Online Trading: What It Is and How It Works

Trading is different from investing in its time horizon. Trading holds a position for seconds to weeks to profit from a price move, while investing holds an asset for years, usually in an investment account, for growth and for the income that ownership brings.

The horizon sets the frequency of decisions. A trader decides on every position, often several times a week, and watches the price while the position is open. An investor decides rarely, buys and holds for the long term, and lets years of growth and dividends do the work. The horizon also sets the direction. A trader can profit from a falling price by going short, while an investor gains only when the asset rises in value or pays income.

Trading often uses leverage, so a deposit controls a position larger than itself. Investing usually pays the full price of the asset and owns it. An investor who owns a share receives its dividends, the share of profits a company pays to its shareholders, while a trader who buys the same share in the morning and sells it in the afternoon receives only the change in its price. In return, trading has three advantages that investing lacks: the chance to profit in either direction, short holding times, and access to many markets from a single account.

Growth over years calls for investing, with the income that ownership brings. Profit from price moves in either direction calls for trading, at higher risk and with more of your time. Many people do both with separate money, and comparing trading and investing against your own goals decides how much of that money each activity gets.

Online trading is different from offline trading in how the order reaches the market. Offline, a phone call to a stockbroker or a floor trader carried the order, while online the trader sends it electronically from a platform or app. What did not change is that a registered broker still stands between the trader and the market, and that the risk is the same.

In the US, the change began with May Day, May 1, 1975, the date the Securities and Exchange Commission ended fixed commissions on stock trades, and discount brokers followed with lower commissions. Before the screen, a private client phoned a stockbroker, the stockbroker passed the order to the trading floor, and the price came back by phone. E*TRADE began offering electronic brokerage in 1992 and internet trading in February 1996, the screen reached private clients with the internet in the late 1990s, and their pocket with the smartphone. In October 2019, Charles Schwab, TD Ameritrade and E*TRADE cut the commission on online trades in US stocks to $0. Online trading is also called electronic trading or e-trading.

Online trading brought the retail trader four advantages. Access: an account opens online, without a relationship with a stockbroker. Speed: an order reaches the market in a fraction of a second, and real-time prices update on a phone. Cost: the commission on an online trade in US stocks has fallen to $0 at the large brokers, far below what a stockbroker charged by phone. Products and hours: a trading app offers stocks, ETFs and options side by side, with futures and forex at some brokers, and US stocks also trade outside the regular session, from 4:00 a.m. to 8:00 p.m. Eastern Time on NYSE Arca.

The structure of a trade and its risk stayed the same. A registered broker still holds the account and carries every order to the market, and a losing trade loses the same money whether the order went by phone in 1985 or by a tap on an app today. An app also makes it easier to trade more often, and trading more often is a risk of its own.

Buying on margin differs from buying with cash in who pays for the asset. In a cash account the buyer pays the full price, while in a margin account the broker lends part of it, up to half at the purchase, and charges interest on the loan. The asset belongs to the buyer either way, with shareholder rights and dividends, but only the margin account allows going short and trading with leverage, and the loan adds a daily cost and the risk of a forced sale.

Take $1,000 of one share. Bought with cash, the share costs $1,000, and the full amount leaves the account. Bought on margin at the 50% that the Federal Reserve's Regulation T requires at purchase, the same share needs $500 of the buyer's money and $500 borrowed. A 10% fall in the share costs $100 in both cases: for the cash buyer, a tenth of the money invested; for the margin buyer, a fifth of the money put in, plus the interest on the loan. Only the margin account could have sold the share short first and gained $100 from the same fall.

The two routes also differ in costs and protections. The cash buyer pays no daily charge while holding the share. The margin buyer pays interest on the loan for every day it stays open, 12.075% a year on balances under $25,000 at Fidelity and Charles Schwab in November 2026, which makes a margin position expensive to hold for months, a cost at the center of how margin trading works. If the equity in the account falls below the maintenance requirement, at least 25% of the value of the shares, the broker can sell them without notice. Both accounts are covered by the Securities Investor Protection Corporation (SIPC) if the broker fails, a cover that never extends to trading losses, and no US rule stops a margin loss at the money in the account.

Holding for years calls for a cash account. Trading short-term moves in either direction calls for a margin account, chosen with the knowledge that the loss can exceed the money put in.

Online trading goes through a broker because a retail client cannot deal on an exchange directly. An online broker is the registered firm that opens the client's brokerage account, holds the money and the securities in it, provides the platform and executes each order, either by routing it to an exchange or another venue or, in retail forex, by taking the other side of the trade as dealer.

