Understand trading.
Make better decisions.

Key terms

• Long: A position intended to benefit from rising prices.
• Short: A position intended to benefit from falling prices. The risks depend on the product being traded.
• Timeframe: The period represented by one chart candle, such as one hour or one day.

Understanding order types

A market order is executed at the available market price. A limit order sets a price limit but may remain unfilled. A stop order is activated when the stop price is reached; its execution price is not guaranteed.

To get started: Before practising in a demo account, explain which product you are trading, which order you are using and how losses can arise.

Further reading: Order types explained – Investor.gov

Reading a chart systematically

Technical analysis examines price movements and, where relevant, trading volume. It helps organise observations and formulate scenarios. It does not provide a certain prediction.

• Trend: Higher highs and higher lows may indicate an uptrend; lower highs and lower lows may indicate a downtrend.
• Support & Resistance: Areas where the price has previously reacted. These areas can be broken.
• Market structure: The sequence of price moves, pullbacks and sideways periods.

Exercise: Mark the most recent highs and lows on a historical chart. Describe two possible scenarios and note which observation would invalidate your assessment.

Understand the risk before entering

Risk management starts by asking how much a trade could lose. Position size, the distance to the planned exit, fees and product characteristics must be considered together.

• Position size: The larger the position, the greater the impact of a price movement.
• Stop-Loss: A planned exit limits the intended risk but does not guarantee a fixed loss amount. Price gaps and slippage can affect execution.
• Reward-to-risk ratio: The ratio of a planned profit target to the planned risk. On its own, it says nothing about the win rate.

Calculation example: For a stock, 20 shares and a €5 distance to the exit correspond to a calculated price risk of €100, before fees and differences in execution. This is an explanation, not a recommended position size.

Further reading: Order types and execution risks – FINRA

Recognise emotions, prepare decisions

FOMO is the fear of missing an opportunity. It can lead you to chase a price even when no planned setup is present. Fear, greed or the desire to recover a loss immediately can also influence decisions.

• Before the trade: Check whether your setup and your predefined rules are satisfied.
• During the trade: Record when you feel tempted to change rules out of hope or fear.
• After the trade: Evaluate how you followed your plan separately from the individual outcome.

Exercise: Record your mood before and after the trade in your journal. Look for recurring situations during your review and deliberately schedule breaks.

Turn an idea into a clear process

A trading plan describes the conditions under which you intend to trade. A journal records how you actually followed that plan.

• Setup: Market, timeframe and conditions for a possible entry.
• Risk: Position size, planned exit and conditions under which you do not trade.
• Documentation: Date, chart screenshot, rationale, costs, outcome and relevant emotions.
• Review: Which rules were followed? Which mistakes recur?

Journal question: “Would I make this decision again with the same information?” Evaluate several documented trades together, rather than judging the quality of your process from a single profit or loss.

Common pitfalls

• Entering without a plan: A spontaneous idea does not replace predefined conditions.
• Underestimating risk: Large positions and leverage can accelerate losses.
• Trying to recover losses: Additional trades driven by frustration can lead to overtrading.
• Focusing only on the outcome: A profit can occur despite breaking rules, and a loss despite correctly following the plan.
• Ignoring costs: Fees, spread and possible financing costs affect the outcome.

Check before every trade: Is my setup present? Do I understand the product and its risk? Is the position size planned? Am I willing to skip the trade?

Further reading: Day trading risks – FINRA