University Logo

Trading Basics — A Complete Beginner’s Guide

What is Trading?

  • Trading is the act of buying and selling financial instruments to make a profit.
  • Examples: Stocks, Forex, Commodities, Crypto, and Indices.
  • Traders speculate on price movements — short-term or long-term.
  • Unlike investing, trading is more active and frequent.

Types of Trading

  • Scalping — Very short-term trades (seconds to minutes).
  • Day Trading — Open and close trades within a single day.
  • Swing Trading — Hold positions for a few days/weeks.
  • Position Trading — Long-term trades based on fundamentals.
  • Algorithmic / Bot Trading — Automated trading using code.

Pre-Awareness & Risks

  • High Risk: You can lose all your capital if unprepared.
  • Understand market volatility and emotional discipline.
  • Never trade money you cannot afford to lose.
  • Use demo accounts before real trading.
  • Avoid scams and fake “get rich quick” schemes.

Key Market Terms

  • Asset: A financial instrument (like a stock or currency).
  • Liquidity: How easily you can buy/sell an asset.
  • Volatility: How much the price moves.
  • Leverage: Borrowed money used to amplify trades.
  • Margin: Deposit required to open leveraged trades.
  • Spread: Difference between buy and sell price.
  • Pips: Smallest unit of price movement in Forex.

Tools & Platforms

  • Trading platforms: MetaTrader 4/5, TradingView, Binance.
  • Broker: Company that connects traders to the market.
  • Charting tools: Candlesticks, trendlines, indicators.
  • Use demo or paper-trading to practice strategies safely.

Risk Management

  • Never risk more than 1–2% of your capital per trade.
  • Always use a stop-loss to limit losses.
  • Set realistic take-profit targets.
  • Diversify — don’t put all money in one asset.
  • Keep a trading journal to learn from mistakes.

Technical Analysis Basics

  • Study price charts to predict movements.
  • Common patterns: Head & Shoulders, Double Top, Flag.
  • Indicators: RSI, MACD, Moving Averages, Bollinger Bands.
  • Understand support & resistance levels.

Fundamental Analysis

  • Focus on economic data, company performance, and news.
  • Used in stock and forex markets for long-term decisions.
  • Examples: Earnings reports, inflation, interest rates, GDP.
  • Combining both technical + fundamental = balanced strategy.

Trading Psychology

  • Emotions are the biggest challenge for traders.
  • Control fear and greed — don’t revenge trade.
  • Stick to your plan and strategy.
  • Maintain patience and discipline.
  • Focus on learning, not daily profits.

Best Practices Before Starting

  • Educate yourself through books and online courses.
  • Use demo trading for at least 2–3 months.
  • Backtest your strategy with historical data.
  • Start small, scale only after consistent performance.
  • Follow reliable sources and avoid hype-based trading.

Trading involves risk. This content is for **educational purposes only** and not financial advice.

References: Investopedia | TradingView | BabyPips