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CreativityTranscript
00:00Hey there, Casey Stubbs here. Today I'm doing a training on what is trading. This is a beginner's
00:08look at the markets. It's based off an in-depth article on tradingstrategyguides.com of the same
00:15title, What is Trading? We'll put a link below in the description. But if you are a beginner and you
00:21want to learn, this is a great place for foundation. I'm going to go over some very key basics and
00:28I'm
00:28going to go over some definitions. So if you want to get started learning to trade, this is the place
00:35to go. All right. So we're going to start with the definition of trading. So trading can be defined as
00:42the exchange of money for goods and services. But beyond that, we need to go one step further to
00:49understand financial markets. When we talk about trading today, we're referring to trading, which
00:55is what we call trading financial instruments. So that's the basic definition, but really it's okay.
01:03I'm going to clean your yard and you then give me a hundred dollars, right? You give me a hundred
01:09dollars to clean your yard. I'm trading money for time, money for services. That's a trade. Or maybe
01:16I want to give you a hundred dollars for that new ladder you have. I'm trading time. I'm trading money
01:23for an actual item. Okay. And that's what, that's the basic definition of trading. But then when we
01:31break it down even further, we're talking about trading in the sense of financial trading instruments,
01:41which is a stock, which I have the definition of that at the end, a future currencies. There's so
01:49many different things that we're going to trade in, in the markets, but let's go ahead and take a look
01:52at instruments. What are instruments? So instruments are simply things that can be traded in the
01:59financial markets. They can be a share of stock, cryptocurrency, futures contract, or a foreign
02:06exchange currency pair. It can be an option. And if all of those are unfamiliar to you, don't worry,
02:14we're going to break it all down during this video. But before we do that, let's ask ourselves
02:21one other question. How do we start trading these instruments and why would we trade them? Well,
02:27the answer is simple. We go into the markets and we trade them. We trade instruments in the markets
02:35and the reason why we do that is to make money. That's the whole purpose behind the financial
02:42markets is to make money. So what are markets? All right. Now a market. Yes, this is basic.
02:53Have you been to the grocery store or the hardware store? Those are basic forms of markets. A grocery
03:00store is a market where you look at your exchange and you want to exchange your money for food that
03:07you need to eat. A hardware store is a market where you exchange your money for materials for building
03:13and fixing things. That's the definition of a market. Now a trading market is a little bit more
03:20advanced than that because for one, it's all on a computer, but a market is just a place where those
03:27type of transactions happen. And they happen at an exchange, a stock market like the New York stock
03:33exchange. Okay. Now I want to break this down a little bit more here and, and share how price moves
03:42in these markets. Because when you're at the grocery store, prices stay pretty fixed. I mean, there's
03:48inflation, inflation where prices go up, but for the most part, they're going to stay the same from day
03:55to day. However, in a market and a stock market, they're going to be changing every second.
04:02And why is that? Because a market is like an auction. And you see here, this is an auction.
04:09Not really, it's a field of cows, but if you've ever been in an auction, a livestock auction,
04:14which I have, where you're bidding for the cows and there's like five or 10 or 20 people
04:21all bidding for the price of that cow. And they're saying, do you got $5? Do we take $10? Do
04:26we take
04:27$20? Right. And there's this buying because one person is trying to sell and other buyers are
04:33competing to get the cow at a certain price. And that auction can increase the price. And I've been
04:41in auctions before. I bought a car once at an auction and I thought I was going to get a
04:46great deal
04:46because the price started out low, but then I got very emotional and I wanted to beat the other guy.
04:53Then it became a competition. And the next thing I know, I was spending more money because I wanted
04:58to win. And that's all start of things that happen inside of a trading market. So one of the things
05:05that happens inside of trading, which is emotions, emotions are what move markets. Yes, it's buying and
05:15selling goods and services. But the reason that you'll see big peaks and valleys is because of
05:21emotions. And those emotions are fear and greed. Fear and greed is the main emotions that move the
05:28market. All right. Now the history of trading, we're going to do a little history lesson here
05:34on trading because trading has a dynamic history spanning thousands of years. Some of the earliest
05:40markets can be traced back to the grain futures in Mesopotamia around 2000 BC. And this is a great
05:48image here because there are some places in the world that are like a blast in the past. You go
05:55back
05:55and you see the architecture. I've been in the Middle East many years ago and I saw structures that were
06:02thousands of years old and it was like, wow, I'm going back in time. It was so cool. Well, the
06:08future
06:09there are tradings have gone around for a long, long, long time. And then it moved on. We saw some
06:16history about the Silk Road, which is when the Europeans were trading the Mediterranean all the way
06:25to Asia. And there was a road, a road to bring goods and services that were bringing trading.