Only member firms can deal on an exchange, and membership requires capital, systems and supervision that an individual does not have. A broker that serves US clients in stocks, ETFs and options is a broker-dealer registered with the SEC and a member of FINRA, while a firm that offers futures or retail forex is registered with the CFTC and is a member of the NFA. Opening an account starts with identity checks, under the customer identification program that the USA PATRIOT Act requires against fraud and money laundering: name, date of birth, address and, for a US person, a taxpayer identification number such as a Social Security number. The broker then keeps clients' fully paid securities and their cash segregated from its own, under the SEC's Customer Protection Rule, so that the firm's creditors cannot claim them if the firm fails.

Execution follows one of two models, and each shapes the price the client gets. In the first, the broker routes the order to an exchange, an ATS or a wholesaler, and the client gets the price of the venue that fills it, with no commission on online trades in US stocks at the large brokers. In the second, the firm is the dealer. The dealer quotes the price, takes the other side of the trade and earns from the spread, so the client's price is the dealer's own quote, the model of retail forex. Some firms run both models, stocks routed to venues and forex as dealer, and even the best online brokers execute every order through one of the two.

Leverage works in a trade by letting a deposit, the margin, open a larger position, so that profit and loss are computed on the full position and not on the deposit. In a US margin account, $5,000 of the trader's money and $5,000 borrowed from the broker buy $10,000 of an ETF that tracks the S&P 500, which is leverage of 2:1. A 1% move in the ETF gains or loses $100, a fiftieth of the trader's money.

Margin and leverage express the same ratio. A margin of 50% means a position twice the money put in, 2:1, the most that Regulation T allows when a stock is bought. A margin of 2% is 50:1, the most a US retail forex dealer may offer on major currency pairs, and a margin of 5% is 20:1, its limit on all other pairs. In a margin account on stocks the broker lends real money, the other half of the price, and charges interest on it every day. In retail forex the deposit secures the position, and the dealer computes the gain or the loss on its whole value.

With the ETF at $500, a spread of one cent is 0.002% of the price, about $0.20 on a $10,000 position, and it comes off both outcomes. A 1% rise gains $100 and leaves $99.80 after the spread. A 1% fall loses $100 and costs $100.20 with the spread. Interest on the $5,000 loan at 12% a year adds about $1.67 a day. A 50% fall in the ETF takes the whole $5,000 of the trader's money.

As losses eat into the account, the broker watches the equity, the value of the position minus the loan. When the equity falls below the maintenance requirement, at least 25% of the value of the shares under FINRA rules and often more at the broker's choice, a margin call asks the trader to add money or securities, and the broker can sell positions without notice. In the example, the requirement is reached when the $10,000 position has fallen to about $6,667, a fall of a third. The margin call and the forced sale are the two safeguards built into how leverage works, and neither changes the fact that the loss is computed on the full position. Leverage itself has a limit in the US, where the rules set the most a retail client may borrow on stocks and use on forex.

The four orders that open and close a trade are listed below.

• Market order: fills now, at the best price available, so a buy fills at the ask and a sell at the bid. The fill is certain and the price is not, and in a fast market the price can be worse than the one on the screen.
• Limit order: fills at the price you set or better, a buy at or below the limit and a sell at or above it. The price is certain and the fill is not, because the order never fills if the market never reaches the limit.
• Stop-loss order: a stop order that becomes a market order when the price reaches a set loss level, and closes the position there. A stop-loss is not guaranteed, because the order fills at the next available price when the price gaps through the level, overnight or on news. That price can be well beyond the level.
• Take-profit order: a limit order to sell at the target, which closes the position when the price reaches it, locking in the gain without the trader watching the screen.

Each order also carries a time in force, the period it stays active: a day order expires at the close if it has not filled, and a good-'til-canceled order stays open until it fills or the trader cancels it, within the limit the broker sets.

Interpreting chart patterns in trading involves analyzing the shape and context of price formations to infer what they suggest about future price direction. Traders interpret chart patterns in terms of who is in control (buyers or sellers), likely breakout direction, and potential price targets. Chart pattern interpretation is about understanding what the shape of price movement suggests regarding trend changes or continuations, and acting on those insights. Traders translate the visual pattern into a trading plan, where they identify a pattern, wait for completion/confirmation, and then enter and manage the trade by reading what the pattern implies for stop and target.

Chart pattern interpretation is a mix of technical guidelines and some art, since experience helps in distinguishing high-probability patterns from false ones and reading context (patterns in the context of larger trends or other signals). Traders get a feel for which patterns to trust and how aggressively to trade them with practice.

