, your position is open; by extension, we say we have a position.

Selling a Position

When you have an open position, it means you have made a purchase or a short sale. When you buy, you hold an asset in your portfolio for the duration of the trade, and when you close the trade, you sell the asset. That is why we say “sell your position” to mean closing a position.

Short

Short refers to short selling. In the financial markets, you can buy or sell, and you can sell even if you don’t own the asset. How does it work? You borrow not money but an asset from the broker, at a given value at that moment. If the price falls, you return the asset to the broker at its earlier price, and you receive the difference.

Volatility

Volatility refers to a price’s tendency to rise very high or fall very low. Some assets are very volatile, which means there is a good chance of seeing their price double or triple, and at the same time of seeing it lose 50% of its value. These positions are risky but can generate large profits. Conversely, other assets are known for being very low in volatility: their price rises over time, but slowly. These are long-term positions that can provide a monthly income, as with real estate, or help you prepare for retirement. They are also a way of building capital.

Beware of Scams

What scams should you avoid when becoming a trader? Many people search Google for “I want to become a trader“, and malicious results are there to lure beginners.

How to Spot Scams

Once again, finance is a discipline that requires a mindset that is both scientific and mathematical. Schools that boast about training traders should also be taken with a pinch of salt. Unfortunately, there are many scams around finance, and the internet is a particularly fertile ground for dishonest businesses. It is therefore important to learn to tell the difference between genuine businesses in the world of finance and the scams that flourish around them, which try to catch the attention of a distracted person who might walk straight into the lion’s den.
Scams look a lot like legitimate businesses.
Appearance is everything for them, and you should have no trouble spotting a scam after reading just the first few lines:

Lots of spelling and grammar mistakes, like a poor translation

Promises of gains with no mention of losses.

Slogans such as “become a millionaire overnight”

Someone talks to you about effortless success.

The promised returns are too high to be true.

You are pressured to act quickly, and you find it hard to leave the site or find information

How to Protect Yourself from Scams

To protect yourself from these countless scams, you can develop certain reflexes as soon as you have a doubt. The pointers we have just given you are warning signs of scams. They should make you look more closely if you notice a detail. Once something has caught your attention and makes you think “is this really a business or a SCAM?” or “Could I get my money back quickly?”, you can move on to analysis.

To analyze an offer, a website or a product, you have at your disposal the best source of knowledge humanity has gathered since the Enlightenment encyclopedia: the internet. When you have doubts about something, type its name into the Google search bar along with your doubt.

How to Research a Broker

For example: “Eko account review 2020” to get information about client accounts with the broker Eko. This way, you will get many results from other internet users, specialist media and finance forums.

If you see lots of blog posts talking about scams, or warnings, go no further: it is certainly a scam. If people tell you “it’s a scam”, don’t check for yourself; you will lose money and time.

However, scams are not the only thing to avoid. Sometimes, when researching a platform or broker, you will find that the reviews don’t mention a scam but that users are very unhappy with the services offered. The platforms that give you access to trading and financial markets are all different, much like banks, except that they offer many more services and you are putting money at stake.

In French, these platforms are called “courtiers” (brokers), and they are the entities you go through to make your financial transactions. Each has its own specialty: some offer all financial products, while others only offer Forex or commodities. In addition, fees will not always be the same, and some brokers have favorable fees for certain products. So once again, you need to do your research to find the platform that matches your goals.

How to Find a Regulated Broker

An online trading platform may be a complex company that has been around for decades, but when you look at broker offers and click on ads, they are all just identical websites. So how do you find your way?

In France there is a standard, REGAFI: the Register of Financial Agents. Thanks to this register, there is no more doubt about the legitimacy of a financial player, broker, online bank or other financial service. But how does this register work?

Financial agents operating in France must apply, with a file, to be included in the REGAFI register. Based on the French state’s criteria, REGAFI then decides whether or not to grant accreditation. For example, brokers operating in France that want to be registered with REGAFI must meet strict criteria that ensure financial activities in France run smoothly. Thanks to this register, you can find out whether you are in good hands.

