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What trading is and how it works (no promises)
Trading is the activity of opening and closing positions in a financial market with a defined method for entry, exit and risk per trade, seeking to capture price movements. It is not a source of passive income or a shortcut: it is a craft that is learned, measured and corrected with your own data. Those who do not control risk end up handing their capital to the market, almost always in less time than they expected.
What trading is, in one sentence
Trading is the active management of positions in a market, with written rules for entry, exit and risk per trade.
The definition that actually works
The difference from investing is the horizon and the method. The investor buys a share of an asset and waits for years; the trader operates on price movements within a specific time window and makes repeated decisions, often with leverage. Their advantage is not in guessing the future, but in repeating a process with positive mathematical expectancy and keeping risk under control when they are wrong, which they will often be.
That implies three practical things: a market to trade in, rules that say when you enter and when you exit, and a clear limit on how much you can lose on each decision. Without the third, the first and the second do not matter.
What trading is not
It is not passive income: it consumes time, attention and study. It is not guessing direction: you work with probabilities, not certainties. It is not a casino, although it may look like one when you trade without a plan and with random position size. And it is not a job that pays from the first month; the learning curve is paid for, almost always, with real losses.
How money is made and how it is lost
Where profit comes from
From the price difference between entry and exit, multiplied by the position size and minus costs. In derivative products you do not own the asset: you speculate on its price and the counterparty is the broker or the market. The formula that matters is expectancy: (probability of winning × average gain) − (probability of losing × average loss) − costs. You can win 40% of trades and make money if the average gain is three times the average loss. And you can win 80% and lose money if the few times you are wrong you lose ten times more.
The cost almost nobody adds up
Spread, commission, financing for holding positions open overnight and slippage in execution. They look like cents, but they multiply with frequency. Illustrative example: 2 trades a day, 20 days a month, 40 trades. If the average cost per trade is €2, that is €80 a month; on a €1,000 account that is 8% a month before you have made anything. Online trading that is cheap on commissions is not always cheap on spread.
The types of trading that exist
By time horizon: intraday, swing and long term
| Type | Horizon | Time in front of the screen | Costs | Overnight risk |
|---|---|---|---|---|
| Intraday | Minutes or hours | High | High (more trades) | Not assumed |
| Swing | Days or weeks | Medium | Medium | Yes (financing, gaps) |
| Long term | Months or years | Low | Low | Yes |
Intraday trading depends on the session: the Asian, European and American sessions have different hours, liquidity and volatility, and the overlaps between sessions tend to concentrate activity. Trading outside your natural hours usually proves costly in decision-making.
By instrument: synthetics, forex, gold
Synthetic indices are instruments whose price is generated by the broker itself using an algorithm; they do not replicate a real asset and trade 24 hours a day, including at weekends. They come in fixed and variable volatility versions, and their behaviour is more erratic than that of a stock index.
Forex is the currency market: pairs such as EUR/USD, enormous liquidity, an over-the-counter market and session-based hours. Gold is a commodity with its own trading hours, sensitive to interest rates, the dollar and geopolitics, with spreads and volatility that vary greatly depending on the moment.
What you really need to get started
Money, time and a risk rule
Capital you can afford to lose without affecting your life, actual time to study and trade, and a per-trade risk rule written down before the first entry. A common reference point is not to risk more than 1% of the account per decision; what matters is not the exact number, but that it exists and is respected. All of this is set out in a trading plan: markets, schedule, entry and exit criteria, risk per trade, maximum daily loss and a record of every trade.
Numerical example with a small account
A €1,000 account, 1% risk per trade = €10. If your stop is 20 points away from the price, the size should be €0.50 per point: if the stop is hit, you lose €10. Ten consecutive losses are €100, 10% of the account, and you are still trading.
At 5% per trade that would be €50, and ten consecutive losses halve the account. Leverage does not change this: it changes the margin required to open the position, not what you risk. Recovery is not symmetrical either:
| Account drawdown | Gain needed to return to the starting point |
|---|---|
| −10% | +11,1% |
| −25% | +33,3% |
| −50% | +100% |
| −75% | +400% |
That is why risk per trade is decided before trading, not after.
The mistakes that always recur
Trading without a plan
Without written rules, every decision is made on impulse and there is nothing to audit. The result is that you do not know whether you are winning by method or by chance, and you cannot correct what is not defined.
Changing strategy every week
A strategy needs a large sample to show whether it works. If you abandon it after three losses and jump to another one, you never accumulate data: you accumulate costs.
Confusing luck with method
Ten winning trades in a row validate nothing, just as ten losses do not invalidate a system with positive expectancy. Only a large, recorded sample with constant risk says anything.
How to measure whether you are doing well
Measure in units of risk, not in money. Keep a record of every trade with the risk assumed, the result in multiples of that risk, the costs paid and whether you followed the rules. With 50-100 trades you can look at average expectancy, win rate, the average gain-to-loss ratio, maximum drawdown and, above all, the percentage of trades that followed the plan. If compliance is low, the result is not yours: it belongs to chance.
Frequently asked questions
What are synthetic indices in trading?
They are instruments whose price does not replicate any real asset: it is generated by the broker's algorithm and offered continuously, 24 hours a day and also at weekends. They are usually presented as fixed or variable volatility indices, and the counterparty to your trade is the broker itself, not a centralised market.
What is a lot in trading?
It is the standardised volume unit used to measure the size of a position. In forex, a standard lot equals 100,000 units of the base currency, and there are fractions (mini and micro). In other instruments, the lot is defined by the broker. Knowing its value per point is essential to calculate how much you are risking.
How do you audit a trading account?
Review the broker's historical statements, not screenshots: number of trades, actual risk taken on each one, costs paid, maximum drawdown and consistency between what your plan says and what you did. Also check whether the result depends on two or three large trades; if so, the sample still says nothing.
What does synthetics mean in trading?
It is the short way of referring to synthetic indices. The term appears on platforms that offer these instruments alongside forex, commodities or cryptocurrencies, and it is worth distinguishing them: they have no real underlying asset or an external market that sets the price.
What are synthetics in trading?
They are products designed by the broker to quote continuously. Their appeal is round-the-clock availability and constant volatility in some versions; their limitation is that you cannot verify the price against an independent market, so the broker's transparency and execution conditions matter more than in other instruments.
Start at the beginning
Before looking for a strategy, understand the market and decide how much you are willing to lose per trade. That is the order of the house.