Volume behavior is part of chart pattern interpretation. Many patterns are considered more reliable if accompanied by certain volume patterns. For example, in a head and shoulders, volume often is highest on the left shoulder and head, then diminishes, and spikes on the break of the neckline. A trader seeing volume spike on the neckline break interprets that as confirming heavy selling and thus a valid reversal. In a flag, declining volume during the flag formation and then increasing on breakout is a classic sign that the continuation is real. Many traders devote many hours of study to a perfect understanding of chart patterns in trading and their rules.

Interpreting candlestick patterns in trading involves analyzing the shape and position of one or several candlesticks to infer the market's current sentiment and potential next moves. Traders look at where a candlestick pattern occurs (after an uptrend, downtrend, or in a consolidation) and what the pattern signifies about buyer-seller dynamics, then use that information to make trading decisions.

Candlestick pattern interpretation is about reading the story each pattern tells about who's winning between bulls and bears, and then making a probabilistic bet that this story will continue to unfold in the indicated direction. By combining knowledge of patterns (knowing the exact rules of the "shooting star", for example) with placement (it happened at a resistance level after a long rally), traders make decisions to buy, sell, or stand aside. Candlestick patterns distill a lot of price info into a compact signal. Traders anticipate short-term market moves and adjust their positions accordingly by interpreting candlestick patterns accurately, ideally with confirmation signals such as volume increases.

Candlestick patterns are interpreted within a broader market context, whether in an uptrend, downtrend, or range. In downtrends, patterns such as the Hammer or Morning Star suggest a bullish reversal, while in uptrends, formations like the Shooting Star or Evening Star warn of a potential top. Multi-candle patterns (for example, Bullish Engulfing or Bearish Engulfing) emphasize momentum shifts from sellers to buyers or vice versa.

Traders often seek confirmation through follow-up candles, volume analysis, or alignment with key support and resistance levels. Higher time frames (daily or weekly charts) typically lend more weight to these patterns than shorter intervals.

Yes, trading losses can exceed the amount invested on a leveraged position, because the loss grows with the full position and a price gap can carry it past the deposit before the broker sells. No US rule gives retail clients negative balance protection: the disclosures that brokers must give for margin accounts and retail forex both state that the client can lose more than the money deposited.

On a $10,000 position in a currency pair held with $500 of margin, the 5% that US rules require on pairs other than the majors, a 5% fall takes the whole deposit. A 10% gap takes $1,000, twice the deposit, whether it comes from a central bank's decision or a political shock, and the dealer cannot close the position at a price the market skipped. A stop-loss does not cap the loss in a gap either, because the stop fills at the next available price.

In a cash account, a share bought outright can lose at most the price paid, because no money is borrowed. In a margin account the loss below zero stays with the client: the broker sells the positions, and any debit balance left is a debt the client owes the firm. The SIPC, which protects clients' securities and cash up to $500,000 if a broker fails, never pays for trading losses, so the whole balance of the account can be lost, and more on margin.

The risk of a trade is limited by three decisions the trader takes before entering it. The trader first decides the most the trade may lose. The trader then sets the exit at the price where the market proves the idea wrong. Last, the trader sizes the position so that the loss at that exit equals the amount decided. Position size therefore equals risk divided by the distance from entry to exit.

The loss of any trade is its size times the distance from the entry to the exit. The risk comes first, usually 0.5% to 1% of the account per trade. The exit comes next, at the price where the reason for the trade no longer holds. The size follows from the two. A wider stop means a smaller position, so the loss stays at the amount decided whatever the market.

A stop-loss order closes the position at the exit, except in a gap, where the order fills at the next available price. A target at least twice the distance to the stop makes each win worth at least two losses, so a trader who wins fewer than half of the trades can still come out ahead.

Limits above the single trade protect the account over a run of losses. Over such a run the account falls from its peak, and that fall is the drawdown. To cap the drawdown, a daily or weekly loss limit stops trading once the account has lost a set amount. A second limit is diversification, the spreading of risk across several positions and markets, which restricts how much one trade or one market can hurt the account. The limits on each trade and on the whole account together make up risk management.

A trading plan writes all of these limits down before the first trade: the markets, the reason to enter, the risk per trade, the stop and the target, and the loss limits. The common ways beginners lose money come from leaving these limits unset.

Online trading is regulated in the US through registration. A firm that deals in stocks, ETFs or options with US retail clients must be a broker-dealer registered with the SEC and a member of FINRA, and a firm that offers futures or retail forex must be registered with the CFTC and be a member of the NFA. If a broker-dealer fails, the Securities Investor Protection Corporation (SIPC) covers up to $500,000 per customer, of which up to $250,000 in cash, but not trading losses.

