Being a Trader, what does it mean?

Most people have no idea what being a trader means and to be honest even I had my doubts about it. In my opinion, before diving deeper into trading, we must understand it´s origins.
This article is just my humble attempt to do that and start exploring some very important concepts. To be good at something we must start from the basics and this actually may help you in your trading journey. It helped me so it might just do you the same.



What is the stock market ?

To understand what the stock market is, we must go deeper into history. I believe that "trader" is just another word for a "merchant", which by definitions is :


"A merchant is a businessperson who trades in commodities that were produced by others, in order to earn a profit.

Merchants can be one of two types:

1. A wholesale merchant operates in the chain between producer and retail merchant. Some wholesale merchants only organize the movement of goods rather than move the goods themselves.
2. A retail merchant or retailer, sells commodities to consumers (including businesses). A shop owner is a retail merchant." (from Wikipedia)

So this is one of the oldest profession in the world, and it´s been around since the birth of capitalism. The first merchants would acquire their goods in one location, transport them to other places, where they thought it would be needed and exchange it for something else, usually with greater value. These goods cold be from spices to gold. 

In order to facilitate the exchange of theses goods, the merchants organized themselves in market places, where buyers and sellers would meet. This is a very important and powerful concept: "Market places  buyers and sellers together and should be efficient to facilitate trading." This the purpose of any market and you should always have that in mind.
So the "Stock Market" is just like any market, but specialized in "Stocks". It is a location where buyers and sellers meet to exchange stocks upon an agreement (a deal). I know this may seem obvious, but understanding this simplicity is very important. Most people say the stock market is to complex for them, but as you can see it is not. The rules around it, believe it or not have one goal, to make trading secure and efficient. 

How to make money as a trader?

A trader´s job, as it was in the past, is to earn a profit by exchanging goods. Simples as that may sound, most people still loose money. So how does one can make money in this profession? Thinking as a merchant, the best way to make money is to find a "good deal", or buy something really cheap to sell it higher  for a better price (or "buy low, sell high"). Now things are getting more complicated. How does one know that something is cheap or expensive?
Up to this date, an Ipad costs U$400 at Apple Store. What if I offer you a new Ipad for let´s say U$10.00? Would you say that is cheap? Sure you would, but if I offer it (the exact same one) for U$1000.00 would you buy it? Is that a good deal?
As you can see, our sense of cheap and expensive is based on one concept: VALUE. Value is determined by 3 factors: price, time and volume and how they affect/relate to supply and demand (and vice-verse). 

Summing up, a trader´s job is to understand where value is, so he can search for "good deals" in order to obtain a profit, by using basic concepts: price, volume, time, value, supply, demand.
:

• Find Value: Market Profile (or Auction Market Theory) - I believe in it simply because it makes sense. It does not predict the future, it only shows you where value is at a given point in time.

• Find Supply and Demand: Technical Analysis - I disagree with some definitions out there. All the tools and indicators found in Technical Analysis are , to me, just an attempt to find imbalances in Supply and Demand. It helps you find places where buyers are or might be willing to buy and where sellers are selling or might be willing to sell. It will never tell you where will price goes next.

So on next articles I will write about this tools, my opinions, tips, how do I use them to trade, get a feel for the market, etc hoping this will help you improve your trading skills.