Understanding what you are getting into

Trading means buying a financial asset intending to sell it again — or the reverse — to profit from the change in its price. The asset can be a currency pair like the euro against the dollar, a stock index like the S&P 500, a share, a commodity or a cryptocurrency. The principle is the same everywhere.

The first thing to correct, because it changes how you look at a chart: a price is not an official value. It is simply the level at which a buyer and a seller have just agreed. It only moves when somebody accepts to transact higher or lower than the time before. So a price curve is not an abstract quantity: it is the trace of decisions taken one after another, by humans and by machines.

What separates trading from investing is the horizon. An investor buys a share and holds it for years hoping the company prospers. A trader takes positions over minutes, hours or days, and does not care whether the company still exists in ten years: they work on the movement of the price, not on long-term value.

One point has to be clear from the start, because it determines everything else: trading is a negative-sum game before costs. For someone to win, someone else has to lose, and the broker takes a cut along the way. That is not a reason to stay away, but it is a reason to distrust anyone presenting it as easy income.

So trading is not a salary, not a savings plan, and not a way to get rich quickly. It is a technical skill learned slowly, with a high failure rate among those who mistake it for something else. The rest of this course exists to keep you out of that majority by simple ignorance.

When you buy, somebody sells. That is mechanical: there is no trade without a counterparty. So the useful question is who that somebody is, and the answer is rarely reassuring. On the markets you are going to watch, most of the volume comes from banks, funds, market makers and automated programs dealing continuously, with costs and information you do not have.

That does not mean it is hopeless: those participants do not share your constraints or your horizon, and many are not trying to predict direction at all. But it does mean you should stop picturing the market as a crowd of individuals. You are the small minority.

Between you and that market sits your broker, and you need to understand how it earns its living. Three sources, generally: the gap between the buy price and the sell price it shows you, a commission per transaction, and financing costs when you hold a position overnight. The step on costs covers each one.

You also need to know what happens to your order. Some brokers pass it to the market and are paid only for the routing. Others take the other side themselves: when you lose, the house collects. Both models exist legally and are run by serious firms, but the second creates an interest that is not yours, and you deserve to know which one you are in.

In practice, before opening anything, check three things: which regulator supervises the entity you are opening the account with, whether your funds are held separately from the company’s own, and what the documentation says about execution. That information is public and a serious firm does not hide it. If you cannot find it, that is already an answer.

Buying — also called going “long” — is betting the price will rise. You buy at 100, the price goes to 110, you sell: the difference is your gain. If it falls to 90 and you exit, the difference is your loss. That is the intuitive direction, the one everybody understands.

Selling — going “short” — is the opposite, and it is what surprises beginners: you bet the price will fall, and you can do it without owning the asset first. In practice you sell at 100, the price falls to 90, you buy back lower: the 10 difference is your gain. The instruments used in trading — futures, CFDs — allow this directly.

The practical consequence matters: a falling market is not a problem for a trader, it is simply a direction. You do not need things to “go up” to make money. You need to be right about the direction, whichever it is.

Two pieces of vocabulary, because they come back everywhere. A position is an open trade: until you close it, its value moves with the price and the gain or loss shown is only provisional. Exposure is the total amount the market moves on your behalf — and the next step will show you it has nothing to do with what you deposited.

One last habit to build straight away: opening a position and closing it are two separate decisions, and the second is harder than the first. Most beginners spend hours choosing when to enter and have no idea when they will exit. Module 3 is entirely about that question.

This is the most important step in the module, and the one almost nobody reads before opening an account. Leverage is the ability to control an exposure far larger than what you deposited. At 1:30, a thousand francs in your account lets you open thirty thousand francs of exposure. The market moves on thirty thousand; gains and losses alike are computed on thirty thousand.

Margin is the share of your capital the broker locks up while the position is open. It is not a cost and it is not a loan: it is a good-faith deposit, returned when you close. Many beginners believe margin is the amount they are risking. It is not, and the confusion is expensive: what you risk depends on the distance between your entry price and your exit point, not on the margin locked up.

The arithmetic is brutal and worth writing down. On thirty thousand of exposure, a 1% move in the market is three hundred francs. If your account holds one thousand, that 1% move — which any market produces on an ordinary day — is 30% of your capital. Three ordinary days in the wrong direction and there is nothing left.

When unrealised losses eat into the required margin, the broker warns you, then closes your positions on its own authority rather than end up your creditor. That is the margin call and the liquidation. You choose neither the moment nor the price, and it happens systematically at the worst place — that is, wherever the market has travelled furthest against you.

Here is the correct way to see it, and it will serve you through all of module 3: leverage does not define your risk, it defines the maximum size you are allowed to open. Your actual risk is set by you, by choosing your exit point and then a position size consistent with it. A trader working properly uses a tiny fraction of the leverage available, and a high cap is of no use to them. Available caps vary by the broker’s jurisdiction and by instrument: read what yours actually says rather than what a forum says about it.