Basic Trading Concepts

What is Trading?

Trading involves buying and selling financial instruments to profit from price movements. Traders analyze the markets and execute trades based on various strategies and timeframes.

Types of Traders

• Day Traders: Open and close positions within the same trading day. They focus on short-term price movements.

• Swing Traders: Hold positions for days to weeks, aiming to capture medium-term market swings.

• Position Traders: Maintain positions for weeks to months, focusing on long-term trends.

• Scalpers: Make numerous small trades throughout the day, profiting from tiny price changes.

Order Types

• Market Orders: Execute immediately at the current market price.

• Limit Orders: Set a specific price at which you want to buy or sell. The order will only execute at that price or better.

• Stop Orders (Stop-Loss and Stop-Entry): An order to buy or sell once the price reaches a specified level, used to limit losses or enter the market.

• Trailing Stop Orders: A stop order that adjusts as the price moves in your favor, locking in profits.

Bid and Ask Prices

• Bid Price: The highest price a buyer is willing to pay for an asset.

• Ask Price: The lowest price a seller is willing to accept.

• Spread: The difference between the bid and ask price, representing the transaction cost.