06:30And then more recently, we had a big, huge bubble in the tulip prices in Holland. Tulip prices were,
06:40there was a lot of speculation around tulip prices. So let's throw a definition here. Speculation.
06:48Speculation is when you have many traders that think that something is going to go up in value. And so
06:55you purchase it because you're speculating. And so there was a history in the, in the 1600s in Holland
07:01where the tulip bulb exploded in price and it created a massive bubble and people were buying,
07:09buying, buying, and it created this massive frenzy. And then what happened at the end of the bubble?
07:14Well, what happens to bubbles? Bubbles pop. And so those bubbles popped and price dropped rapidly.
07:22And a lot of tulip traders ended up going out of business, which we see happen today.
07:29And then that brings us to modern trading where it's all done on exchanges. And even further than
07:35that, it's done in electronic markets. Most of the traders don't even see each other anymore.
07:42It happens all behind a computer screen, but it's important to know the history and how things work
07:48behind the scenes and what has happened in the past in markets. Now, when you're talking about markets,
07:55we have to talk about trading. And now we're going back to instruments, but there's different types of
07:59trading. There's stock trading, which is trading with companies. There's crypto trading, which is
08:06different types of cryptocurrencies, which is a newer form of trading. There's futures. And futures is
08:13just trading a price on a commodity, a future price on a commodity, very similar to an option.
08:21And then there's options, which is an option to buy a stock at a certain price. There's forex,
08:27which is currency trading, trading the dollar versus the yen. Then there's algo trading, which is
08:34robots, algorithms, expert advisors, all computer programs that are doing trading. And then it's all,
08:43all brought together by online trading. Everything is done trading online. Now, very little market
08:50trading happens in person. It's mostly all done online and it can be done by everyday people like
08:57you and me. And then in order to facilitate trading, we have brokers. Brokers are companies that place your
09:06order and they'll send your order from an individual to the exchange. Now, there's also something called
09:15a moneymaker, which is the person behind the scenes that is placing those orders or that's moving those
09:21orders, that's sending them to the market. They're a person that has a lot of money or a lot of
09:25shares
09:26and they are filling your orders for a fee, which is very similar to what brokers do. And you see
09:32this
09:32picture here. This picture is a man calling on the phone and that's what brokers used to do.
09:38So this is kind of a blast from the past, but nowadays everything's done automated online. But without a broker
09:46or market makers, you cannot trade. Now, there's also different ways to trade. And so let's go into
09:56that. There's technical analysis. So when you're trading, we're kind of transitioning here and we're
10:03talking about now, how do we actually trade? So now that we know a little bit about what trading is,
10:07we want to transition and talk about ways to trade. And we have technical analysis. And so technical
10:15analysis is the study and speculation of price movement. There's speculation, remember that term,
10:23using technical factors. And so technical factors is kind of like engineering. There's specific things
10:30that we're looking for and it's working behind the scenes to cause price to move in certain ways. And so
10:36we
10:36have chart patterns. So when we look at charts, we'll see different patterns. And I have a video
10:44that I'll link to below that has in-depth analysis of chart patterns, but it's more in-depth than what
10:51we have in this particular training. We also have support and resistance, which is key price levels that the
11:01charts and the prices will honor. And again, we have a really in-depth training on that as well.
11:09And I'll link to that and support and resistance. You kind of think of, okay, if it's trading at a
11:13dollar,
11:14there's lots of people that are buying around that level around the $1 mark. So there's a lot of orders
11:20there and order flow is what moves markets order flow, which is also controlled by fear and greed.
