What can you trade?
Stocks, ETFs, futures, forex, options and crypto, explained in one sentence each.
Six things people trade
1. . A stock is a tiny piece of a . One piece is called a . If you own 1 share of a pizza company that has 1,000 shares, you own 1/1,000 of the company. If the company makes more money, your share is usually worth more.
2. . A basket of lots of stocks you can buy in one click. Instead of buying one apple, you buy the whole fruit basket. Safer, because one bad apple doesn't ruin it.
3. . A promise to buy or sell something later at a price you agree on today. Farmers started this hundreds of years ago with rice and wheat. Today traders use futures on things like gold, oil and the whole stock market (like the and the ). Futures move fast, so they are for experienced traders.
4. . Trading one country's money for another's. When you travel to Mexico and swap dollars for pesos, you just did a forex trade. Traders do it to profit from one getting stronger than another.
5. . A ticket that gives you the choice (not the duty) to buy or sell a stock at a set price before a set date. Like paying $5 to hold a concert ticket price for a week. You'll learn these much later.
6. . Digital money that lives on computers, like Bitcoin. It trades every day, all day, and its price can jump around a lot.
Where it all happens
Stocks and futures trade on an , which is the official marketplace. You don't walk into the exchange. You open an account with a , and the broker sends your orders in for you.
Remember
- Stock = a piece of one company. ETF = a basket of many.
- Futures = a promise to buy or sell later. Forex = trading money for money.
- Options = a ticket with a choice. Crypto = digital money.
- You trade through a broker, and the broker talks to the exchange.
Check yourself
1. What is a share?
2. You swap dollars for pesos on a trip. What kind of trade is that?
3. Who sends your buy and sell orders to the market?
Next lesson: Who trades, and when?
Money Tree School is education, not financial advice. Examples use made-up or historical numbers to show how things work; they are not recommendations to buy or sell anything. Markets can lose money.