What is Trading and How Does Trading Work?

If someone mentions the word trading, most people envision stock market displays blinking numbers or yelling brokers in exchanges. However, trading is actually a lot less complicated. Simply put, trading is the process of exchanging financial assets in hopes of gaining profit.

This article will be narrating in plain language what trading actually is, how it operates, the various types of trading, and what a beginner should know before they start.

What is Trading?

Trading refers to purchasing an asset at a lower price and selling it at a higher price. The asset may be a stock of a company, a commodity such as gold or oil, a currency such as USD/INR, or even virtual currencies such as Bitcoin.

For instance, if you purchase 10 shares in a company at ₹100 each, you have invested ₹1,000. If the price increases to ₹120 per share and you sell, you earn a profit of ₹200. That gap is the essence of trading.

How Does Trading Work?

Trading occurs in financial markets, and these days most trading is done online through brokers or apps. The process is simple:

Open an account with a registered broker.

Fund your account.

Select the asset you wish to trade.

Enter a buy or sell order.

Watch the market and get out when your target or stop-loss is reached.

The basic concept behind trading is easy: buy low and sell high. Short selling (sell first and buy later) is done by some traders as well to gain when prices drop.

Trading Types

Trading is unique to each person. It varies based on your time, risk tolerance, and personality. These are the key types:

Intraday Trading – Buying and selling in the same day. High-risk but returns quickly.

Swing Trading – Holding for days or weeks to ride out price swings.

Positional Trading – Holding positions for months to reap long-term trends.

Scalping – Placing many trades in minutes or seconds to take small but regular profits.

Futures and Options – Sophisticated techniques of trading contracts instead of the underlying asset.

Why Do People Trade?

Individuals trade for various purposes. Some need an extra income source, and others employ trading to accumulate wealth quicker than saving money conventionally. For most, trading provides the ability to access global markets and get closer to financial freedom.

But it should be noted that trading is not gambling. It needs patience, knowledge, and discipline.

Risks in Trading and How to Avoid Them

Trading is risky. Most newbies lose money since they venture into the market without prior preparation. Some of the common errors include:

Trading on hearsay or random advice

Employing the whole capital in one transaction

Disregarding stop-loss orders

Trading without knowing the asset

To minimize risk, newbies should:

Set a stop-loss always to cap losses

Begin with little amounts

Diversify among different assets

Prioritize learning before pursuing profits

Conclusion

Trading is possibly the most thrilling means to engage in the world of finance. It enables one to accumulate wealth, but it takes more than passion to be successful. A structured methodology, ongoing education, and adequate risk management are the secrets to long-term success.

If you are a beginner, do it step by step. Learn the fundamentals, test with tiny trades, and build up your confidence gradually. Being positive minded, trading can not only be a skill but also a useful instrument for wealth increase.

Shocking Truth: Why 99% of Option Buyers Lose Their Money!

How 90% of Problems Can Be Solved!

Ever felt like the market is stacked against you when you're trying to buy options? You're definitely not alone — and honestly, you might be onto something.

In this blog, we’re diving into why nearly every newbie stumbles in the world of options trading, how the whole system really operates, and most importantly, how YOU can steer clear of becoming just another statistic.

This isn’t financial advice — it’s a straightforward chat, written in a relatable tone for anyone looking to not just survive but thrive in the options trading arena.

Let’s Get One Thing Straight: The Stats Are Eye-Opening!

According to various industry studies and brokerage reports:

About 90-99% of option buyers consistently lose money.

Why is that? Are they clueless? Are they just lazy? Not at all. They’re simply playing the wrong game with the wrong mindset.

Reason 1: Options Are a Decaying Asset (Time is Not on Your Side!)

When you buy options, you’re investing in something that loses value every single day, even if the stock price doesn’t budge.

This phenomenon is known as Theta Decay.

Imagine you bought a Call Option, hoping the stock will climb. But even if it stays the same, the price of your option drops daily — because time is ticking away.

"Options are like ice cubes... they melt away over time."

And many new traders completely underestimate this decay.

Reason 2: Most Option Buyers Are Lured by Quick Cash

Let’s be real — most beginners jump into options because:

They saw someone turn ₹5,000 into ₹50,000

They think it’s simpler than grasping futures or stocks

They believe “lottery-style” profits are a breeze

But here’s the kicker: that’s exactly what the savvy sellers want you to believe.

