Trading is different from investing, usually focused on more short-term movements in markets. Learn the essentials you'll need to know to be a successful trader.

Frequently Asked Questions

  • What is a stock?

    A stock is a security that represents the ownership of a part of a company; it is also commonly referred to as a share, or equity, in the company. Stocks can be bought and sold on the open market via stock exchanges, and t🔯hose transactions are governed by various regulations meant to protect the investing public.

  • What is Volume-Weighted Average Price (VWAP)?

    Also known as the VWAP, the꧑ Volume-Weighted Average Price is a trading benchmark that is used by traders to see the average price that a security has traded through the day, in both volume and prices of trades.

  • What is a limit order?

    A limit order is a kind of order that an investor makes when he or she wants to buy or sell a stock at a specific price. The two types of such orders are a ཧbuy limit order, whereby the order will be placed at the limit price or lowe🐎r, and the sell limit order, where the order will be executed at the limit price or higher.

  • What is the risk/reward ratio?

    The risk/reward ratio is used by investors to measur♏e the prospects of reward for their investments over the potential risk of losing that capital. The ratio helps assess the expected return and risk of a given trade.

Key Terms

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Robinhood vs. eToro
Volume Weighted Average Price
Volume-Weighted A🎐verage Price (VWAP): Definition and Calculation
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Rule of Thumb: Definition and Financial Examples
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What Is a Shareholders' Agreement? Included Sections and Example
What Is a Bid-Ask Spreadꦿ, and How Does It Work in Trading?
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Whipsaw: Definition, What Happens to Stock Price, an✨d Example
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Open Position: Meaning and Risk in Trading
Maintenance Maꦡrgin: Definition and Compܫarison to Margin Accounts
Decline: What It Is, How It Works, Example
Money Management: The processes utilized to record and administer an individual’s, household’s, or organization’s finances.
Money Management: Definition and Top Money𝓡 Managers by Ass♔ets
Funds Ma🐬nagement: Definition🐻, Responsibilities, and Industries
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Bidder: What it Means, How it Works, Types
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Retrocession: Definition, Types,ꦇ Example, Criticisms
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Portfolio Margin: Overview, How it Works
close up of man hand analyzing stock market chart
What Is a Fill? Definition in Investing, 🧸How It Works, and Typeꦑs
Midsection Businessmen Analyzing Charts On Laptop In Office
Futures Prices Converge Upon Spot Prices
Woman Checking Stocks and Shares Data With Smartphone in City
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Futures Trading
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A woman wearing glasses holds a smartphone, and the screen of the phone is pointed to her face but is reflected in her glasses. It displays stock chart data.
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How to Calculate the Notional Value of ꦇa Futures Contಞract
What Is a Trader, and What Do Traders Do?
What Is a Trader, and What Do Traders Do?
Signatory
Endorser: What They ar🐼e, What They do, Best Practice𒐪s
Offer to Buy An Asset: Types and Examples
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How To Reduce Risk With Optimal Position Size
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Self-Serving Bias: Definition and Examples
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Attribution Bias: What It Is and Why It Is Important in Fin🌼ance
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5 Ways to Avoid 🌊Present Bias in Inv💯estment Decisions
Buying Power (Exꦚcess Equity): Definition in Trading and Example
Illiquid Assets: Overview, Risk and Examples
Investor: A person or entity who commits capital with the expectation of financial returns.
What Does a🅘n Inv💦estor Do? What Are the Different Types?
Liquidity
Understanding Liquidity and How to Measure It
Notional Value
Understanding Notional Value and How It Works
Speculation: Conducting a financial transaction that could yield a significant gain or loss.
Speculation: Trading With High Risk𝕴s, High Potential Rewards
Trading in the Pre- and Post-Market Sessions
A salesperson in a produce warehouse stands near crates of fresh avocados and uses a tablet to check the current market price.
Spot Rate: What It Is, How It Works, Example
Spot Market
Spot Market: Definition, How They 🌞Work, and Example
Know Your Shareholder Rights
Two colleagues discuss charts on their computers at a work table
🌸Average Daily Trading Volume (ADTV): Definition, H𓆉ow To Use It
Breakeven Point
Breakeven Point: Defin🌠ition, 🔥Examples, and How To Calculate
Clearing
What Is Clearing? Definiti𝓀on, How It Works, and Example
Proprietary Trading: A financial firm or bank that invests for direct market gain rather than earning commissions and fees by trading on the behalf of clients.
Proprietary Tradingꦿ: What It Is, How It Works, Benefits
looking up at the skyscrapers in london's financial district
What Is an Ac🙈tivist Shareholder? What They Do and How They Work
Short Covering: Buying back borrowed securities in order to close out an open short position.
Short Covering: Definitio𝓡n, Meaning, How It Works, and Examples
A person looks down while working in front of a computer screen displaying stock data at the New York Stock Exchange
Tick Size: Definition in Trading, Requirements, and 🃏Examples
The reflection of an derivative investor appears on a computer monitor showing the price movement of the underlying stocks they are following.
Underlying Asset༒ (Derivatives)—Definition, How ꦰIt Works, Examples
woman at desktop looking at financial charts
Drawdown in Banking vs. Drawdown in Trading: What's the difference?
Cross Trade
What Is Delivered Ex Ship (🌄DES), and How Is It Different From DAT and DAP?
Slippage
Slippage: What It Means in Finance, With Examples
Clos💎e Position: Definition, How It Works in Trading, and Example
An engineer stands on a rooftop of a highrise building as they look at a telecommunication tower and estimating the cost to replace it.
Sinking Fund Method: Definition, H♛ow It Works, and Advantag🙈es
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Upside: Risk/Reward Definition and Examples
A stock trader on the floor of the stock exchange signaling a trade based on current stock prices.
Trade Signal