What is Trading?

In This Lesson

Introduction to trading concepts and market basics.

Duration: 15 min

Overview

Introduction to trading concepts and market basics. This lesson will provide you with practical knowledge and actionable insights you can apply to your trading immediately.

By the end of this lesson, you'll have a clear understanding of the concepts and be able to apply them in real trading scenarios. Let's dive into the details.

Key Concepts

Trading Definition

Buying and selling financial instruments to profit from price movements over various timeframes.

Market Participants

Retail traders, institutions, market makers, and algorithms all interact to create price movements.

Trading vs Investing

Trading focuses on short-term price moves (days to months), investing on long-term value (years).

Risk and Reward

Every trade involves potential loss (risk) and potential gain (reward). Success comes from favorable ratios.

Practical Application

Now let's put this knowledge into practice. Follow these steps to apply what you've learned:

1. Open a demo account with a reputable broker like TD Ameritrade or Interactive Brokers
2. Learn the basic order types: market orders (instant execution), limit orders (specific price), stop orders (risk management)
3. Follow financial news on Bloomberg, CNBC, or Reuters for one week to understand market dynamics
4. Paper trade 10 trades with clear entry and exit reasons before using real money
5. Join trading communities on Reddit (r/Daytrading, r/StockMarket) to learn from others
6. Read "Trading in the Zone" by Mark Douglas to understand trading psychology

Common Mistakes to Avoid

Expecting Quick Riches

Trading is not a lottery ticket. 90% of traders lose money because they treat it like gambling instead of a business.

Trading Without Education

Jumping into trading without understanding basics guarantees losses. The market is unforgiving to the unprepared.

Using Survival Money

Trading with rent money or emergency funds creates emotional pressure that leads to poor decisions.

Key Takeaways

Trading is a business requiring capital, education, and emotional discipline
90% of traders lose money - education and practice are your edge
Success takes 6-12 months of learning and 1-2 years to become consistently profitable
Start with simulation trading to develop skills without financial risk
Your mindset and risk management matter more than your strategy

Your Next Steps

Ready to continue your learning journey? Here's what to do next:

• Review this lesson's key concepts
• Complete the practical exercises
• Take notes on what you've learned
• Practice with a demo account
• Move on to the next lesson when ready