If the broker you want to trade with is registered with REGAFI, you have nothing to fear. How do you know if your favorite trading platform is REGAFI-certified? It’s simple: go to the French government website https://www.regafi.fr/spip.php?rubrique1

If the broker you are looking for is on the list, you will see all the authorizations it holds, for example CFD trading, FOREX trading, the use of leverage, etc.

However, if the broker you are a client of does not appear on the list, get your money back as quickly as possible and leave: you are not safe.

How to Find the Right Broker

“If I want to become a trader today, what should I do?” First of all, find a broker.
To find the right broker, as usual, you need to ask yourself some questions. What we mean is that you need to work out what you need from a broker, and to do that, start by drawing up a financial plan. When you trade or actively invest your money, the first thing to do is choose a time horizon for each period. That gives you a basis for your calculations. Do you plan to invest for 1 year? 5 years? 15 or 25 years? The rest depends on this.
Next, determine how much of your savings you will use and the return you are aiming for.
These elements, plus the time horizon, form the basis of your financial plan.

Let’s take an example. Meet Marc Example. He is a young, dynamic executive, and since he has plenty of money, he wants to invest some of it to start building solid wealth. Great news for him, but without more information, an investment and trading specialist at Trader Francophone won’t be able to help him at all.

It’s as if someone said “I want to make money”. It’s impossible to give relevant advice.

Platforms

There are many tools available for trading. First, specialist forums such as the Finance forum on JeuxVideo.com, which, despite appearances, is a very serious investment forum. Then specialist websites that publish their analysis for free, such as Trader Francophone and Ton Argent.fr. Finally, you will find websites that display asset prices.

In the past, there were mainly Yahoo Finance and Google Finance. But today, platforms such as TradingView and MetaTrader take independent traders and beginners to a level never reached before. With TradingView, you get stock charts of the same quality as those you would see on a Wall Street trading floor or at JP Morgan. With MetaTrader, you get additional tools to make the most of your brokers’ capabilities.

Example of a Financial Plan

Now let’s start from the beginning. Marc Example wants to invest. He wants to:

invest €5,000

for 1 year

and earn a 50% return.

Now things are clear. With this information, we can set a goal. We know what growth rate we are looking for, and we can already tell which assets Marc will need to turn to.

To get such returns, there aren’t many options. You won’t find a 50% annual return in savings accounts or bonds, nor in real estate. However, you can turn to stock indices, the stock market in general and, above all, margin trading with leverage. With this last option, you could make 50% in a day. But you could also lose 100% in a day!

The volatility of margin trading is a double-edged sword. Gains rise fast and disappear just as quickly. So to avoid losing everything and succeed in building a portfolio with margin trading, you need to practice money management. It is a way of managing your money that reduces the risk taken.

Volatility risk is also present in stock trading. For stocks, the best way to reduce the risks linked to sharp price swings is diversification.

Reducing Trading Risks

Risk is the unpleasant part of an investment, admittedly, but it is also the reason you make money. If you are rewarded in hard cash, it is because you took a risk; your money could just as well have stayed safely under your pillow. Risk is a way of attracting investors, traders and speculators. Through risk, the money needed to finance industrial projects, for example, is raised.

However, risk remains a concern for an investment portfolio. You cannot reduce the risk inherent in a financial product. When you buy a share, you cannot stop the future from bringing its price down. If you make a bad investment, you will lose money; that’s life. Remember that money is not created in the markets. Every euro earned by someone has to be lost by someone else. The only ones who are sure to win are the exchanges, brokers and banks.

What Does a Broker Do?

Do you know the story of the gold rush? At the end of the 19th century, large gold deposits were discovered in the United States. The news attracted adventurers from all over the world, armed with shovels and pickaxes, in search of glory and conquest. But none of these prospectors brought back mountains of gold. Most barely extracted enough to eat and not freeze to death. Yet great fortunes were made during this period!

Do you know who made a fortune from the gold rush? The sellers of pickaxes and shovels, the people who equipped the gold diggers. That’s what brokers are: sellers of pickaxes and shovels who watch you dig.

