What is Trading?
The word "Trading" is an umbrella term for the exchange of goods at a point in time. Trading uses these markets where you will be capitalizing off of the facilitation and the exchange of goods. The same way someone is willing to buy a fruit at a price is the same way a person is willing to buy a stock or commodity like a car.
Once you start to associate a demand with every particular thing in life, trading becomes easier. People change their mind about how much they are willing to pay for things all the time, this is called demand.
How does trading work?
At its core, trading is simply the act of exchanging goods, services, or assets. In financial markets, this means buying things like stocks, cryptocurrencies, or commodities with the goal of selling what you bought later when the price is higher making a profit from the price rising.
Every asset, whether it's a share of a company's stock, Gold, or a barrel of oil, has fluctuating demand. Traders analyze various factors to predict when demand for a particular asset is likely to increase or decrease.
- A liquidity gap (a FVG) in stock bar chart price action
- Economic news (GDP, interest rates)
- Global events (geopolitical tensions)
- Technological advancements
- Market sentiment and investor psychology
Stocks
Stocks represent ownership of a company. When you purchase shares, you own a piece of that business.
✓ Pros
- Works for both short-term and long-term strategies
- Regulated and transparent, rarely any shady things
✕ Cons
- Gains are slower but risk is low
- Need capital to invest meaningfully
Futures
Futures allow you to trade with leverage, speeding up potential profits (and losses).
✓ Pros
- High leverage allows for massive gains from small price movements
- More liquid than holding underlying assets
- Make money faster
✕ Cons
- High leverage also means magnified losses
- Requires much better risk management
Forex (Foreign Exchange)
The global exchange of currencies. The largest financial market with $6T+ daily volume.
✓ Pros
- Low barrier to entry - trade with $10
- Practice for free with MetaTrader
- High liquidity and tight spreads
✕ Cons
- Extreme leverage can liquidate accounts fast
- Requires strong risk management
Cryptocurrency
Digital currencies that operate independently of traditional banking systems.
✓ Pros
- 24/7 trading availability
- High volatility creates profit opportunities
- Decentralized and global access
- Lower fees than traditional markets
✕ Cons
- Extreme volatility can lead to significant losses
- Regulatory uncertainty in many jurisdictions
- Technical complexity for beginners
DEXs (Decentralized Exchanges)
A DEX is a trading platform that allows you to make trades without the need for extremely sensitive personal information like your passport. Unlike traditional stock exchanges like Robinhood, DEXs use enterprise grade security techniques facilitate peer-to-peer trading directly between users.
How DEXs Work
DEXs typically use unchangeable code to facilitate trades for its users. DEX's are so good for trading because DEXs allow you to trade a variety of assets and you use something called a "web3 wallet" to trade on them.
Trading Tokenized Assets
DEXs excel at trading various tokenized assets. Popular DEX platforms include gtrade, Hyperliquid, and Ostium.app.