11:26And that order flow is what helps make the markets move. Then we have indicators. Indicators are things
11:34like the MACD. I have a great video on MACD I'll link to below. I also could like some other
11:41indicators,
11:42such as the moving averages. We have great moving average strategies, and I'm not trying to get you
11:47distracted. Don't worry about those other things, but I'm just letting you know that we have a lot of
11:53indicator strategies and education. We'll just link to them below, but don't get distracted.
11:58But an indicator is just a tool on your chart that helps determine price. And then lastly,
12:05we have trends. Trends are very important in technical analysis. These all follow under the
12:11umbrella of technical analysis. And we do have great videos on trends, but the definition of a trend
12:17trend is price moving in a certain direction for a long period of time. And as traders, we want to
12:23try to find those trends, look at the charts and learn how to profit from trends. Now, the next type
12:32of
12:32trading that we have is fundamental analysis. Very important. Fundamental. There's technical,
12:41and then there's fundamental. And fundamental is an analyst method of analyzing financial markets by
12:50underlying economic, financial, and other qualitative and quantitative factors that affect
12:56the value of an instrument or security. Now, I'm the kind of guy that likes to define the things that
13:02I'm
13:03speaking. And so when we say qualitative and quantitative factors, that's basically data,
13:09data, right? It's a fancy word for saying data, information. And so we look at the four types of
13:18data, economic analysis, what's happening in the economy. We look at inflation and we look at interest
13:27rates. We look at selling of goods, retail sales. These are all economic data that we help use to determine
13:38what's going to happen in the pricing. Then there's industry analysis, what's happening in the car
13:43industry, what's happening in the toy industry, what's happening in the energy sector, right?
13:48These are all different things that we analyze fundamentally. Also, we have social sentiment,
13:57social sentiment. That's whatever. What's everybody saying? What's everyone saying about the market?
14:02You know, there's an old saying that when you get a stock tip from your grandmother,
14:08you know that it's time to sell because the market is really excited, right? So when everybody and their
14:14brother knows about a certain stock, that's time for you to sell. Now, that's not a specific strategy.
14:20It's just kind of a funny saying that is is true. But when everybody's talking about it, you know,
14:25when people first start talking about it, you want to get in. But then when everybody's doing it, well,
14:31then there's no reason to do it anymore because the smart people are getting out. So it's getting
14:36into a trend early, getting out before the bubble crashes, going back to the Dutch tulip bubble.
14:42The bubble crashed and it didn't work out too well for the people that didn't get out in time.
14:48And then the last type is company analysis. How much revenue does the company make?
14:53How much shares are outstanding? Does the company pay a dividend? What are the growth
14:58rates of the company? How many other investors are? What's happening in the news with the company?
15:02With fundamental analysis, there's a myriad, a myriad of things to study. And when I say myriad,
15:10I mean a lot, a lot, a lot of stuff to study. And the way that I would recommend is
15:17fundamental
15:18analysis is important to help you get a gauge of what you want to invest in. But the charts is
15:23where
15:23you pull the trigger. So one of my key little bonus strategies here that I like to look at is
15:30go for new technology because new technology changes the world. And it's been amazing.
15:37A new concept. It's been amazing for stock market growth in the past. And Kathy Wood,
15:46the founder of ARK hedge funds, she posted a great big idea report that talks about all of the new
15:54tech that's coming out. And I like to read stuff like that. And I like to invest in new tech
15:58because
15:59it's a great fundamental analysis. And that would follow industry analysis. So I recommend get into
16:06something new that you think has a big potential in the future. The other thing I like to look at
16:13is go for the leader. There's always a leader. And usually the leader is way better than the rest.
