INTRODUCTION TO TRADING Flashcards
Question: What is the stock market?
Answer: The stock market is a place where people buy and sell shares of companies. It allows investors to own a piece of a company and trade stocks to make a profit.
Question: Who are the main players in the stock market?
Answer: The main players include retail investors (individuals), institutional investors (hedge funds, mutual funds, banks), market makers (who provide liquidity), and regulators (like the SEC).
Question: What is the difference between investing and trading?
Answer: Investing is long-term, focusing on company growth over years. Trading is short-term, aiming to make quick profits from price movements in days, weeks, or even minutes.
Question: What are stocks, ETFs, and options?
Answer:
Stocks: Shares of a company that give ownership.
ETFs: A collection of stocks traded together as one unit.
Options: Contracts that give the right (but not obligation) to buy or sell a stock at a specific price.
Question: What is the difference between day trading and swing trading?
Answer:
Day trading: Buying and selling stocks within the same day.
Swing trading: Holding stocks for a few days to weeks to capture larger price movements.
Question: What is a brokerage account, and why do you need one?
Answer: A brokerage account is an account where you deposit money to buy and sell stocks. It connects you to the stock market and allows you to trade.
Question: What is the difference between a cash account and a margin account?
Answer:
Cash account: You trade using only the money you deposit.
Margin account: You borrow money from the broker to trade larger amounts
Question: How do stock prices move?
Answer: Stock prices move based on supply and demand. If more people want to buy a stock, the price goes up. If more people want to sell, the price goes down.
Question: What is risk vs. reward in trading?
Answer: Risk is the chance of losing money, while reward is the potential profit. Good traders manage risk to ensure their losses are smaller than their gains.
Question: What are bid, ask, and spread?
Answer:
Bid: The highest price a buyer is willing to pay for a stock.
Ask: The lowest price a seller is willing to accept.
Spread: The difference between bid and ask prices.
Question: What is liquidity in trading?
Answer: Liquidity is how easily you can buy or sell a stock without affecting its price. High liquidity means many buyers and sellers are trading the stock.
Question: Why do traders need a plan before trading?
Answer: A trading plan helps avoid emotional decisions and keeps traders focused on strategy, risk management, and profit goals.
Question: What is slippage in trading?
Answer: Slippage is when a trade gets executed at a price different from what was expected due to fast market movements.
Question: What is volatility, and why does it matter?
Answer: Volatility measures how much a stock price moves up or down. High volatility means bigger price swings, which can mean higher profits or higher losses.
Question: What are market orders and limit orders?
Answer:
Market order: Buys or sells a stock immediately at the current price.
Limit order: Sets a specific price to buy or sell at, only executing if the price reaches that level.
Question: What is a stop-loss order?
Answer: A stop-loss order automatically sells a stock when its price drops to a set level, helping to limit losses.
Question: Why is trading psychology important?
Question: Why is trading psychology important?
Question: Why is trading psychology important?
Question: Why is trading psychology important?
Question: What is FOMO in trading?
Answer: FOMO (Fear of Missing Out) is when traders rush into a trade because they see a stock moving fast, often leading to bad decisions.
Question: What is paper trading, and why should beginners use it?
Answer: Paper trading is practice trading with fake money. It helps beginners learn without risking real money.