So they always win. That’s true. But you can win too. All the money lost in the markets is won by someone else. So there is money to be made, unlike gold! To win at trading and in the stock market, you have to approach the problem the other way around. It’s not your gains you need to optimize but your losses. You need to make losses disappear, focus on them and eliminate them conscientiously, almost obsessively.

What Are Brokerage Fees?

There are two types of losses in trading and investing: those due to fees and those due to volatility.
To eliminate fees, there isn’t really a method other than a lot of research. You need to look at all the platforms, compare prices for the different assets, and so on. It is a big information-gathering task that can take time. First, you need to know which assets you want to trade. Once you have chosen your markets, see which broker offers the most favorable fees for those assets. But other factors can come into play: the minimum deposit to open an account, sign-up and transfer times, and spreads, which are another type of fee.
To save you lengthy research, Trader Francophone has gathered the fee and usage information for the best regulated brokers in France.

Risks

When you invest, you take risks. You take even more risk if you are an amateur trader, without qualifications, or a beginner. Two steps can help you become a profitable trader: money management and diversification. Once you have achieved these two goals, you will be able to eliminate almost all losses and risks from your trading portfolio. In these conditions, it is much easier to become a profitable trader.

Two Strategies to Reduce Risk

Diversification

Diversification is a way of spreading the losses and gains of all your positions so that they are less exposed. It is particularly useful when trading commodities or other very volatile products.

Diversification means spreading your positions across different types of assets. For example, you can diversify internationally by betting on different countries.

For example, if you buy French, German and US shares, you reduce the risk of a bankruptcy hitting your portfolio. Although, with the Covid crisis, you never know. Maybe you should buy Chinese shares first! But diversification also means investing in different markets.

If you invest in real estate, to diversify you will need to look at stocks or precious metals. If you invest in margin trading, you can put your money into less volatile, safer investments such as bonds.
The advantage of margin trading is that you can virtually increase the size of your positions with leverage.

Money Management

Money management means using your money intelligently. When you trade, you use leverage. Leverage is a tool that multiplies your investment. With 100x leverage, your gains are multiplied by 100, but so are your losses. So what should you do?

There are two principles in money management. The first is not to trade with all your capital. If you have €10,000, you are not going to buy €10,000 worth of the same stock or open a €10,000 order on a single trade. You commit only part of your money to the position and keep the rest as a safety buffer. You only stake part of your capital, never all of it, and even less all of your capital on the same position.

The second principle of money management is to decide in advance when you will close your trade. A trade is a buy order you place. For the duration of the trade, it is “open”. When you close it, that is when you make money if the trade is a winner, and vice versa.

Let’s Take an Example

You have €1,000 invested in a €100,000 position. That’s leverage of 100!

If the position gains 1%, it will be worth €101,000.

If you close your position at that point, you make €1,000.

That’s a 100% profit in a single move!

But if the position loses 1%, the opposite happens.

You have no money left and your account is closed.

€1,000 lost in a day.

This can put more than one trader off going independent.

This is where money management comes in. On online trading platforms, you can place pre-set orders. These orders are designed to sell at safety thresholds, to take your profits or cut your losses.

Taking profits: if the price gains 1%, as in the example above, it may only last a moment.

Sometimes the price gains 1% before reversing and losing 3%.

But if you set an automatic sell order at 1%, the position will be sold and you pocket the difference: position opened at €100,000, sold at €101,000.
Net profit: €1,000.

Becoming Profitable Through the News

Finding the Right Information

Over time, traders have become more than mere intermediaries. With the digitalization of finance, more and more financial products have appeared: futures, swaps, complex financial products, and so on. Traders at the top banks make their margins by selling products to other people at slightly different prices.

In the financial markets, information is king. If you get information before someone else, you can make money. If you get information before everyone else, you can become rich. Conversely, if you are the last to get the information, there is a good chance you will lose money.

To become traders, interns from HEC therefore have to gather information constantly. It is vital. Wall Street traders spend their time collecting, accumulating and gathering as much information as possible. If professional traders do it, your first task as an amateur trader on the way to becoming a real pro will be to get hooked on information.

