Trading Basics
What is Trading?
Answer: Buying and selling financial assets to make a profit or manage risk.
What is a bull market?
A market where prices are generally rising.
What is a financial market?
A place where buyers and sellers exchange financial assets.
Should you invest money you cannot afford to lose?
No.
Which usually has a longer time horizon: trading or investing?
Investing
Name one financial asset people can trade.
Stocks, bonds, ETFs, commodities, currencies (Forex), or cryptocurrencies.
What is a bear market?
A market where prices are generally falling.
Name one factor that can affect stock prices.
Company earnings, interest rates, economic news, government policy, world events, investor confidence, or new products.
What is diversification?
Spreading investments among different assets to reduce risk.
Which type of trader buys and sells within the same day?
A day trader.
What does owning a share of stock mean?
Answer: You own a small part of a company.
What is a portfolio?
A collection of investments.
If many people want to buy a stock and few want to sell it, what usually happens?
The price goes up.
Why is having a trading plan important?
It helps avoid emotional decisions and manage risks.
Which trader typically holds investments for several days of weeks?
A swing trader.
What are the two groups that make every market?
Buyers and sellers.
What is volatility?
The amount prices move up and down
What axis on a stock chart usually shows the price?
The Y-axis
True or False. Even professional traders lose money on some trades.
True
Which approach generally requires more daily attention: trading or investing?
Trading.
What determines the price of an asset in the market?
Supply and demand
What is a dividend?
A payment some companies make to shareholders.
What does a green candlestick usually represent?
The stock closed higher than it opened.
What is the most important goal of risk management?
Protecting your money while managing potential losses.
Which approach has historically been a more common strategy for long-term wealth building?
Long term-investing.