16:20And so if you can find a leader of an industry that is leading a growth industry, that's a great
16:26investment strategy. Okay. Just a little bonus tip for those of you that are interested in getting
16:31started. We've got a lot more information where that comes from. All right. Now, what is the purpose
16:38of trading? Okay. Well, honestly, the purpose of trading is to make money. And that's in the
16:44financial markets. It's not always the case. Sometimes you want to trade because you want a
16:49new ladder, right? That's not to make money. That's to get you stuff you want, which is really a
16:54for a type of money, right? I want a new ladder. I want that bed. I want that house. I
17:01want,
17:01I want freedom, freedom. I want freedom, right? And so you want to make money and gain certain things
17:10in your life. What is the purpose of trading list? Here's an answer that seems pretty obvious,
17:15but it's not lose money. You don't want to lose money. And yet here's a little, I get to the
17:22challenges
17:23section here, but a little quick tip. You can lose money in trading. And so you don't want to do
17:29that. You need to come in with a plan. And so if you're watching this as a beginner, I want
17:33you to
17:33come in with your eyes open and with a plan. Okay. And, uh, you must have a strategy. Now with
17:40a heads
17:41up on the strategy, I do have a book coming out very soon. Uh, it's called the complete trading strategy.
17:47I'll put a link to it. You can check that out as well because it has a really good strategy
17:53in it
17:54that I've developed over years and years. All right. Uh, so anyway, steps to developing a strategy,
18:00determine what kind of trader you're going to be. So what does that mean? Well, are you going to be
18:05a
18:06swing trader, a swing trader? What's that? Oh boy. I guess I need to go back to some definitions.
18:13Swing trading. It's when you hold the position for a few days or a few weeks. Well, then there's
18:19a position trader. That's an investor, someone that holds for years. Then there's a day trader.
18:24You're holding trades for five minutes just in one day. So what kind of trader do you want to be?
18:29An investor, a positional trader, a swing trader, a day trader, an algo trader who uses robots.
18:36What kind of trader do you want to be? Do you want to be a stock trader, an options trader,
18:40a currency trader, a crypto trader, right? There's a lot of decisions here. Well, I'm going to put
18:47some links in the, in the video below because you can learn about some of these things because it's
18:55hard to make a decision. There's so much information, but I would say if you're just beginning,
18:59pick one, go with it. Don't get analysis paralysis. Just pick something. If you think cryptos are cool,
19:05go with them. If you like a certain stock, go with it. You know, if you just start buying a
19:10few
19:10little tiny things and get the hang of it, but always go into it managing risk, risk, risk, risk.
19:17Here, let's throw another definition. What is risk? Risk is the amount of money that you could
19:23potentially lose when you're trading. And yes, trading is risky. You always need to go in with
19:28your eyes open, knowing that there's risk involved. And listen, also don't play the markets
19:38like a casino. It's a lot of people think that, Oh, it's the risk. It'll relieve my problem. It'll
19:44relieve my pain. I'm going to go in and I'm going to hit it big in the market and I
19:48won't have any more
19:49problems. Well, you know, your problems that you had when you started in the markets are still there.
19:55You have to solve your problems. You have to look at one problem at a time and take, do the
20:01work
20:01and solve the problem. One of my friends and mentors, Chris Williams says, you got to do the
20:08work. You got to do the work. Hey, let me say it. You got to do the work. All right.
20:13So step number
20:14one is determining what kind of trader you're going to be. Step number two is study potential trading
20:19strategies. Very simple. I have a book that's being released very soon on that.
20:25Link will be in the description below. Then step number three, get education about the markets,
20:31practice trading, practice trading. You can use a demo account to practice. You practice with a very
20:39small dollar account. You need to start small and take step by step by step. And then step number five
20:46is develop with a financial plan, right? You want to learn a financial plan. That is a very important
20:56part of this because trading is one piece of the puzzle. You need to be monitoring your expenses,
21:02how much you want to invest, how much you want to reinvest, how much you want to add,
21:07how much you want to pull out of the market. What are you going to do with your profits? Are
21:11you going to
21:11roll it into something else, but just have an overall financial plan, which again, I will put
21:16some links to some other training on that. As a matter of fact, I was thinking about creating a
21:22course here very soon called the 12 principles of financial freedom. And if anybody's interested in
21:30that, let me know in the comments and say, Hey, I want to know about financial freedom. I would love
21:35to know if that would be interesting because that's not market related, but it's a very basic
21:41principle that most people don't know about. And I want to teach. Okay. Now I feel like it's really
21:50important for me to say this, there's challenges involved, right? There's challenges in trading.
