Market, limit and stop orders
Market orders seek execution at available prices, limit orders constrain the execution price, and stop orders activate after a trigger. The choice determines which risks remain when a trade reaches the market.
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Trading foundations
Reading a forex pair
A currency pair states the price of one currency in units of another.
Markets & instruments
Stocks and share ownership
A stock represents an ownership interest in a company. Its market price and the cash it distributes are separate parts of the investment result.
Bonds, coupons and yield
A bond is a debt claim. Its coupon, trading price and yield answer different questions.
Exchange-traded funds
An ETF gives investors a tradable interest in a portfolio, but the label alone says little about the risks inside it.
Futures contracts
A futures position is exposure to a specified contract, including its size, expiry and settlement terms.
Calls, puts and option premiums
An option buyer pays for a contractual right. The seller accepts the corresponding obligation.
Technical analysis
Simple moving average
A simple moving average is the arithmetic mean of a rolling window of prices.
Fundamental analysis
Consumer Price Index
The CPI measures changes in consumer prices. An index level, a monthly change and an annual change are different figures.
Policy rates and market rates
A central-bank policy setting and a traded market yield are distinct observations.
Market mechanics
Bid-ask spread: quotes, costs and market depth
The bid-ask spread is the difference between the best buying and selling quotes. Measuring it alongside available quantity helps explain the cost of entering and leaving a position.
Risk management
Leverage and exposure
Leverage measures exposure relative to the capital supporting it. A small margin requirement does not make the position small.
Position sizing
Position sizing connects an intended loss budget to the distance between entry and a planned exit.
Drawdown and recovery
Drawdown measures the fall from an earlier equity peak. The percentage gain needed to recover is larger than the percentage lost.
Trading psychology
Keeping a trading journal
A journal preserves what was known and planned before the outcome was visible.
Strategies & testing
Expectancy and win rate
Win rate counts successful trades. Expectancy also accounts for the size of wins, losses and costs.
Designing a backtest
A backtest applies recorded rules to historical observations. Its result depends on what the simulation permits and excludes.