The financial market is a place where people and institutions buy and sell financial assets. It plays a key role in the economy by connecting those who have money to invest with those who need funds to grow their businesses or manage expenses.
In simple terms, it’s a system that helps money flow efficiently between investors, companies, and governments.
Financial instruments are tools of trade each represents a contract or asset you can buy, sell, or invest in.
Stocks: Ownership shares in a company.
Forex: Trading one currency against another.
Commodities: Physical goods like gold, silver, oil, or wheat.
Indices: A group of stocks representing a segment of the market (e.g., S&P 500, KSE100).
Cryptocurrencies: Digital currencies like Bitcoin and Ethereum.
ETFs: Funds that track an index or sector and can be traded like stocks.
To understand it simply, let’s compare the top performers in each field. Warren Buffett, one of the most successful investors in history, has earned an average of 20% return per year through long-term investing.
On the other hand, Jim Simons, a legendary trader, achieved an average of 66% yearly return with his trading strategy.
This shows that trading has the potential to boost your monthly returns from 1.5% to 5% or even more, but it also comes with higher risk and requires strong skills to handle market ups and downs effectively.
Speculation and hedging are two common approaches used in financial markets, but they serve very different purposes.
Speculation involves taking a position in the market with the goal of making a profit from price movements. Traders who speculate try to predict whether the price of an asset will go up or down and buy or sell accordingly. It carries higher risk because profits depend entirely on market direction.
On the other hand, hedging is used to reduce or protect against potential losses. Businesses, investors, and even governments use hedging strategies to safeguard themselves from price fluctuations in things like currencies, commodities, or interest rates.
For example, an airline company might hedge fuel prices to avoid losses if oil prices rise. In short, speculation aims for profit, while hedging aims for protection.
CFDs (Contracts for Difference) allow traders to speculate on price movements without owning the actual asset. You profit or lose based on the difference between the opening and closing prices of a trade. CFDs are popular because they offer leverage, meaning you can control a large position with a small amount of capital.
Futures market is based on contracts that require the buyer and seller to exchange an asset at a predetermined price on a specific future date. Futures are standardized and traded on regulated exchanges like the Chicago Mercantile Exchange (CME). For example, if you agree to buy crude oil at $80 per barrel for next month, and by then the price rises to $90, you make a profit. However, if it falls to $70, you incur a loss. Futures are commonly used by traders and companies to hedge against price changes or to speculate on future price movements.
The Options market works slightly differently. An option gives you the right, but not the obligation, to buy or sell an asset at a specific price within a set time period. There are two types of options a call option (right to buy) and a put option (right to sell). For example, if you buy a call option on Tesla stock at $200 and the price goes up to $250, you can exercise your option and make a profit. If the price stays below $200, you can simply let it expire, losing only the premium you paid. Options are widely used for hedging and speculative trading, offering limited risk and potentially high rewards.
Short selling is a trading strategy used to profit from a price decline in an asset, such as a stock or commodity.
Instead of buying first, a trader borrows the asset from a broker and sells it at the current market price. Later, when the price drops, the trader buys it back at a lower price and returns it to the broker, keeping the difference as profit.
For example, if a trader sells a stock at $100 and later buys it back at $80, they earn a $20 profit per share. However, short selling is risky because if the price goes up instead of down, the trader faces potential losses.
Every trade involves two sides a buyer and a seller but many types of participants operate in financial markets:
Retail Traders: Individual traders like you, trading through online platforms.
Institutional Traders: Banks, hedge funds, and mutual funds managing large capital.
Market Makers: Provide liquidity by continuously quoting buy/sell prices.
Central Banks: Influence currency value and monetary policy.
Corporations: Hedge risks or raise funds through bonds or stock issuance.
Day trading involves buying and selling financial instruments within the same day. Traders close all their positions before the market closes to avoid overnight risk. They focus on small price movements using charts, technical indicators, and quick decision-making. It requires full-time attention and discipline.
Swing trading aims to capture short- to medium-term price movements that last from a few days to a few weeks. Swing traders analyze charts, trends, and patterns to find entry and exit points. It’s less stressful than day trading but still requires regular market monitoring and good timing.
