What is Trading?
Trading is a proactive buying and selling activity aimed at outperforming the market average. Rather than buying an asset to hold for years, traders speculate on price movements—both up (going long) and down (going short).
The core of trading is volatility. Traders require price movement to generate profit. While an investor might be content with a flat market that pays dividends, a trader views a flat market as "dead money." Success in trading requires a rigorous adherence to a trading plan, risk management protocols, and psychological discipline.
What is the difference between trading and investing?
| Factor | Trading | Investing |
|---|---|---|
| Time Horizon | Minutes to Weeks(Short-term)
| Months to Decades(Long-term)
|
| Objective | Quick Gains / Income
| Wealth Protection & Growth
|
| Analysis Used | Technical Analysis(The "How")
| Fundamental Analysis(The "Why")
|
| Risk & Volatility | Volatility Risk(Price Noise)
| Thesis Risk(Core Story)
|
| Costs | High Sensitivity
| Low Sensitivity(Daily)
|
How does online trading work? Basics of Trading.
Common Principles Explained:
How it works behind the scene with Market Participants
Online trading is a chain: you submit an order, your broker routes it, and the order is filled against liquidity from a venue or liquidity providers. Depending on the setup, the broker may operate an internal dealing model or an agency model that routes to external liquidity, which affects spreads and how fills behave during fast markets.
Execution quality is shaped by price feeds, order routing, and latency. For active strategies, even milliseconds can matter, which is why some firms colocate near major data centers such as Equinix to reduce delays.
A Tier-1 licensed CFD Broker, like TMGM. We are obligated to provide the best pricing available. On top of that, TMGM uses Tier-1 Liquidity provider and NY4 Server, which produces the best possible pricing, this is why TMGM’s Edge Account is the most suitable for serious traders.
"Article 27 Obligation: to execute orders on terms most favourable to the client – European Securities and Markets Authority (ESMA)”
Different Styles of Trading
Common styles are day trading (scalping, a form of day trading), swing trading, and position trading, mainly defined by holding period and trade frequency. The shorter the horizon, the more your results depend on execution, news spikes, and microstructure effects like spread widening.
Trading style is also influenced by whether you use discretionary decision making or a systematic rules based approach. Systematic styles benefit from backtesting and consistent risk rules, while discretionary styles rely more on pattern recognition and experience, but can suffer from inconsistent execution.
Pro Tip: If your strategy targets small moves, test it using realistic assumptions for spread, commission, and slippage, because “paper edge” often disappears once execution costs are applied.
Assets to Trade
Online trading covers forex, commodities (like gold and silver trading), shares, ETFs, crypto, indices, and interest rate products (bonds), depending on venue and jurisdiction. Each asset class has different volatility regimes, liquidity patterns, trading hours, and cost drivers, so the same strategy rarely transfers cleanly across markets.
Product structure matters as much as the asset itself. A spot market, a futures contract, and a CFD can reference the same underlying, but differ in financing, margin, rollover mechanics, and how overnight exposure is priced.
How to Decide My Trading Style?
Start with constraints, not tactics. Your trading style should be chosen based on what you can execute consistently, not what sounds exciting in theory.
Pick the style where those three factors match your schedule, your attention span, and your risk limits, then commit to one or two instruments and a repeatable entry and exit rule so you can measure results in a journal.
| Trading style | Effort | Time commitment | How Long before Profiting? | Best fit for | Main hidden risk |
|---|---|---|---|---|---|
| Scalping | Very high | Full focus during sessions, constant monitoring | Very short (minutes) | Traders who can react fast and treat execution as the edge | Complicated learning curve, small costs can wipe out profits: spread widening, slippage, overtrading |
| Day trading | High | Dedicated blocks of screen time most trading days | Short (same day) | Traders who want no overnight exposure and can focus intraday | News spikes, emotional churn, forcing trades to “use the day” |
| Swing trading | Medium | Check charts 1–3 times per day, manage positions daily | Medium (days to weeks) | Traders with a job who can manage risk but not watch ticks | Overnight gaps, swaps, holding losers too long |
| Position trading | Low to medium | Periodic review (a few times per week) | Long (weeks to months) | Traders who prefer fewer decisions and can sit through drawdowns | Regime change, thesis drift, long drawdowns, opportunity cost |
Use the table as a filter around three realities:
Effort level (how intense the decision making and execution is)
Time commitment (how much screen time and monitoring the style demands)
How long before profiting? (how quickly the approach typically aims to realize gains).
The shorter the profit horizon, the more the outcome depends on execution quality and costs, while longer horizons trade speed for patience and drawdown tolerance.
Why Do People Trade Online?
Beyond the potential for financial independence, trading offers Liquidity—the ability to convert assets to cash instantly. It also provides the ability to profit in bear markets (by shorting), something traditional "buy and hold" investing cannot do. With barriers to entry at an all-time low, anyone with an internet connection and risk capital can participate in the global financial ecosystem.
Many people also like the fact that trading often operates on global market hours, meaning that you can make money almost 24/7, suitable for a flexible lifestyle. Traders also sometimes use it for hedging (to reduce the impact of negative economic events from affecting their purchasing power). They do this by reducing currency exposure or offsetting portfolio risk around events.
The trap is that accessibility can encourage overtrading and oversized positions. Convenience does not reduce market risk, it often increases behavioral risk.
Important: Leverage magnifies losses the same way it magnifies gains, so the first skill to master is position sizing with a predefined stop loss, not finding a perfect entry.
FAQ
Is trading gambling?
It becomes gambling when there is no defined edge, no risk limit, and decisions are driven by emotion or random outcomes. Trading is a skill process when you use probabilistic thinking, consistent risk sizing, and a repeatable method you can evaluate over many trades.
How much money do I need to start trading online?
Enough to survive normal drawdowns without changing behavior. In practice, you want sufficient capital so risking a small fixed percentage per trade still results in meaningful but controlled position sizes after spreads, commissions, and stop distance.
What is the safest way to trade with leverage?
Use the lowest leverage that still fits your strategy, cap risk per trade, and plan exits before entry. Combine a stop loss, conservative margin usage, and protections offered by your venue, such as negative balance protection where applicable, and assume slippage can occur in fast markets.
How much capital do I need to start trading?
While some brokers allow deposits as low as $10, effective risk management typically requires at least $500-$1,000 to trade micro-lots without over-leveraging.
