Trading Skills
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.
Fundamental Trading Skills
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Frequently Asked Questions
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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 those transactions are governed by various regulations meant to protect the investing public.Learn More What Is a Stock?
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What is Volume-Weighted Average Price (VWAP)?Also known as the VWAP, the 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.Learn More Volume-Weighted Average Price (VWAP)
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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 buy limit order, whereby the order will be placed at the limit price or lower, and the sell limit order, where the order will be executed at the limit price or higher.Learn More Limit Order
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What is the risk/reward ratio?The risk/reward ratio is used by investors to measure 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.Learn More Risk/Reward Ratio
Key Terms
- Market RiskMarket risk is the possibility that an investor may face losses due to various factors impacting one’s investments in financial markets. Traders and investors try to minimize market risk by diversifying their investments, and watching how changes in interest rates, exchange rates, local or global conflicts, and economic growth or contraction may impact their investments.
- Stop OrderA stop order is an order to buy or sell a security when its price moves past a particular point, so that once it hits that strike price, the investor can exit his or her position by limited the expected loss or locking in potential profits. Once the price hits that target, the stop order becomes a market order.
- Day TraderDay traders are traders who have a very short time horizon for their investments to take advantage of volatile markets and intraday market price moves. Day traders aim to profit by making trades on very short-term price movements, which offers the possibility of quick gains, along with the high risk of losing one’s investments.
- Shareholders’ AgreementLike the name implies, a shareholders' agreement is a document involving a company's shareholders that describes how the company should operate and details the rights and obligations of shareholders. The agreement, also known as a stockholders' agreement, helps protect the rights of those stakeholders.
- TraderA trader is a market participant who buys and sells financial securities in what tends to be a relatively short time horizon. Traders differ from investors, who tend to have a longer-term investing horizon, and who are content to buy and hold securities to lock in longer-term profits.
- Trading PlatformTrading platforms in general are online software tools used to manage and execute market positions through an online broker. Such platforms can range from basic order entry screens for beginners to more sophisticated platforms with live quotes and charting capabilities.
- Whipsaw
Whipsaw is a trading term that describes a price movement that acts like a whipsaw, moving quickly in one direction, but then quickly moving back in the opposite direction. When trading securities, a whipsaw price movement often results in trading losses due to the price volatility.
- FillA fill is a market order that has been executed, or filled. For example, if an investor wants to buy a share at $10, and finds a willing seller who wants to sell at that price, the order is made, and the order is filled, completing the transaction.
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Perpetual Futures: What They Are and How They Work
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How to Trade Options on Webull
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Best Swing Trading Platforms 2024
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How to Trade 0DTE Options
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How to Trade Options
Explore Trading Skills
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How to Open a Swing Trade Account
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How to Trade NFTs
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How to Swing Trade
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4 Best Futures Trading Platforms
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Investopedia's Top Terms of 2018
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Framing Effect: What It Is and Examples
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Oil Gains as OPEC Holds Steady on Output Increases
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Robinhood vs. eToro
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Volume-Weighted Average Price (VWAP): Definition and Calculation
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Trading Desk: Definition, What It Does, Common Types
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Rule of Thumb: Definition and Financial Examples
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What Is a Shareholders' Agreement? Included Sections and Example
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What Is a Bid-Ask Spread, and How Does It Work in Trading?
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Whipsaw: Definition, What Happens to Stock Price, and Example
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Open Position: Meaning and Risk in Trading
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Maintenance Margin: Definition and Comparison to Margin Accounts
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Decline: What It Is, How It Works, Example
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Money Management: Definition and Top Money Managers by Assets
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Funds Management: Definition, Responsibilities, and Industries
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Absolute Return vs. Relative Return: What's the difference?
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Bidder: What it Means, How it Works, Types
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Retrocession: Definition, Types, Example, Criticisms
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Exit Strategies: A Key Look
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Portfolio Margin: Overview, How it Works
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What Is a Fill? Definition in Investing, How It Works, and Types
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Futures Prices Converge Upon Spot Prices
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Batting Average: What it is, How it Works
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Free Tools To Help You Manage Your Money
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Are Micro E-Mini Futures 'The Next Big Thing'?
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Ultimate Trading Guide: Options, Futures, and Technical Analysis
Commodity Spot Prices vs. Futures Prices: What's the Difference?
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How to Calculate the Notional Value of a Futures Contract
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What Is a Trader, and What Do Traders Do?
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Endorser: What They are, What They do, Best Practices
Offer to Buy An Asset: Types and Examples
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Left Hand Side (LHS): Overview and Examples in Forex
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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 Finance
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5 Ways to Avoid Present Bias in Investment Decisions
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Best Options Trading Courses
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Buying Power (Excess Equity): Definition in Trading and Example
Illiquid Assets: Overview, Risk and Examples
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What Does an Investor Do? What Are the Different Types?
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Understanding Liquidity and How to Measure It
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Understanding Notional Value and How It Works
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Short Squeeze: Definition, Causes, and Examples
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Speculation: Trading With High Risks, High Potential Rewards
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Trading in the Pre- and Post-Market Sessions
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Spot Rate: What It Is, How It Works, Example
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Spot Market: Definition, How They Work, and Example
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Know Your Shareholder Rights
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Average Daily Trading Volume (ADTV): Definition, How To Use It
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Breakeven Point: Definition, Examples, and How to Calculate
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What Is Clearing? Definition, How It Works, and Example
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Proprietary Trading: What It Is, How It Works, Benefits
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What Is an Activist Shareholder? What They Do and How They Work
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Short Covering: Definition, Meaning, How It Works, and Examples
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Tick Size: Definition in Trading, Requirements, and Examples
Underlying Asset (Derivatives)—Definition, How It Works, Examples
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Drawdown in Banking vs. Drawdown in Trading: What's the difference?