Investing is focused on building wealth over the long term, while trading aims to generate returns in the short term—daily, monthly, or quarterly. Investors generally hold through market fluctuations, whereas traders look for quick opportunities to profit from price movements.

The amount of money needed to begin trading depends on the securities you choose. Stocks are usually bought in round lots of 100 shares, meaning if a stock costs $60 per share, you’d need $6,000. Some brokers allow margin trading, so you may only need half the amount upfront. For options and futures, trading is done by contracts—one options contract typically represents 100 shares of the underlying stock.

Day trading results vary and depend on strategy, risk management, and available capital. Research from the University of California shows many individual traders trade too frequently with undiversified portfolios, often reducing their returns. In addition, brokerage fees and trading costs can eat into potential profits, making consistent success challenging.

Stock prices are usually determined through an auction process where buyers place bids and sellers set offers. A bid is the highest price a buyer is willing to pay, while an ask (or offer) is the lowest price a seller accepts. When the bid and ask meet, a trade is executed.

Options trading provides opportunities to profit in both rising and falling markets because asset prices—whether stocks, currencies, or commodities—are always moving. Traders can apply specific strategies suited to different market conditions, but each carries risks, including potential losses if the market moves against the position.