Trading Basics for Beginners

Everything you need to know to start your trading journey — from markets and order types to risk management fundamentals.

Beginner 12 min read

What Is Trading?

Trading is the act of buying and selling financial instruments — stocks, options, futures, or other assets — with the goal of profiting from price changes. Unlike long-term investing, where you buy and hold for months or years, active trading focuses on shorter timeframes, from minutes to weeks.

At its core, trading is about identifying opportunities where the probability of a profitable outcome is in your favor, managing your risk so that losses stay small, and executing with discipline so that emotions don't override your plan.

Key Principle: Successful trading is not about being right every time. It is about ensuring your winning trades earn more than your losing trades cost. This is called having a positive expected value (EV).

Who Trades?

Markets include a wide range of participants:

Retail traders — Individual investors like you, trading from home with a brokerage account.
Institutional traders — Banks, hedge funds, and pension funds trading large volumes.
Market makers — Firms that provide liquidity by continuously quoting buy and sell prices. Understanding how market makers operate is central to GEX analysis.
Algorithmic traders — Programs that execute trades automatically based on rules. IntelliTrade's auto-trading agents fall into this category.

Markets and Exchanges

Financial markets are organized venues where buyers and sellers come together. The major types relevant to IntelliTrade include:

Stock Market

Exchanges like the NYSE and NASDAQ where shares of companies are bought and sold. The S&P 500 (SPX) tracks the 500 largest U.S. companies and is the primary index IntelliTrade analyzes.

Options Market

Options are contracts that give you the right to buy or sell an asset at a specific price. Traded on the CBOE and other exchanges. Learn more about options →

Futures Market

Standardized contracts to buy or sell an asset at a future date. Traded on the CME. ES, MES, and NQ are popular index futures. Learn more about futures →

Market Hours

The U.S. stock market operates on Eastern Time (ET):

Pre-market: 4:00 AM – 9:30 AM ET
Regular Trading Hours (RTH): 9:30 AM – 4:00 PM ET
After-hours: 4:00 PM – 8:00 PM ET

Futures markets trade nearly 24 hours on weekdays, giving you extended access to price movements.

Understanding Order Types

When you place a trade, you need to tell your broker how to execute it. The order type determines the price and conditions under which your trade gets filled.

Market Order

Buys or sells immediately at the best available price. You get fast execution but no control over the exact price. Best used when you need to enter or exit a position quickly.

Limit Order

Buys at or below a specified price, or sells at or above a specified price. You control the price but there is no guarantee of execution — the market may not reach your price. IntelliTrade uses limit orders for most entries to ensure favorable pricing.

Stop Order (Stop Loss)

Becomes a market order when a specified price is reached. Used to limit losses by automatically selling when the price moves against you. For example, if you buy at $100 and set a stop at $95, your position is automatically sold if the price drops to $95.

Stop-Limit Order

Combines a stop and a limit: once the stop price is triggered, it places a limit order instead of a market order. Gives you more price control than a plain stop, but may not fill in fast-moving markets.

Important: In fast-moving markets, market orders and stop orders can experience slippage — executing at a worse price than expected. This is why limit orders are preferred when precision matters.

Reading Price Charts

Price charts are the primary tool for understanding what a market is doing. The most common chart type is the candlestick chart, which shows four data points per time period:

Open — The price at the start of the period
High — The highest price reached during the period
Low — The lowest price reached during the period
Close — The price at the end of the period

A green (bullish) candle means the close was higher than the open — price went up. A red (bearish) candle means the close was lower than the open — price went down.

Timeframes

Charts can display data in different timeframes: 1-minute, 5-minute, 15-minute, hourly, daily, and more. IntelliTrade primarily uses 5-minute charts for intraday analysis and trade generation.

Volume

Volume shows how many shares or contracts were traded during each period. High volume on a price move suggests conviction; low volume may suggest the move is weak.

Risk Management Fundamentals

Risk management is arguably the most important skill in trading. Even the best strategy will fail if you risk too much on any single trade.

Position Sizing

Never risk more than a small percentage of your account on a single trade. A common rule is the 1-2% rule: risk no more than 1-2% of your total account value on any one position. If you have a $50,000 account, your maximum risk per trade would be $500 to $1,000.

Risk-Reward Ratio

Before entering a trade, know your potential reward relative to your risk. A 2:1 risk-reward ratio means you stand to make $2 for every $1 you risk. This means you only need to be right 34% of the time to break even. IntelliTrade calculates the Return on Risk (ROR) for every trade idea to ensure favorable ratios.

Stop Losses

Always have a plan for when a trade goes wrong. A stop loss defines your maximum acceptable loss and removes emotion from the exit decision. IntelliTrade's exit management system automates this process with trailing stops, breakeven protection, and time-based exits.

IntelliTrade Advantage: The automated system enforces risk controls that are difficult for humans to maintain — daily loss limits, position size caps, and dynamic exit rules that adapt to market conditions.

Diversification

Don't put all your eggs in one basket. Spread your risk across different strategies, instruments, and timeframes. IntelliTrade offers both options and futures trading to provide diversification across asset types.

Key Terms Glossary

Bid: The highest price a buyer is willing to pay for a security.
Ask (Offer): The lowest price a seller is willing to accept for a security.
Spread: The difference between the bid and ask price. A tighter spread means more liquidity and lower trading costs.
Liquidity: How easily an asset can be bought or sold without significantly affecting its price. High-volume assets like SPX options are very liquid.
Volatility: A measure of how much and how quickly prices change. Higher volatility means bigger price swings — more risk and more opportunity.
VIX: The "Fear Index" — measures expected volatility over the next 30 days. High VIX (above 25) means the market expects big moves.
P&L (Profit and Loss): The difference between what you paid and what you received. Positive P&L = profit. Negative P&L = loss.
Long: Buying an asset with the expectation that its price will rise. "Going long" means you profit when prices go up.
Short: Selling an asset you don't own (borrowing it) with the expectation that its price will fall. You profit when prices go down.
Fill: When your order is executed by the broker. A "filled" order means the trade has been completed.
Slippage: The difference between the expected price and the actual execution price, usually during volatile conditions.
Expected Value (EV): The average outcome of a trade strategy over many repetitions. Positive EV means the strategy is profitable over time.