Beginner · Lesson 1 of 11 · 5 min video · 6 min read
Start here: what trading is
Before charts, indicators or strategies: what trading really is, which markets you can trade and why prices move at all.
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What trading is
Trading means buying something you think will rise in price, or selling something you think will fall, and closing the trade later. Your profit or loss is the difference between the price you got in at and the price you got out at.
Most people trade through a broker using an app such as MetaTrader 5. You rarely own the thing itself. Instead you trade a contract on its price, so you can make (or lose) money whether the market goes up or down.
Buying (going long) makes money when price rises. Selling (going short) makes money when price falls. Both lose money if price goes the other way.
Trading is not investing
An investor buys a share or a fund and holds it for years. A trader holds for minutes, hours or days and looks for shorter moves. Trading is faster, more active and riskier. It is a skill that takes months to learn, not a quick way to make money.
The markets on BTM
| Type | Examples on BTM | What it is |
|---|---|---|
| Forex | EURUSD, GBPUSD, USDJPY | One currency priced in another. EURUSD at 1.1650 means 1 euro costs 1.1650 US dollars. |
| Metals | XAUUSD (gold), XAGUSD (silver) | The price of an ounce of gold or silver in US dollars. |
| Indices | US30, NAS100, SPX500, GER40, UK100 | A basket of big company shares, such as the Dow Jones or the DAX. |
| Energy | USOUSD (oil), NGCUSD (natural gas) | Commodities that move on supply, demand and world events. |
| Crypto | BTCUSD, ETHUSD, XRPUSD | Digital currencies. Open every day, including weekends, and very volatile. |
What makes prices move
Price moves when there are more buyers than sellers, or the other way round. The reasons behind that change all the time, but the big ones are:
- News and data: interest-rate decisions, inflation, jobs figures and company results.
- Interest rates: money tends to flow towards currencies with higher rates.
- Risk mood: when people are nervous, money often moves into gold, the US dollar, the yen and the Swiss franc.
- Big players: banks, funds and companies trade huge amounts and can push prices for hours or days.
The US releases inflation figures that are higher than expected. Traders expect US interest rates to stay high, so they buy US dollars. EURUSD falls, because the dollar is now worth more against the euro.
How you make or lose money
Every trade has three parts: where you get in (the entry), where you get out if you are wrong (the stop loss) and where you take profit (the target). Lesson 7 shows how to size each trade so a single loss can never hurt you badly.
Common mistakes
- Thinking trading is a fast way to get rich. Most beginners lose money in their first year.
- Trading with money you cannot afford to lose.
- Jumping between markets every day instead of learning two or three well.
Check yourself
1. You sell (go short) EURUSD at 1.1650. Price falls to 1.1600. Have you made or lost money?
Made money. A short trade profits when price falls.
2. What does XAUUSD at 4,020 mean?
One ounce of gold costs 4,020 US dollars.
3. Name two things that can move a market.
Any two of: news and economic data, interest rates, the general risk mood, and big players such as banks and funds.
Try it on BTM
For education only, not financial advice. Trading carries a high risk of losing money, especially with leverage. Only trade with money you can afford to lose.
For educational purposes only. Nothing here is financial advice. Past performance does not guarantee future results, and trading carries a high risk of losing money, so only trade with money you can afford to lose. Read the risk warning.