The SEC, the Securities and Exchange Commission, writes the federal rules for brokers and markets, and FINRA, the Financial Industry Regulatory Authority, is the self-regulatory organization that drafts the rules for its member firms and polices their compliance. For futures and retail forex, the CFTC, the Commodity Futures Trading Commission, is the federal regulator, and the NFA, the National Futures Association, is the self-regulatory organization with which every firm that trades futures with the public must be registered. Each state also has its own securities regulator. The SIPC is the backstop if a broker-dealer fails. It returns clients' securities and cash up to $500,000 per customer, of which up to $250,000 in cash, and it never pays for losses made by trading. Futures and retail forex fall outside the SIPC, and the money a client deposits with a retail forex dealer is not protected as customer funds if the dealer fails.

The SEC also keeps the PAUSE list of firms that falsely claim to be registered in the US or that impersonate registered firms, and the CFTC keeps the RED List of foreign firms that appear to need its registration without having it.

The check before depositing takes a few minutes. Search the firm's name on FINRA BrokerCheck for a broker-dealer, or on the NFA's BASIC database for a futures or forex firm, confirm that the name, the website and the phone number match the ones you were given, and search the PAUSE list and the RED List for the same name. A firm that is not registered, or whose details do not match, should receive no money. The check of the registration and the warning lists is the part of what SEC regulation involves that falls to the reader rather than to the firm.

The four US rules that limit leveraged trading for retail clients are listed below.

• Margin on stocks: under the Federal Reserve's Regulation T, a client may borrow at most 50% of the price of a stock when buying it, and under FINRA rules a margin account needs at least $2,000 of equity before any borrowing.
• Maintenance margin: under FINRA rules, the equity in a margin account must stay at least 25% of the value of the shares held, throughout the trading day, and many brokers ask for more. Below that level, the broker can sell positions without notice.
• Day trading on margin: since June 4, 2026, FINRA's intraday margin requirements have replaced the pattern day trader rule, so day trading no longer requires $25,000 of equity, and a broker may keep the old rule until October 20, 2027.
• Leverage on retail forex: under CFTC rules, a retail client may use at most 50:1 on major currency pairs and 20:1 on all other pairs, and NFA rules require the dealer to close positions first in, first out, without holding opposite positions in the same pair.

The table below gives four groups of markets, compared on the maximum leverage a retail client may use.

None of the four rules stops a loss at the money in the account. The disclosures that FINRA requires for margin accounts and the CFTC for retail forex both state that a client can lose more than the deposit and owe the difference to the firm.

CFDs and spread bets are not available in the US because federal law treats them as swaps, which only an eligible contract participant may trade away from a regulated exchange. For an individual, being an eligible contract participant means having more than $10 million invested at their discretion, so an ordinary retail client cannot open a CFD with a US firm.

The Dodd-Frank Act of 2010 brought swaps under the Commodity Exchange Act and the Securities Exchange Act. A CFD counts as a swap, or as a security-based swap when it follows a single share or a narrow index, and both laws allow a person who is not an eligible contract participant to trade one only on a registered exchange. In 2015 the SEC fined Sand Hill Exchange for offering security-based swaps to retail investors, and OANDA, a US forex dealer, states in its disclosures that CFDs are not available to residents of the United States.

The spread bet, which brokers offer in the UK and Ireland, pays a price change the way a CFD does, so away from an exchange it falls under the same swap rules for anyone who is not an eligible contract participant. Many trading guides online come from international brokers and explain CFDs on stocks, indices and currencies, but those pages are written for clients outside the US. A US resident trades the same markets through stocks and ETFs, options, futures or retail forex, with a firm registered in the US.

Trading is taxed in a brokerage account on each gain when the position is sold, at a rate that depends on how long it was held, and not year by year while the money stays inside an IRA. Gains on positions held one year or less are short-term and taxed as ordinary income, gains on positions held more than one year are long-term and taxed at 0%, 15% or 20%, and an IRA can hold stocks, ETFs and funds but does not allow borrowing on margin or selling short.

An IRA, an individual retirement account, is a tax-advantaged account set by IRS rules. Each person can pay in up to $7,500 in 2026 across all of their IRAs, or $8,600 from age 50. In a traditional IRA the contributions may be deductible and the withdrawals are taxed, while in a Roth IRA the contributions are not deductible and qualified withdrawals are tax-free. Withdrawals before age 59½ usually carry an additional tax of 10%. Inside an IRA, gains and dividends are not taxed year by year, but the account cannot borrow, sell short or run options strategies that need margin.