Finding Specialist Financial News Sources

But be careful! We’re not talking about the 8 p.m. TV news. Nor is it about collecting all the information without sorting it. You need to learn to identify good information, and to do that, you need to identify good sources. Some newspapers publish specialist finance and stock market information. For example, you will find “finance” pages in the print edition of Le Figaro. But that’s barely enough to get familiar with the field.

Over time, build your own collection of newspapers, trader websites, YouTubers and influencers. In short, find information wherever you can, but find relevant information.

Depending on your field and the market sector that interests you, you will find the best information in different media and from different players.

How to Find the Information That Matters to You

Traders who specialize in Forex, for example, trade the differences between countries’ sovereign currencies, such as the euro or the dollar. These traders will scrutinize statements by central bank governors very closely, because central banks set key interest rates, which influence money creation and therefore the value of currencies.

Traders who specialize in gold will be on the lookout for newly discovered deposits, new mining regulations, global demand for the yellow metal and possibly technological innovations that use gold. For example, gold is found in the circuit boards of the latest smartphones.

Silver is also a good example. Traders interested in the gray metal will of course want to know what is happening with silver deposits. But Tesla’s new batteries are news that caught their attention: demand for silver could explode in the coming years, because much of the innovation in batteries and electric range relies on the industrial use of silver.

This is the kind of news you need to look for constantly. Some online newspapers specialize in a particular type of asset: commodities, Forex, stocks, etc. There are also many French-language forums that will help you learn very quickly and, above all, exchange with people of all levels and backgrounds. Exchanging ideas is the best way to learn.
Many people dream of being a notorious trader like the Wolf of Wall Street.

How to Trade with Automatic Orders

An automatic sell order has a double advantage!

The first advantage of an automatic order is that you don’t have to make a judgment call. You have decided the sell price in advance, calculating that at this price it will represent a 100% profit. That’s more than enough when you think about it! But your mindset changes between the moment you place your order and the moment you collect your profits.

The second advantage is that sometimes you simply aren’t there when the price reaches your target. So instead of missing the opportunity, the computer executes your order.

We have seen the advantage of pre-set orders for selling when you have made money. But they also let you limit your losses.

How to Limit and Manage Your Losses

To cut losses on a losing trade, you can, for example, tell the broker you will sell if the price falls more than 0.5%. That way, if the price reaches this threshold, your position will be closed and you can’t lose more than 0.5% of the position, i.e. 0.5% x 100,000 = €500.

Here again, the advantage of an automatic order over a “human” order is accepting the loss. When you make your trading plan and set the loss limits you will tolerate, you are thinking “cold”. That means your emotions are locked away in a box in the basement and you are thinking rationally. A 0.5% loss is a small risk taken to earn thousands of euros. But when you are in front of your computer, you don’t have the same perspective. Seeing a losing position and closing it is never easy. Even when the position is deep in the red, it stings.

The problem is that when the loss is small, you always tell yourself “come on, a bit more and I’ll close… just a bit more and I’ll close”, because deep down you hope the trend will reverse.

The human mind struggles to accept loss and defeat. Yet it is vital to cut losses before they exceed your gains. You need to strike a balance across your different trades if you really want to become a good trader.

What Are the Different Financial Markets?

Forex Trading

Currency trading: Foreign Exchange (Forex)
Forex is a separate field within the financial markets. It is the currency market, the market where all the world’s currencies can be exchanged for one another. It is the market that sets exchange rates, and it is influenced by countries’ trade balances and central bank policies. Central banks can decide to print money, which changes the amount of money in circulation, and as you know, value is linked to the number of units in circulation.

Forex trading is done exclusively with leverage on the main trading platforms. With trusted brokers in France, you will find Forex trading with leverage ranging from 1 to 500. A Forex lot is made up of 100,000 units of currency. So a lot of euros is worth €100,000 and a lot of dollars is worth $100,000. To trade such volumes, you obviously either need millions of dollars to invest in the markets or you need leverage.

The broker you are registered with will lend you money. This lets you earn much more than you could with your own capital. But you can also lose a lot! Leverage should not be taken lightly, and you must strictly apply money management rules when trading with leverage.

How to Trade Commodities

Commodity trading is also very popular among traders. The commodity market includes every raw material you can think of:

Wheat

But also precious metals such as silver and gold, or less precious metals that are just as important for industry, such as copper, as well as sugar and US lean hogs. There are different ways to trade commodities.

