Core elements

Before you start trading, it is important to understand the core concepts. This page explains the key elements you will encounter while trading.

Market analysis

There are two ways to look at the market:

Fundamental analysis focuses on the underlying value of a company. You analyze financial reports, news, product launches, and market conditions. This is especially useful for long-term investing.

Technical analysis focuses on price movements and chart patterns. You use historical data to estimate where price may move next. This is what daytraders and swingtraders typically use.

In this tutorial, we focus only on technical analysis. Besides technical analysis, there are important news events you should track as a daytrader or swingtrader, such as earnings releases, U.S. economic data, and Federal Reserve rate decisions. These events can cause spikes, meaning sudden and aggressive price movements, and they create major risk for open positions.

Market direction

The terms bullish and bearish describe overall market sentiment. Bullish means traders expect prices to rise. Bearish means they expect prices to fall. This sentiment is mainly shaped by:

• Price action: Higher highs and higher lows indicate a bullish trend; lower highs and lower lows indicate a bearish trend.
• Volume: Rising volume during rising prices strengthens bullish sentiment; rising volume during falling prices strengthens bearish sentiment.
• News and events: Positive company news, macroeconomic data, or sector trends can create bullish sentiment, while weak numbers or uncertainty can create bearish pressure.

You also use these terms for setups or candlesticks: a bullish setup supports long entries, while a bearish setup supports short entries.

What is a trend?

A trend is the general direction in which price moves. There are three types:

Uptrend (rising or bullish trend): Price forms higher highs and higher lows. The trend is upward. This favors long trades.

Downtrend (falling or bearish trend): Price forms lower highs and lower lows. The trend is downward. This favors short trades.

Range (sideways market): Price moves between an upper and lower boundary without a clear direction. This is also called "consolidation."

"The trend is your friend" is a well-known trading expression. It is easier to trade with the trend than against it. An uptrend does not mean you should always go long, but long trades are statistically more likely to succeed.

Long vs short

A long position means you buy because you expect price to rise. Your profit comes when price moves above your entry. A short position means you sell first (shares are borrowed through your broker automatically - you do not need to manage this manually) because you expect price to fall. Your profit comes when you buy back at a lower price. To make money in daytrading or swingtrading, prices do not always need to rise. You can profit in falling markets, just as you can lose money in rising markets.

What is a chart?

A chart (price chart) is a visual representation of how the price of a stock, index, or other financial instrument develops over time. It is your most important tool as a trader.

Time is shown on the horizontal axis, and price on the vertical axis. By reading a chart, you can immediately see whether price is rising, falling, or moving sideways. Charts help you identify patterns and make decisions.

What is a ticker?

A ticker is the abbreviation used to identify a stock or financial product on an exchange. For example:

• AAPL = Apple
• TSLA = Tesla
• NVDA = Nvidia
• SPY = S&P 500 index

When you want to place a trade, you use the ticker to select the correct instrument. Every ticker is unique and refers to one specific product.

What is a candlestick?

A candlestick is a way to visualize price movement. Each candlestick shows four key prices for a specific time period:

• Open: Price at the start of the period
• High: Highest price during the period
• Low: Lowest price during the period
• Close: Price at the end of the period

Green candlesticks are bullish, meaning price rose (close higher than open).
Red candlesticks are bearish, meaning price fell (close lower than open).

The body of the candlestick (the thick part) shows the difference between open and close. The wicks (lines above and below the body) show high and low.

By reading a candlestick chart, you can quickly identify buying or selling pressure and how volatile price is.

The next step is learning how to read charts. Continue here: Reading charts