What is Trading?
Trading is the practice of buying and selling financial assets โ stocks, currencies, commodities โ to profit from price movements. Unlike long-term investing, trading focuses on shorter timeframes and active decision-making.
Trading
Active buying & selling of assets over short periods โ minutes to months. Goal: profit from price swings.
Investing
Holding assets for years or decades to benefit from long-term growth and compounding returns.
Speculation
High-risk, short-term bets on price movements. Higher potential reward โ but higher chance of loss.
Markets You Can Trade
| Market | What You Trade | Hours | Typical Style |
|---|---|---|---|
| Stocks | Company shares (Apple, Teslaโฆ) | 9:30am โ 4pm ET | Day / Swing |
| Forex | Currency pairs (EUR/USD, GBP/JPY) | 24/5 | Scalping / Day |
| Crypto | Bitcoin, Ethereum, altcoins | 24/7 | Swing / Position |
| Futures | Contracts on commodities, indices | Nearly 24/5 | Day / Scalping |
| Options | Right to buy/sell at a set price | 9:30am โ 4pm ET | Swing / Position |
Trading Styles at a Glance
Scalping
Seconds to minutes. Dozens of tiny trades per day. Requires extreme focus.
Day Trading
Open & close within the same day. No overnight exposure.
Swing Trading
Hold for days or weeks. Captures medium-sized price swings.
Position Trading
Weeks to months. Based on fundamental trends and macro analysis.
Reading Charts
Charts are the language of trading. The most important chart type is the candlestick chart โ each "candle" packs 4 pieces of price information into one visual shape.
Anatomy of a Candlestick
Open
Price at the start of the period
Close
Price at the end of the period
High
Highest price reached (top wick)
Low
Lowest price reached (bottom wick)
Common Candlestick Patterns
Marubozu (Bullish)
Big green candle, tiny wicks. Shows strong buying pressure all session.
Doji
Open โ Close. Very long wicks. Signals indecision โ could mean reversal.
Hammer
Long lower wick, small body at top. Bullish reversal signal at market bottoms.
Shooting Star
Long upper wick, small body at bottom. Bearish reversal signal at market tops.
Support & Resistance
Price tends to bounce at certain levels โ where buyers and sellers historically fought for control. Click the chart to draw your own S/R lines and see how price reacts.
Floor Level
A price zone where buyers step in. Price bounces up from support. A break below support is bearish โ the floor became a ceiling.
Ceiling Level
A price zone where sellers step in. Price gets rejected at resistance. A break above resistance is bullish โ the ceiling became a floor.
Order Types
Understanding how to place orders correctly can be the difference between a good trade and a disaster. Here are the main order types every trader needs to know.
Market Order
Buy or sell immediately at the current best available price. Fast, but no price guarantee.
Limit Order
Set a specific price you're willing to pay/receive. Only executes if price reaches your level.
Stop Order
Triggers a market order once price hits a level. Used to enter breakouts or cut losses.
Stop-Limit
Like a stop order but converts to a limit order. Prevents extreme slippage.
๐ Live Order Book Simulator
Click on any order row to simulate placing a trade at that level.
Stop Loss & Take Profit
These two orders are your safety net. Every trade should have both set before you enter.
Automatically closes your trade if price moves against you by X amount. Limits your maximum loss.
Rule of thumb: risk no more than 1-2% of your account per trade.
Automatically closes your trade when it hits your profit target. Locks in gains without watching the screen.
Target at least 2:1 reward-to-risk ratio for consistent profitability.
Key Technical Indicators
Indicators are mathematical formulas applied to price data. They help you identify trends, momentum, and potential reversals โ but no indicator is perfect. Use them together.
RSI โ Relative Strength Index
MomentumMeasures the speed and magnitude of recent price changes. Ranges from 0 to 100. Values above 70 suggest overbought conditions; below 30 suggests oversold.
Moving Averages (MA)
TrendSmooths out price noise by averaging past closing prices. The crossover of two MAs (fast vs slow) is a classic entry signal.
RSI โ Price Chart + Signal Overlay
Live ExampleHere's how RSI looks on a real price chart. The top panel shows price; the bottom shows RSI. Notice how oversold dips (green zone) often precede price bounces.
MACD โ Convergence / Divergence
Trend + MomentumThe MACD line (fast EMA minus slow EMA) crosses its signal line to generate buy/sell signals. The histogram shows the gap between them โ growing bars mean strengthening momentum.
Bollinger Bands
VolatilityThree lines: a moving average in the middle, with upper and lower bands at 2 standard deviations. When the bands squeeze tight, a big move is coming. When price touches the outer bands, it may reverse.
Volume โ Confirming Price Moves
VolumeVolume shows how many units were traded. High volume confirms that a price move has conviction. Low volume means the move might be weak and likely to reverse. Hover the bars to see details.
Risk Management
Risk management is the single most important skill in trading. You can be wrong 60% of the time and still be profitable โ if you manage your losses correctly.
๐งฎ Position Size Calculator
Fill in your trade details to calculate the correct position size.
Risk:Reward Ratio
For every trade, compare how much you stand to gain vs. how much you risk losing.
Break-even Minimum
Risk $100 to make $100. You'd need a >50% win rate just to stay even. Not recommended.
Acceptable
Risk $100 to make $150. A 40% win rate can still be profitable. Minimum viable ratio for most strategies.
Recommended
Risk $100 to make $200+. With a 40% win rate and 2:1 R:R, you are profitable even losing more trades than you win.
โ ๏ธ Emotional Traps to Avoid
Revenge Trading
Taking impulsive trades after a loss to "win back" money. This almost always leads to bigger losses.
FOMO
Fear of Missing Out. Chasing a trade that's already moved far. Leads to buying tops and selling bottoms.
Overconfidence
After a winning streak, increasing position sizes dramatically. Sizing should stay consistent.
Moving the Stop
Shifting your stop loss further away when price gets close. You set it for a reason โ honor it.
Knowledge Check
Test what you've learned. Each correct answer earns XP. You can retry as many times as you like.
Trading Glossary
Quick definitions for the most common terms you'll encounter as a trader. Click any term to expand.