Position trading is a long-term approach where traders hold positions for weeks, months, or even years based on major trends or fundamental analysis. It requires patience and a strong understanding of market direction. Position traders focus on big moves and usually ignore short-term price noise.
A pip stands for “percentage in point” and is the smallest unit of price movement in most currency pairs or assets. For example, in forex, a move from 1.2000 to 1.2001 is one pip. It helps measure how much a market has moved and calculate profits or losses.
Lot size refers to the amount or quantity of an asset being traded in a single order. In trading, it helps define how big your position is and directly affects your profit or loss. The larger the lot size, the bigger the impact of each price movement on your account balance.
The spread is the difference between the buying (ask) price and the selling (bid) price. It’s how brokers earn money when traders open positions. A tighter spread means lower trading costs, while a wider spread increases costs.
A swap is the overnight fee charged or paid when a position is held overnight. It’s based on the interest rate difference between two currencies or the holding cost of an asset. For example, in forex, if the currency you bought has a higher interest rate than the one you sold, you might earn a positive swap. Otherwise, you pay it.
A commission is a fixed or percentage-based fee that some brokers charge per trade. Not all accounts have commissions, as some include the cost within the spread. Understanding pips, spreads, swaps, and commissions is essential for managing costs and calculating true profitability in trading.
A-Book broker sends all client orders directly to liquidity providers, such as banks or financial institutions. This means the broker acts only as a middleman and doesn’t take the opposite side of your trade. They earn money through spreads or small commissions, not from client losses. A-Book brokers usually offer transparent pricing, true market execution, and no conflict of interest.
B-Book broker, on the other hand, does not send trades to the external market. Instead, it takes the opposite side of the client’s position, meaning the broker profits when the trader loses. These brokers often offer fixed spreads and may use this model to provide faster execution or manage small accounts more efficiently.
A market order is the simplest type. It executes immediately at the current market price. Traders use it when they want to enter or exit a position quickly, without waiting for a specific price. However, the final price may vary slightly due to fast market movements.
A limit order allows traders to set a specific price at which they want to buy or sell. For example, if gold is trading at $2,400 and you place a buy limit at $2,380, your order will only execute when the price drops to that level. It helps traders get their desired price but might not always be filled if the market doesn’t reach it.
A stop order is used to trigger a trade once the market reaches a certain price level, often to limit losses or enter a breakout. For instance, a sell stop order can close your position automatically if the price falls below your set level, protecting you from larger losses.
The trading session refers to the specific hours during which financial markets are open for trading. Since the global market operates across different time zones, trading runs almost 24 hours a day from Monday to Friday. The main trading sessions are Asian, European, and American (US) sessions, and each has its own characteristics in terms of volatility and trading volume.
The Asian session, led by Tokyo, starts first. It’s generally calm and has lower volatility, making it suitable for traders who prefer slow and steady market movements. The European session, centered in London, opens next and is known for high activity and strong price movements, as it overlaps with both the Asian and US sessions. The American session, led by New York, is the most volatile and liquid, especially when it overlaps with London hours.
These overlapping periods often create the most trading opportunities due to high market participation. Understanding trading sessions helps traders choose the best times to trade based on their strategy, preferred volatility, and the instruments they focus on, such as forex, commodities, or indices.
Risk management is one of the most important parts of successful trading. It helps traders protect their capital and survive in the market over the long term. Instead of focusing only on profit, risk management focuses on how much a trader can afford to lose on each trade and how to control that loss.
The Risk-to-Reward Ratio (RRR) measures how much a trader risks compared to how much they aim to earn. For example, if a trader risks $100 to make $300, the RRR is 1:3. A good RRR ensures that even with a few losing trades, the overall result can still be profitable.
The win rate is the percentage of trades that end in profit. Like 40% win rate means you win 4 trade out of 10 or 40 out of 100. A trader doesn’t need a high win rate if the RRR is strong. For example, with a 1:3 RRR, even winning 3 out of 10 trades can lead to profit.
A stop loss is a pre-set level where the trade closes automatically to limit losses. It protects traders from emotional decisions and large unexpected moves.
Take profit order automatically closes the trade when the price reaches a target level, securing profits before the market reverses.