21:56So I'm going to go over the challenges and then I'm going to talk about the benefits because I think
22:00I, it would be very poor, poor teaching on me, poor teaching on me. I'd be a poor teacher if
22:07I
22:07told you about all the benefits, but I didn't tell, talk about the challenge. Well, the challenge is
22:12there's a learning curve. There's a learning curve involved. You can lose money is another challenge.
22:20Mental. It's a mental game mindset, like crazy. You got to be, you got to develop a really strong
22:28mindset. You got to learn the basics and go back to the basics. You got to have risk management and
22:33discipline. These are all challenges. A trader will reveal how weak you are trading the markets.
22:40They'll reveal how weak you are in financial management. And it's can be very ugly. It can be
22:47a looking in the mirror and boy, like not liking the person that you see when you do stupid stuff
22:51over
22:52and over again that you're not supposed to do, right? But that's why you're watching this video.
22:56So you can learn how to do it the right way, uh, stress. Another big issue with trading and learning
23:04to trade is it can cause a lot of stress. If you don't do it the proper way, it can
23:09be stress-free
23:10if you manage it with the right way, which is taking care of your risk, knowing you having a plan
23:17going in, following that plan, using good mind management and risk management. There's no stress,
23:22but if you don't do it right, it causes a lot of stress. All right, now I'm going to talk
23:28about
23:28the benefits for a minute. The benefits. Well, one of the greatest benefit is wealth creation,
23:36right? Wealth creation. Trading has created more wealthy people than anything I think ever,
23:43right? Because even, you know, business owners is a really big one, but most traders are buying
23:48businesses anyways. When you buy a stock, you buy a business. So you're a business owner when you trade,
23:53right? And so, yes. Oh, I'm going to start my own business. Well, why not just buy a share of
23:58one of the greatest businesses in the world and ride their coattails to wealth, right? That's
24:02a trader's mindset. Another great power and benefit of, of trading is compounding.
24:12You take that compounding. You take your profit and roll it into the next one. And then you roll
24:17it into the next one. And then you roll it into the next one. Compounding wealth is the greatest
24:23secret on the planet. It is the secret to wealth. And so everyone should be doing this. Whether you're
24:31even trading in the markets or in real estate or in art or whatever, you want to take your profits
24:37and
24:37roll it into something else, that's compounding wealth. Compounding wealth is the way to true
24:42wealth. And then the last benefit is just time and freedom. You know, doing this doesn't necessarily
24:49take a lot of time. I don't do all the research myself. I buy research reports or I hire people
24:55to
24:56do the research for me because I can and because I want to have more time. So I get people
25:03to do my
25:03research and then I make decisions based on that research. So it's given me a lot of time and a
25:11lot
25:11of freedom. I have the ability to travel, which is another great thing. I take my family, we go on
25:19vacation, we travel across the country. It's a true blessing, right? So trading has been a true blessing
25:26and it's been very cool to be able to do it. But it took some time. It took some challenges.
25:33It took
25:35a lot of hard work. I had to do the work. And that's why I'm putting this training out there
25:40so that
25:41those of you that are just starting out can benefit from this. All right, now I want to go over
25:47a couple
25:48key definitions. Let's go over some definitions. So these are just a handful. There's a lot more on my
25:56website at the What Is Trading website. I recommend everybody go ahead and check it out. But trading,
26:03the definition of trading, buying and selling instruments to make a profit. Stock,
26:09a type of instrument that represents ownership in a company. The definition of stock is a type of
26:18instrument that represents ownership in a company. Commodity, a raw material or primary
26:24hold on, Casey boy. Commodity, a raw material or primary agricultural product that can be bought and sold,
26:37such as gold or wheat or cattle or hogs or corn. A currency, a currency is a unit of exchange
26:45that's
26:46a medium for goods and services. Money, a currency is trading money. An option, the definition of option,
26:54a contract that gives the buyer the right, but not the obligation to buy and sell an asset at a
26:59specified
26:59price within a specified period. Yes, I get it. That is complicated in definitions. But basically,
27:06it says, hey, if I own this car and I'm going to sell it to you for a thousand dollars,
27:15you now buy the option to buy it at a thousand dollars. But you pay me ten dollars for that
27:22option.
