Free Trading School · Level 1: What Is Trading?
What trading actually is
Trading is buying and selling financial assets, such as shares, currencies or commodities, to profit from changes in their price. You buy something you expect to rise, or sell something you expect to fall, and close the position later. The difference between your entry and exit price, minus costs, is your profit or loss.
That sounds simple, and the mechanics are. What makes trading hard is that nobody knows where price will go next. Every trade is a decision under uncertainty, and the skill is not predicting the future: it is managing risk so that your winners are worth more than your losers over many trades.
Trading vs. investing
| Investing | Trading | |
|---|---|---|
| Holding time | Years | Minutes to weeks |
| Main source of profit | Business growth, dividends | Price movement |
| Activity | Low: buy and hold | High: frequent decisions |
| Main risk | Picking poor businesses | Poor risk control and discipline |
Neither is better. Many people do both: a long-term investment portfolio for retirement and a small, separate trading account to develop a skill.
Trading is a skill business with real costs and real risk. Your first goal is not to get rich, it is to survive long enough to get good.
Quick answers
Trading is buying and selling financial assets, such as shares, currencies or commodities, to profit from changes in their price. You buy something you expect to rise, or sell something you expect to fall, and close the position later. The difference between your entry and exit price, minus costs, is your profit or loss.
Trading is a skill business with real costs and real risk. Your first goal is not to get rich, it is to survive long enough to get good.
$100 profit. 100 shares × $1 gain per share = $100.
Next lesson: Who is on the other side of your trade