Trading is the act of buying and selling financial assets — shares, currencies, commodities, crypto — with the aim of making a profit from price movements. That is the one-sentence version. The rest of this lesson unpacks what that actually means in practice.
Buying Low, Selling High (and the Reverse)
The classic idea: you buy something at one price, wait for it to go up, and sell it for more. The difference is your profit. Simple enough. But trading also lets you do the opposite — shorting. When you short, you're essentially betting the price will fall. You "sell" first (borrowing the asset), then buy it back cheaper. If the price drops, you pocket the difference. If it rises, you lose money.
Key Concept
Trading works in both directions. You can profit when prices go up (going long) or when prices go down (going short). This is different from traditional investing, where you only make money if your asset goes up.
Trading vs Investing
People use these words interchangeably, but they are fundamentally different activities:
| Factor | Trading | Investing |
|---|---|---|
| Timeframe | Minutes to weeks | Months to decades |
| Approach | Technical/chart-based | Fundamental/value-based |
| Frequency | Multiple trades per week | Handful of trades per year |
| Goal | Short-term profit | Long-term wealth building |
| Stress level | Higher | Lower |
Neither is inherently better. Warren Buffett is an investor. Most hedge fund managers are traders. The key difference is your intent and timeframe.
Markets You Can Trade
There are five main markets available to UK traders:
- Stocks — shares in companies like Apple, Tesco, or Tesla
- Forex — currency pairs like GBP/USD (the pound vs the dollar)
- Crypto — Bitcoin, Ethereum, and thousands of other digital currencies
- Commodities — gold, oil, wheat, natural gas
- Indices — baskets of stocks like the FTSE 100 or S&P 500
We will cover each of these in detail throughout this course. For now, just know that the principles of trading apply to all of them — only the details change.
Who Trades?
Retail traders — individuals like you and me, trading from home with personal money. We make up a small percentage of total volume but our numbers have exploded since 2020.
Institutional traders — banks, hedge funds, pension funds. They move enormous amounts of money and often have access to better tools, data, and execution.
Market makers — firms that provide liquidity by always being willing to buy and sell. They profit from the spread (the tiny difference between the buy and sell price).
The Honest Truth
Warning
According to FCA data, 70-80% of retail traders lose money. This is not a scare tactic — it is a regulatory requirement for brokers to display this figure. Most losses come from poor risk management, emotional decisions, and lack of education. This course exists to help you avoid those mistakes.
So Why Learn?
Even if you never place a single trade, understanding how markets work makes you better with money. You will understand why your pension value fluctuates, why mortgage rates change, why petrol prices spike, and how to think about risk and reward in every financial decision you make. That knowledge alone is worth the time.
Example
Imagine you bought 100 shares of a company at £5 each (£500 total). The price rises to £6. You sell all 100 shares for £600. Your profit is £100, minus any fees or tax. That is trading at its most basic. Everything else in this course builds on this foundation.
Risk Disclaimer: Trading financial markets involves significant risk of loss. The content on this page is for educational purposes only and does not constitute financial advice. Past performance is not indicative of future results. You should not trade with money you cannot afford to lose. 70-80% of retail investor accounts lose money when trading CFDs and spread bets. Consider whether you understand how these products work and whether you can afford the high risk of losing your money.