What is trading?
What is trading and how does it work?
Learning objectives
By the end of this lesson, you'll be able to:
- Explain what a market is and what actually happens when you trade
- Describe what a broker does between you and the market
- Recognise the difference between trading and investing
Markets are just meeting points
A market is anywhere buyers and sellers meet to agree prices. Some are physical exchanges with strict opening hours (the London Stock Exchange), others are global networks of banks and dealers that never centralise anywhere — the currency market works like that, which is why it runs 24 hours on weekdays.
Trading means buying and selling things whose price moves — currencies, gold, company shares, stock indices — to profit from those moves. Unlike investing, where you buy and hold for years, trading works on shorter horizons: hours, days, weeks. Shorter horizons mean more decisions, and more decisions mean more ways to be right and wrong.
Where a broker fits
You can't call a bank's dealing desk and ask to trade €50. A broker like Alpari aggregates prices from large institutions and passes them to you, executes your orders, and lends the mechanics (platforms, charts, leverage) that make small-scale trading possible.
The broker earns mainly from the spread, a tiny gap between the buying and selling price, and sometimes commission. That's worth remembering: every trade starts a fraction behind, so trading more often isn't automatically better.
Example: Anna thinks the euro will strengthen against the dollar. She buys €10,000 worth of EUR/USD through her broker. The price rises 0.7% over two days (about 70 pips — a pip is the standard unit of price movement; more on that in Foundations) and she closes, collecting roughly $70 before costs. If the price had fallen 0.7% instead, she'd have lost roughly $70. Both outcomes were always on the table — that symmetry is the honest heart of trading.
What trading is not
It is not a salary, not a get-rich-quick scheme, and not gambling if you treat it as a skill with risk control (though plenty of people manage to gamble with it anyway)
Most retail traders lose money, usually by risking too much, too soon, with no plan. This academy exists to put you in the other group: the path ahead covers the mechanics, the risk maths, and the habits, in order.
Key takeaways
- Markets are meeting points for buyers and sellers; forex is a 24/5 global network, not a building
- A broker aggregates institutional prices and executes your orders, earning mainly from the spread
- Trading = shorter horizons and more decisions than investing with profit and loss equally available
- Most retail traders lose; the difference is risk control, a plan, and patience