27:22You'd pay me ten dollars so that you can buy the car for a thousand. And why would you do
27:27that? Well,
27:28for cars, it doesn't make a lot of sense. But in stocks, you would do it because
27:32maybe you think that the stock is going to go up to two thousand. So you buy you pay ten
27:37to hold on to
27:38it and that you can buy it for a thousand. So if it does go up to two thousand, you're
27:43like, hey,
27:43I have this option. I can buy it at a thousand bucks. Now you automatically get that thousand
27:48dollars in profit. Right. So that's the benefit of options. Lots of education. I'll put some links
27:54in the description. Lots of education on options. It's a great thing. Okay. Futures. Futures is a
28:01financial contract that obligates the buyer to purchase an asset or the seller to sell an asset
28:07at a predetermined price and date. And one of my good friends who was on my podcast, the How to
28:13Trade
28:13It podcast, he defined it by saying that it was a derivative. A future is a derivative. So yes,
28:19you can, it's like an option. You buy a price, a future at a certain price or date, but it's
28:25a copy.
28:26It's a synthetic purchase. You are not actually trading the wheat, but you're trading a derivative
28:33of wheat. You're not actually trading gold. You're trading the derivative of gold. It's a copy. It
28:42has always been very confusing to me. It's been a hard one for me to wrap my mind around, but
28:47bonds,
28:47the definition of a bond is a debt security that represents a loan made by an investor to a borrower.
28:54So a bond is basically debt, right? But you can trade debt. Imagine that. That's why I think it's
29:00been hard for me to wrap my mind around, but yes, you can trade debt. The bond market is a
29:07massive,
29:08massive, massive market. And there are so many bond traders. A lot of people don't realize that.
29:15Okay. The next definition we're going to talk about is bull market. That's a pretty simple one. A
29:20bull market is a financial market in which prices are rising or expected to rise. A bear market is a
29:27financial market in which prices are falling or expected to fall. So you hear this term a lot,
29:32the bulls and the bears. Is it a bull or a bear? Well, if it's a bear, it's going down.
29:39If it's a
29:40bull, it's going up. And I forget, I should have looked this up. I forget where those terms came from.
29:47Somebody told me once and now I'm neglecting that to you. If you know where the term come from,
29:55please leave me a comment and let me know. All right. Financial charts or trading charts. It's
30:01just a visual representation of financial data used to make trading decisions. That's kind of
30:07where technical analysis, which we talked about early comes in. Candlesticks are also financial
30:15instruments. They're visual items, candlesticks on a financial chart. They're actually called
30:20Japanese candlesticks. You get those on a chart. And then broker is an individual firm that
30:24acts as an intermediary between buyers and sellers in a financial market. And then there's also
30:30market maker, the person that holds all the money and he's doing the orders. A lot of times the broker
30:36isn't the market maker. The broker is just the guy, the middle man. And then the market maker is the
30:41one that holds all the cash and they both get a tiny piece of the action. And market makers make
30:47a lot
30:48of money when something goes up or down and they're holding a lot of it. And then lastly is an
30:52exchange
30:53where financial assets are bought and sold. It's just like the New York stock exchange. Coinbase is a
31:01crypto exchange. We have, uh, the Chicago options exchange. There's all of these different exchanges
31:11where traders go to make purchases. All right. So that is the basic beginning. But again,
31:20there's a lot more detail that I didn't go over because of time wise,
31:25but if you want to get the full scope of this, just go to my website and it's trading strategy
31:31guides.com. What is trading and it's forward slash what dash is dash trading. The link is in the
31:40description. It's a great article and I would love it. If you'd go to the article, leave a comment,
31:45comment. But if this was designed for beginners, because I got a lot of
31:52questions saying, Hey, I need to know what is trading. What is this whole trading thing?
31:56And, uh, we took some time to develop this. So I hope it's helpful to you.
32:02Leave a comment. All right. Well, that's it for this one. We'll come up with some more of these
32:06basics. If you like them, if you like the basic stuff, let me know so I can put more of
32:11it out
32:12and beginner stuff too. But again, thank you. And until the next video.
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