Slippage happens when an order executes at a slightly different price than expected, usually due to fast market movements or low liquidity. It can affect both stop loss and take profit levels.
Trading psychology is the mental and emotional side of trading that affects decision-making, discipline, and consistency. Even with the best strategy, traders can lose money if they can’t control their emotions. Understanding and managing trading psychology is just as important as learning technical or fundamental analysis.
Two common emotional challenges are FOMO (Fear of Missing Out) and greed. FOMO happens when traders jump into trades because they see others profiting and fear missing a move. This often leads to entering at the wrong time. Greed makes traders hold winning positions too long or take too many trades, hoping for bigger profits, which can quickly turn gains into losses.
Overtrading and revenge trading are also major psychological traps. Overtrading happens when a trader takes too many trades without proper setups, often due to excitement or the urge to make quick money. Revenge trading happens after a loss, when the trader immediately takes another trade to recover the loss emotionally instead of logically. Both behaviors usually lead to bigger losses and frustration.
A good plan gives clear entry, exit, and risk rules, but emotional traders often ignore it under pressure. Successful traders stay calm, stick to their plan, and treat trading like a business, not a gamble. Mastering trading psychology means learning patience, discipline, and emotional control to make rational decisions even in stressful market conditions.
A funded account is an opportunity provided by trading firms where traders can trade with the company’s capital after passing a test or evaluation phase. In return, profits are shared between the trader and the firm. It allows skilled traders to earn from larger accounts without risking their own money.
A signal manager provides trade signals recommendations on when to buy or sell to followers. These signals can be shared manually through social media or automatically via copy trading platforms. It’s a way for skilled traders to build an income stream by helping others trade.
A strategy manager is an experienced trader who manages trading strategies for investors. Investors can connect their accounts to follow the manager’s trades automatically. This setup benefits both sides the manager earns a share of the profits, and investors can benefit from professional strategies without trading themselves.
Social media earning plays a big role in today’s trading business. Traders can share educational content, analysis, and trading journeys on platforms like YouTube, X (Twitter), and Instagram to build an audience and earn through ads, sponsorships, or mentorship.
Now, invest your savings in strong and reliable asset classes such as ETFs, Gold, and Silver. These assets have a long history of holding and growing value over time. ETFs (Exchange Traded Funds) give you exposure to a wide range of companies or markets, reducing risk through diversification. Gold and silver, on the other hand, act as safe-haven assets that protect your wealth during inflation or market downturns. By investing consistently and allowing your returns to compound meaning your profits generate more profits your account can grow significantly over 20 to 30 years.
Charting platform: Tradingview
Trading platform: Meta trader, cTrader, Broker application
News and events: Forexfactory
Journaling: myFxbook
Technical analysis is the study of price movements and market behavior using charts and indicators. Instead of focusing on a company’s performance or economic data, it looks directly at price action to predict future movements. The main idea behind technical analysis is that all important information such as news, earnings, and trader sentiment is already reflected in the price.
Fundamental analysis is the process of studying the real-world factors that affect the value of an asset, such as a company, currency, or commodity. It focuses on the overall health of an economy, business performance, and global events rather than just price charts. The goal is to find the true value of an asset and decide whether it’s overvalued or undervalued.
A trading plan is a written guide that defines how a trader approaches the market. It includes clear rules for entry, exit, risk management, and psychology. A good trading plan helps remove emotions from decision-making and keeps the trader consistent under all market conditions. It’s like a business plan for trading without it, success becomes a matter of luck.
Finding an edge means discovering what gives you a consistent advantage over other traders. It could be a specific chart pattern, a market behavior, or a timing method that works repeatedly. An edge doesn’t guarantee every trade will win, but over time, it increases the chances of profitable outcomes. Every successful trader develops and refines their own edge through experience and testing.
Backtesting and forward testing are methods used to test a trading strategy before risking real money. Backtesting means applying your strategy to past market data to see how it would have performed. Forward testing (or demo testing) means trying the strategy in real-time conditions using a demo account. Both steps help identify strengths, weaknesses, and realistic expectations before live trading.
Journaling is the habit of recording every trade, including entry, exit, reasoning, and emotions. Over time, it helps traders analyze performance, spot mistakes, and improve decision making.