They sell you those options and then kick back while time decay works its magic.

Fear and greed are weaponized against buyers every single day.

Reason 3: Poor Strike Selection = Guaranteed Loss

Most newbies opt for OTM (Out-of-the-Money) options because they’re cheap.

But just because something is cheap doesn’t mean it’s worth anything.

Here’s how it typically plays out:

You buy an OTM Call for ₹20
Stock moves a little, but not enough
Expiry comes close — and boom, your ₹20 becomes ₹2 or zero

You’ve just paid the seller — again.

Reason 4: No Plan, Just Hope

This is harsh, but true:

Most option buyers don’t have a trading plan.

They have hope, FOMO, and Twitter screenshots.

No risk management
No entry/exit plan
No understanding of Greeks (Delta, Theta, Vega)

They just enter based on tips or "gut feeling" and exit when they panic.

Reason 5: Options Buying Is a Low-Probability Trade

Even if everything goes your way…

The stock moves fast
Your direction is right
News supports you

You still might lose because the premiums were too expensive when you entered.

Why? Because options are already pricing in the expected move.

This makes buying a low probability game unless you’re highly skilled.

So, How Do You Solve These Problems?

Great question. If 99% lose, what’s the 1% doing differently?

1. Trade with a Plan — Not Emotion

Set target & stop loss
Use proper position sizing
Only risk what you can afford to lose

2. Understand the Greeks

Know how Delta & Theta affect your trade
Avoid buying just before expiry unless you're scalping

3. Avoid Buying Deep OTM Options

Stay near ATM or ITM if you're buying
OTM = High reward but near-zero probability

4. Use Options as a Tool — Not a Gamble

Use it for hedging or directional view confirmation
Don't expect every trade to hit jackpot

5. Practice First. Go Real Later.

Use virtual trading apps to learn
Track your win-loss ratio before using real money

Bonus Tip: Learn to Sell Options (But Carefully)

While this blog is about option buyers, eventually you’ll realize:

The real consistent earners in options are option sellers.

They use probability, math, and time decay to their advantage.

But selling requires:

Bigger capital
Solid risk management
Deep market understanding

If you're serious — learn both sides of the game.

Final Thoughts: The Market Is Not Against You — It’s Against Ignorance

99% of buyers lose because they follow the herd blindly.
But you can choose to study the game, slow down, and learn properly.

Options trading is not a casino — it’s a business.

If you treat it like gambling, you'll burn out.
But if you treat it like a craft, you’ll get better, slowly but surely.

Want to Master Options?

How to Raise Capital for Trading in the Stock Market: 5 Smart Strategies for Beginners (2025 Guide)

Changpeng Zhao (CZ): The Crypto Trader Who Built Binance & Revolutionized the Crypto World

Why do losses happen in the stock market – and how to prevent it?

Why Do Most People Lose Money in the Stock Market? Here's How You Can Avoid It

👉 “If the market takes money from you every time, then the problem is not your strategy… the real problem is your thinking!”

The stock market gives equal chances to everyone. But most people enter at the wrong time, with the wrong mindset, and with zero preparation.

So, let’s break down why traders lose money in the stock market and most importantly — how you can stop it.

🔍 Why Beginners Lose Money

1. Trading Without Learning
Most beginners directly invest without understanding price action, trends, or candlesticks. Remember, this is not a classroom — here, every mistake costs money.

2. The Get-Rich-Quick Mentality
Using 5X, 10X leverage, over-trading, and random entries… all are fueled by greed.

💡 The 3 Biggest Psychological Mistakes

1️⃣ FOMO – Fear of Missing Out

Jumping into trades after seeing others’ profits is the biggest trap. Just because your friend made ₹10k doesn’t mean you should enter without logic.
✅ Solution: Stick to your own trading rules. If your setup doesn’t give a signal, skip the trade.

2️⃣ Revenge Trading

A loss triggers anger → leading to another impulsive trade. But here, emotions fight the market, not logic.
✅ Solution: Pause after a loss. Don’t trade until you’re mentally calm. Markets open daily — you’ll get chances.

3️⃣ Overconfidence & Greed

After 2-3 winning trades, many traders think they’ve “mastered” the market. Then they increase lot sizes, risk big capital — and a single bad trade wipes them out.
✅ Solution: Stay disciplined even after profits. Don’t break rules when you’re winning.

