What is Trading?

What is Trading?

Trading refers to the buying and selling of financial instruments such as stocks, currencies, commodities or cryptocurrencies with the aim of profiting from price movements. In contrast to classical investing, where securities are held long-term, traders aim for short-term to medium-term gains.

The most important markets

• Forex (Foreign Exchange Market) – The largest financial market in the world with daily trading volume exceeding 6 trillion dollars. Currency pairs such as EUR/USD, GBP/JPY or USD/CHF are traded. The Forex market is open 24 hours a day, 5 days a week.
• Stocks – Shares in publicly listed companies. Well-known exchanges include the NYSE, NASDAQ, and the Frankfurt Stock Exchange. Stocks offer both dividends and capital gains.
• Cryptocurrencies – Digital currencies such as Bitcoin, Ethereum and Solana. This market is extremely volatile and tradable around the clock.
• Commodities – Gold, silver, oil, natural gas and agricultural products. They often serve as a hedge against inflation.
• Indices – Bundles of stocks such as the S&P 500, DAX 40 or Nikkei 225. They reflect the overall performance of a market segment.

Trading vs. Investing

The main difference lies in the time horizon and strategy:

• Investing: Long-term approach (years to decades), focus on fundamental analysis, buy-and-hold strategy
• Trading: Short-term approach (minutes to months), focus on technical analysis, active buying and selling

Trading styles

• Scalping – Very short-term trades (seconds to minutes). Goal: Small profits from minimal price movements. Requires high concentration and quick reaction.
• Daytrading – Positions are opened and closed within a trading day. No overnight risk, but high time commitment.
• Swingtrading – Positions are held for days to weeks. Based on identifying price swings within a trend.
• Position trading – Long-term approach with holding periods from weeks to months. Combines technical and fundamental analysis.

What do you need to get started?

• Broker account – A regulated broker with low fees and reliable platform
• Trading capital – Only use money you are willing to lose. At least €500-1000 recommended for getting started
• Trading plan – Clear rules for entry, exit, position size and risk management
• Education – Solid knowledge of markets, chart analysis and psychology
• Demo account – Practice on a demo account before trading with real money