Trading Basics

New to trading? This guide covers fundamental concepts you need to understand before placing your first trade on PiTrade.

What is a Stock

A stock represents ownership in a company. When you buy a stock, you own a small piece of the company and become a shareholder. You can benefit from company growth and may receive dividends. The stock price reflects company value and performance, market demand and supply, investor sentiment, and economic conditions.

Why Trade Stocks

  • Capital Appreciation: Buy low, sell high, profit from price increases, long-term wealth building
  • Dividend Income: Regular payments from companies, passive income stream, reinvest for compounding
  • Portfolio Diversification: Spread risk across companies, different sectors and industries, reduce overall portfolio risk

Market Mechanics

Trading Hours

  • Regular Hours: 9:30 AM - 4:00 PM ET, Monday - Friday, most trading volume
  • Pre-Market: 4:00 AM - 9:30 AM ET, lower volume, higher spreads
  • After-Hours: 4:00 PM - 8:00 PM ET, lower volume, higher volatility

Bid-Ask Spread

Bid Price: What buyers will pay
Ask Price: What sellers want
Spread: Difference between bid and ask

Example: Bid $50.00, Ask $50.10, Spread $0.10

Volume

Volume is the number of shares traded. High volume means many shares trading with easier buying/selling and more stable prices. Low volume means few shares trading with harder buying/selling and more volatile prices.

Trading Terminology

Key Terms

  • Bull Market: Prices rising, investor optimism, good time to buy
  • Bear Market: Prices falling, investor pessimism, caution advised
  • Volatility: Price fluctuation, high volatility = big swings, low volatility = stable prices
  • Liquidity: Ease of buying/selling, high liquidity = easy trading, low liquidity = difficult trading
  • Dividend: Payment to shareholders, usually quarterly, passive income
  • Earnings: Company profits, released quarterly, affects stock price
  • P/E Ratio: Price-to-Earnings ratio, valuation metric, lower = potentially undervalued

Risk & Reward

Types of Risk

  • Market Risk: Overall market decline, affects all stocks, diversification helps
  • Company Risk: Specific company problems, affects individual stock, research helps
  • Liquidity Risk: Difficulty selling, low volume stocks, avoid illiquid stocks

Risk Management Strategies

  • Diversification: Don't put all capital in one stock, spread across sectors, mix different risk levels
  • Position Sizing: Don't risk too much per trade, typical 1-5% per position, protects overall portfolio
  • Stop-Loss Orders: Limit downside losses, automatic protection, peace of mind

Getting Started

Steps to Start Trading

  1. Learn the Basics: Understand stocks and orders, learn market mechanics, study trading terminology
  2. Open Account: Sign up on PiTrade, complete verification, fund your account
  3. Start Small: Begin with small amounts, practice with paper trading, build confidence
  4. Do Your Research: Read company news, check financial statements, understand what you're buying
  5. Place Your First Trade: Choose a stock, decide order type, execute trade
  6. Monitor & Learn: Track your trades, review performance, learn from mistakes

Next Steps:

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