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Trading basics

Orders, spreads, leverage and position size. The vocabulary you need before the charts make sense.

Before charts, indicators or strategies, there are a few plain facts about how trading works: what an order actually does, what you pay every time you trade, how leverage changes the size of your mistakes, and how much of your account a single trade should touch. Get these wrong and no strategy saves the account. Get them right and most beginner disasters simply cannot happen.

This path is three lessons. Read them in order: first whether your account is big enough to start, then when to trade, then what moves prices. Each takes ten to fifteen minutes.

Read in this order

  1. 1How Much Money Do You Need to Start Trading?Start here. Not the broker minimum: the real floor is what a round trip costs next to what you risk per trade.
  2. 2What Is the Best Time of Day to Trade?The sessions, the overlaps and the hours to avoid, and how to find the hours you personally trade well.
  3. 3What Economic Factors Affect Stock Prices?Finish here. Markets move on the surprise against the forecast, which is why the calendar is a risk tool, not a signal.

The four words you need first

  • Order. An instruction to your broker. A market order fills now at whatever price is available. A limit order fills only at your price or better, or not at all. A stop order becomes a market order once a price is touched, which is how most stop losses work.
  • Spread. The gap between the buy and the sell price. You pay it on every trade, win or lose, so the more often you trade, the more it matters.
  • Leverage. Borrowed size. It does not change whether a trade is good. It multiplies what the trade does to your account, in both directions.
  • Position size. How much you buy or sell. It is the one number you fully control, and it should come from how much you are willing to lose, not from how sure you feel.

Leverage, in numbers

With 1:30 leverage, 1,000 dollars controls a 30,000 dollar position. A 1% move against that position is 300 dollars, almost a third of the account. The leverage did not make the trade worse. It made the same move thirty times more expensive. That is why position size, not the leverage your broker offers, should decide how much you trade.

Why costs decide more than beginners expect

A small account and frequent trading are a bad combination. If every round trip costs you the spread plus commission and you risk only a few dollars per trade, costs can take a large share of every win before the market has done anything. The first lesson shows how to check this with your own numbers before you deposit anything.

Timing and news

Markets are not equally active all day. Spreads widen when few people are trading, and moves get larger when major sessions overlap or scheduled news is released. You do not need to predict the news. You need to know when it is due, so that you are not surprised by a move you could have seen on the calendar.

How to use this path

Read one lesson at a time and check it against your own situation: your account size, your broker’s costs, the hours you can actually sit at the screen. If you are new, practise on a demo account while you work through this path, and move to real money only when you can explain why every trade was taken.

Next path: Risk management →

All lessons in this path, newest first