These assets are available through ETFs. These are synthetic financial products, which means they are created by brokers at clients’ request. When a client wants to buy gold or silver, for example, they buy an ETF, a tracker that follows the price of precious metals. That way, without having to buy precious metals from a dealer, you can speculate on their price.

How Does a Futures Contract Work?

Another way to invest in commodities is through futures contracts. A futures contract is a contract in which you commit to paying at a later date.
What does that mean?
With a futures contract, you commit to buying a lot of a commodity, such as cotton or wheat. This lot is delivered to the holder when the contract expires.

This form of speculation was originally created to allow farmers to sell their harvests, so they could finance their farming before actually reaping the harvest. Once a futures contract has been sold, it can be bought and sold on the secondary market. Speculation makes its price fluctuate until the contract expires. At that point, the person holding the contract is free either to take delivery of the commodities or to sell the contract on once again.

Why Did the Price of Oil Crash?

At the height of the Covid-19 crisis, we witnessed a rare event, probably unprecedented in human history: the price of the US OIL index fell to zero and even reached negative values on some markets. The reason for this spectacular drop? Demand for oil fell drastically because of the effects of the coronavirus. But the price quoted is not the actual price of oil; it is the price of futures contracts!

Nobody wanted to buy the futures contracts anymore. Demand for fuel was so low that all storage space was full, so tankers would have had nowhere to unload their precious cargo once they arrived at port! Finance and trading have very concrete applications!

Knowing that at expiry the oil would have no value and that there would be no right to store it, everyone wanted to sell their contracts, which meant the price momentarily, and only digitally, reached a negative value.

How to Trade Stocks

Stocks are securities issued by companies. Through stocks, companies can raise money in the financial markets. When you buy a share, you give money to the company. In exchange, you receive a share that entitles you to a capital gain, dividends or voting rights in the company.

Shares are first issued on the primary market. This is the initial public offering, or IPO. During the IPO, you finance the company directly: you buy securities from the company, and it raises huge amounts of cash to fund its development projects. The shares are then traded on the secondary market, where you can sell your shares to other investors. Stocks are very profitable and very volatile investment vehicles.

Some stocks are safe and stable, such as shares in the largest or oldest companies. Conversely, some stocks are very volatile and can lose all their value overnight. This is the case, for example, of shares issued by start-ups or by unstable companies such as Lehman Brothers. Some shares offer additional benefits: some entitle holders to quarterly dividends as well as voting rights in the company. The company that issues the shares decides what type of shares it wants to create. And there are different ways to buy shares.

How to Buy Shares Through a Bank

In France, you can buy shares through a PEA (plan d’épargne en actions), a tax-advantaged stock savings plan that can be opened at any bank in France. You can also use an online platform to buy your shares. Finally, you can invest in stocks through CFDs, which gives you access to leverage. This last method makes stock trading even more speculative and should be used by experienced traders.
Stocks are ideal for investing in industrial sectors.

For example, if you want to invest in entertainment, buy Disney shares.

For e-commerce, buy Amazon shares.

For gold through companies, you can buy shares in gold mining companies.

Stocks are also a very good way to diversify. With stocks, you can invest money in different parts of the world, in different industrial sectors, and in different industries or business areas.

The biggest investment fund managers, such as Warren Buffett, head of Berkshire Hathaway, hold highly diversified stock portfolios. The billions of dollars these men own just keep growing.
For Warren Buffett, it was his legendary portfolio that made him one of the three richest men on the planet.

How to Make a Profitable Savings Investment: Bonds

Saving is not exactly the same as investing. Savings accounts, for example, are savings products: the money is kept safe. Investments involve taking risks: the money is put to work.

Bonds are profitable savings products. They are securities created by governments or very large companies. They allow governments to raise money in the markets, just as stocks allow companies to do so. What’s the difference? Bonds don’t experience the same swings as stocks, which is why they are considered safe, steady assets.

The main appeal of bonds is not high returns, which are found where there is volatility. They work differently, offering returns that are set in advance and guaranteed.

