Beginner
Cryptocurrency
What Is Cryptocurrency?
Cryptocurrency is a category of digital assets that generally uses cryptographic techniques and distributed ledger technology. Examples include Bitcoin and Ether.
Crypto markets operate differently from traditional exchange-based equity markets. Many crypto markets trade continuously, including outside the conventional weekday sessions associated with major stock exchanges.
Important Characteristics
- High volatility: many crypto assets can experience large price movements.
- Market structure: trading takes place across different venues with varying liquidity and rules.
- Technology risk: infrastructure, custody, smart-contract, or protocol risks may exist depending on the asset.
- Regulatory risk: rules and market access can change.
Crypto exposure can also be obtained through different instruments, so we must distinguish the asset itself from derivatives or funds that reference it.
Key Terms
Cryptocurrency, crypto asset, digital asset, blockchain, distributed ledger, liquidity, volatility.
Knowledge Check
- What is cryptocurrency broadly?
- Why can crypto markets behave differently from traditional stock markets?
- Name two categories of risk relevant to crypto markets.
Beginner
Options
What Are Options?
An option is a derivative contract that gives its holder a defined right, but not generally an obligation, to buy or sell an underlying asset at a specified strike price under specified conditions before or at expiration, depending on the option style.
Calls and Puts
A call gives the holder the right to buy the underlying. A put gives the holder the right to sell the underlying.
The buyer pays a premium for the option. The seller, or writer, receives the premium but takes on contractual obligations that can create substantial risk depending on the position.
Basic Option Terms
- Underlying: the asset or reference instrument.
- Strike price: the contractual exercise price.
- Expiration: the point after which the option ceases to exist.
- Premium: the price paid for the option.
Options are more complex than straightforward stock positions because their value depends on several variables. Their detailed pricing and risk characteristics are covered later in the curriculum.
Key Terms
Option, derivative, call, put, strike price, expiration, premium, underlying.
Knowledge Check
- What is the fundamental difference between a call and a put?
- What does the option buyer pay?
- Why are options more complex than a simple stock position?
Beginner
What Is a Financial Market?
A financial market is an organized environment in which participants buy, sell, and exchange financial assets. These markets connect participants who have capital with participants who need capital, while continuously forming prices through transactions. We can encounter markets for equities, bonds, currencies, commodities, derivatives, and other financial instruments. Our first objective is not to predict prices, but to understand what kind of system we are participating in.
Key Terms
- What Is a Financial Market? — the core concept introduced in this lesson.
Beginner
Commodities
What Are Commodities?
Commodities are tradable physical goods or standardized raw materials. Major commodity groups include energy products, metals, and agricultural products.
Examples include crude oil, natural gas, gold, silver, wheat, and coffee. We can gain commodity exposure through different instruments, including futures, ETFs, and certain shares or derivatives.
What Influences Commodity Prices?
Commodity prices can be strongly affected by physical supply and demand, inventories, weather, production capacity, geopolitical events, transportation, currency movements, and global economic activity.
The instrument through which we trade a commodity matters. Holding a physical commodity, trading its futures contract, and buying an ETF linked to it can create different costs, risks, and exposures.
Key Terms
Commodity, energy, metals, agriculture, supply, demand, inventory, futures.
Knowledge Check
- Name three major commodity groups.
- Why can weather affect commodity prices?
- Why does the chosen trading instrument matter when gaining commodity exposure?
Beginner
CFD
What Is a CFD?
A CFD, or Contract for Difference, is a derivative contract whose value reflects the price movement of an underlying instrument between opening and closing the position. We do not acquire ownership of the underlying asset simply by opening a CFD position.
Common Characteristics
- CFDs can provide long and, where supported, short exposure.
- They are commonly offered with leverage.
- Financing or overnight charges can apply when positions are held.
- The trader is exposed to the terms, pricing, and counterparty risk of the CFD provider.
CFDs can be used to trade price movements in shares, indices, currencies, commodities, and other markets, depending on the provider.
Leverage can make a relatively small price movement produce a large percentage change in account equity. This makes position sizing and risk control especially important.
Key Terms
CFD, derivative, underlying, leverage, margin, financing cost, counterparty risk, long, short.
Knowledge Check
- Do we own the underlying asset when we open a CFD?
- What two characteristics can make CFDs particularly risky?
- Why should overnight financing be considered?
Beginner
Trading vs Investing
Trading and investing both involve allocating capital to financial assets, but their objectives and time horizons can differ substantially. Trading generally focuses on exploiting price movements over a defined, often shorter horizon, while investing usually emphasizes longer-term ownership and value creation. Neither approach is automatically superior. We need to understand the distinction because time horizon influences strategy, risk management, costs, analysis, and decision-making.
Key Terms
- Trading vs Investing — the core concept introduced in this lesson.
- Kereskedés és befektetés — a lecke központi fogalma.
Beginner
Price, Value and Market Price
Price and value are related but not identical concepts. Value is an assessment of what an asset may be worth based on relevant information, assumptions, cash flows, utility, or other factors. Market price is the price at which transactions are currently taking place. The market price can differ from our estimate of value, and that difference is one reason analysis exists. A trader must learn to distinguish what the market is pricing now from what we believe the asset may be worth.
Key Terms
- Price, Value and Market Price — the core concept introduced in this lesson.
Beginner
Volatility
Volatility describes the magnitude and variability of price movements over time. High volatility means prices can move substantially and rapidly, while low volatility generally indicates smaller and more stable price changes. Volatility creates opportunity, but it also changes risk. A stop distance, position size, and expected range that may be reasonable in a calm market can be inappropriate in a highly volatile market. We will later use volatility as a measurable component of risk management and strategy selection.
Key Terms
- Volatility — the core concept introduced in this lesson.
Beginner
Spread
The spread is the difference between the best available buying price (ask) and selling price (bid) at a given moment. It is one of the basic transaction costs of trading. A narrow spread generally indicates efficient liquidity at the current level, while a wide spread can make entering and exiting a position more expensive. Spread can vary by instrument, market conditions, trading session, liquidity, and volatility. We should learn to account for it before judging whether a trade is attractive.
Key Terms
- Spread — the core concept introduced in this lesson.
Beginner
Stock
What Is a Stock?
A stock represents an ownership interest in a company. When we own shares of a company, we own a small portion of that business. The size of that ownership depends on the number of shares we hold relative to the total number of shares outstanding.
Stocks are issued by companies to raise capital. Investors can then buy and sell those shares in the secondary market. The market price changes as buyers and sellers continuously interact.
Why Do We Trade Stocks?
We may trade stocks because we expect their market price to move. The reasons for those movements can include company performance, expectations about future earnings, economic conditions, interest rates, sector developments, market sentiment, and changes in supply and demand.
Basic Stock Characteristics
- Ownership: a share represents a proportional ownership interest.
- Price: the market determines the current trading price.
- Liquidity: heavily traded stocks can generally be entered and exited more easily.
- Volatility: different stocks can experience very different price fluctuations.
- Risk: the value of a stock can fall substantially, including to zero in an extreme company failure scenario.
Example
If a company has 1,000,000 shares outstanding and we own 1,000 shares, our proportional ownership is 0.1%. The fact that we own shares does not mean that we control the company; the significance of our ownership depends on the company’s share structure and the rights attached to the shares.
Key Terms
Stock, share, equity, shareholder, shares outstanding, market price, liquidity, volatility.
Knowledge Check
- What does a stock represent?
- Why can a stock’s market price change even when the company itself has not changed materially that day?
- Why are liquidity and volatility relevant to a trader?