⚡ Technical Mistakes That Burn Capital

Instead of repeating “No… No… No…” let’s simplify the blunders:

Ignoring Stop Loss → One wrong trade can wipe out the entire account.
Poor Risk Management → Putting all capital in one trade is gambling, not trading.
Lack of a Plan → Entering without entry-exit levels is like driving blindfolded.

✅ Fix:

Always place a Stop Loss.
Risk max 1–2% per trade.
Have a daily written plan (levels, setups, capital allocation).

🛠️ How to Prevent Losses: Practical Framework

STEP 1: Keep a Trading Journal
Note every trade: Why did you enter? What was the outcome? Learn your own patterns.

STEP 2: Build a System & Follow Signals
Stop random entries. Backtest your strategies and stick to them.

STEP 3: Weekend Learning, Weekday Execution
Study charts and strategies on weekends. Execute calmly during weekdays.

STEP 4: Risk Control = Game Control
Fixed Stop Loss + proper position sizing = long-term survival.

❤️ Personal Experience (Emotional Connect)

“I was once making the same mistakes — no Stop Loss, over-trading, greed. I lost ₹10,000 in chasing ₹1000 profits. That’s when I realized… the fight is not with the market, it’s with myself.

When I put discipline above emotions — the market started rewarding me.”

🚀 Final Words

Losses are your real teacher. The question is: are you listening?

If you apply these lessons, your losses will no longer be just “losses” — they will become an investment in your future success.

👉 This is Arun Raj Trader — your stock market friend, not a fake guru. Follow, subscribe, and start trading seriously. 🔥

Power of the Stock Market: Unlocking Wealth and Opportunities

Why understanding the stock market can completely change your financial future.

Introduction

In India, we often hear people saying, "Stock market is risky!"

But very few talk about the incredible power the stock market holds — not just to make money, but to create real financial freedom.

Whether you're a student, a working professional, or a business owner, understanding the power of the stock market can open up opportunities that are hard to find elsewhere.

Today, let's decode how the stock market works and why it is considered one of the most powerful wealth-building tools in the world.

The Power of Compounding

You must have heard the famous saying by Albert Einstein —

"Compounding is the eighth wonder of the world."

In the stock market, compounding is like planting a tree.

You invest a small amount today, and over time, it grows into something massive.

Imagine investing ₹10,000 today. If your investments grow at just 15% per year, in 20 years, you could have over ₹1 lakh without adding a single extra rupee!

This is the real magic of the stock market — your money works for you, even when you sleep.

Stock Market vs Traditional Saving Methods

In India, traditionally, people love Fixed Deposits, Gold, and Real Estate.

But compare the returns:

Investment Type	Average Annual Return
Fixed Deposit (FD)	5%-6%
Gold	7%-8%
Real Estate	8%-10%
Stock Market (Sensex Average)	12%-15%

While FDs keep your money "safe," the stock market grows your money faster, beating inflation in the long run.

Ownership in Big Companies

When you buy a company's stock, you are not just buying a piece of paper.

You are actually becoming a part-owner of that company.

Think about it —

By investing in companies like Tata Motors, Infosys, or Reliance, you are becoming a small partner in India's biggest success stories.

This ownership can bring:

Dividends (Regular income)
Capital appreciation (Price rise)
Pride in owning a piece of top companies

Opportunities in Every Market Condition

Many people fear market crashes.

But smart investors know that every dip is an opportunity.

When the market falls, quality stocks are available at discount prices — just like a sale at your favorite store!

History has shown again and again:

After every major fall, the market has always bounced back stronger.

Those who stay patient and invest wisely during tough times are the ones who create real wealth.

Stock Market: Not Just About Money

The power of the stock market is not just financial.

It teaches you valuable life lessons like:

Patience
Discipline
Risk Management
Emotional Control

Learning how the market works makes you a better decision-maker, not just in investing, but also in business and personal life.

Risks Are Real, but Manageable

Let's be honest — stock markets do have risks.

But with proper knowledge, research, and a long-term mindset, you can easily manage these risks.

The key is:

Invest in quality companies
Stay diversified (don’t put all your money in one stock)
Think long-term (at least 5-10 years)
Avoid emotional decisions

Remember, no one becomes rich overnight in the stock market. It’s a slow but steady journey.