When bonds are issued, governments sell them on the primary market. They are then resold on the secondary market. Each bond guarantees its owner a certain amount plus interest. Bonds are issued by countries such as France, the United States or Germany.

Bonds support an entire financial market built on strong stability. They are used to protect portfolios, secure positions and hold value that is safe from both inflation and volatility.

How to Trade CFDs

CFDs are contracts for difference. What does that mean?

Well, with a CFD, you are making a bet.

You are not buying a share to sell it later at a profit.

No, with a CFD you are betting that the share will go up or down.

When you close your contract, if the share price has fallen, you will have to pay the difference.

Conversely, if the share has risen, you pocket the difference.

CFDs are purely speculative instruments that do not let you own a share. In the same way, ETFs are speculative products that do not let you own gold or silver. This means that all the benefits linked to shares, such as dividends or voting rights, do not come to you.

It is a different way of investing in stocks. When you trade CFDs, you are not aiming for the long or medium term. These contracts are generally not held open for more than a few hours. For periods longer than one or more days, you will have to pay additional fees. So it is far from buying shares and holding them for several months.

Why Trade CFDs?

The advantage of CFDs is that you can use leverage. In addition, CFDs are products issued by brokers, so you will never have liquidity problems. Liquidity issues come from real-world friction. Shares are tangible assets: they are titles to ownership of part of a company, so you need to find a buyer when you sell a share. With CFDs, which are purely digital products, you will never have problems linked to the physical nature of financial products.

For example, when you trade gold or real estate, you have to wait to find a buyer. You have to travel, meet the person, and so on. When you trade shares through a PEA, or on exchanges through professional traders, you don’t need to meet the buyers. That’s already better than physical gold or apartments.

With CFDs, it’s even simpler! You don’t need a buyer: as in a casino, the broker plays against you. If you win, the broker pays. If you lose, the broker pockets the money.

Margin in Trading

What Is a Trader’s Margin?

Margin is the founding principle of leverage and trading. Without margin, you can only invest the amount you have. That sounds obvious, but very few traders are content to invest only what they have.

Even when you take out a mortgage, you invest more than you have. By lending you sometimes 95% of the price of your property, the bank gives you leverage that you repay over time. In trading, leverage lasts much less time: positions are open for a few hours, or a day at most. You pay fees for the whole time your position is open, because the broker is lending you money, and these are the interest charges you pay back. But with this money, you can take positions on €100,000 Forex lots and on stock lots for amounts far greater than anything you could imagine owning.

Leverage is how banks make so much money in the financial markets, how traders get rich, and also how people go bankrupt and lose everything they have. In reality, margin in leverage is the proportion of the total price that you have to pay.

How Does Leverage Work?

The broker advances part of the money, but part of it must still be paid by you. When you use 100x leverage, you pay one hundredth of the position and the broker pays the rest. That hundredth is called the margin. Margin becomes even more important when you start opening several trading positions.

Your available margin in a trading account can cover several positions. The more positions you open, the more your available margin shrinks, and the more you are performing a balancing act. At the slightest sharp move in the market, you risk your account. A position could lead to a loss greater than your available margin. You would then find yourself in what is called a margin call. So always make sure you keep a reasonable margin.

A margin call can trigger a domino effect that forces all your positions to close, wipes out all your gains or even closes your trading account. That is why margin and leverage are dangerous tools.

Is Trading Compatible with Islam?

To become a trader, you sometimes need to find out what your religion allows. Becoming a trader is not a trivial matter in Islam, which regulates trading and speculation. That is why some trading accounts take Islamic principles into account and do not offer leverage. Click here to see Islamic trading account offers.

How Are Independent Traders Taxed?

Independent traders are taxed on the capital gains made on their trades during a tax period, generally a quarter or a year. Becoming a professional trader means receiving a tax assessment.

Final Word

We have explained the main things you need to master to start becoming a trader. While understanding all of this may take time, don’t get discouraged. On the contrary, surround yourself with traders, professionals and amateurs: the right environment helps you learn. Keep reading as many articles as possible to stay immersed in trading. And once you are ready, start trading!

Feel free to add your questions in the comments!