Outside the IRA, a trader holds positions in a taxable brokerage account, and the holding period sets the rate. Short-term gains, on positions held one year or less, are taxed as ordinary income, at the same rates as wages. Long-term gains are taxed at 0% up to $49,450 of taxable income for a single filer in 2026, at 15% up to $545,500 and at 20% above it, and higher incomes can pay a further 3.8% net investment income tax. Net losses reduce other income by up to $3,000 a year, and the wash sale rule disallows a loss when the same or a substantially identical security is bought within 30 days before or after the sale. Futures and broad-based index options follow the 60/40 rule, 60% long-term and 40% short-term whatever the holding period. The IRS sets these rules, and their effect depends on personal circumstances and can change.

The table below gives three routes to a market, compared on their form, the tax on their returns and the main limit each one carries.

Owning for years points to the IRA first, up to the yearly limit. Trading short-term moves happens in a taxable brokerage account, where gains held one year or less are taxed as ordinary income. Fidelity, a US broker named here as an example rather than a recommendation, offers both a taxable brokerage account and traditional and Roth IRAs.

Yes, it is possible to start trading with little money, because there is no fixed minimum. The budget is the most you accept to lose, and at a risk of 1% per trade an account of $100 risks $1 on each trade and an account of $500 risks $5.

The right amount is decided by the budget, not by the broker's minimum deposit. The budget is the sum you can lose entirely without real distress, after the emergency fund is in place, and $100 is enough to place trades at 1% of risk as long as the position size follows from the stop. Borrowing on margin needs at least $2,000 of equity, so a small account trades with cash, and some brokers sell fractional shares, which let a small account buy part of one share.

At $1 of risk per trade, the gains are small too, and the temptation is to raise the leverage to make the account grow faster, which turns a small budget into a fast loss. The risk per trade stays the same fraction of the account whatever the size of the account.

A demo account costs nothing, so the practice that comes before the first deposit needs no money at all.

The seven steps that set up a first trade are listed below.

1. Pick the market and the reason: choose one liquid market and write down why you expect it to move. In the example, the market is an ETF that tracks the S&P 500, quoted at $499.99 / $500.00, the reason is a view that the index will rise, and the cash account holds $2,000 of money that is truly spare.
2. Decide the risk: fix the most the trade may lose before anything else. At 1% of the account, the risk is $20.
3. Set the stop-loss and the target: place the exit where the reason no longer holds, and the target at least twice as far from the entry. The stop-loss goes at $490, $10 below the entry price of $500, and the target at $520, $20 above it.
4. Size the position: divide the risk by the distance to the stop. $20 ÷ $10 gives 2 shares, a position worth $1,000, paid in full from the cash account with no leverage.
5. Place the order: buy 2 shares with a market order, which fills at the ask of $500.00, then place a stop order at $490 and a limit order to sell at $520, both good 'til canceled and linked so that one cancels the other. The position opens 2 cents down, one cent a share, because it would close at the bid of $499.99. The spread is inside both results, since the trade opens at the ask and closes at the bid, and the purchase settles one business day later.
6. Manage and close: leave the orders to work and do not move the stop-loss. If the price reaches the target of $520, the position closes $20 a share up, a gain of $40. If the price reaches the stop of $490, the position closes $10 a share down, a loss of $20, the risk decided first. Bought with cash, the position pays no interest for the nights it stays open, and an online trade in a US ETF carries no commission at the large brokers, only the SEC fee of about $0.02 on the sale. A gap through $490 fills the stop at a worse price, and the loss then exceeds $20.
7. Record the trade: write down the reason, the risk, the entry, the exit, the result, the costs and any rule you broke, before the next trade.

Yes, online trading is open to any adult who passes the broker's checks. The checks are proof of identity, a taxpayer identification number such as a Social Security number, the age of majority in the client's state, usually 18, and, before margin or options, the broker's approval. Trading one's own money needs no license.

The identity checks are a legal requirement against fraud and money laundering, met with a name, a date of birth, an address and an identification number. Before options, the broker asks about your objectives, income, net worth and experience and approves the account for a level of options trading, and before margin it gives you the margin disclosure statement and asks you to sign a margin agreement. The same checks apply to a student, who can open an account like any other adult, while a minor can own investments only through a custodial account, run by an adult until an age set by state law.

In the US, registration is required to act for other people, as a broker or as an investment adviser who manages their money or advises them for pay, registered with the SEC or with a state.

No, trading is not like gambling by design, because a trade has a known cost, the spread, and a loss capped by position size and a stop-loss, while a bet faces odds set by a bookmaker. Without a tested method, a fixed risk and costs under control, trading behaves like gambling.

A bookmaker sets the odds of a bet so that the bookmaker profits across all bets, and the bettor loses the whole stake on a losing bet. A trade's cost is the spread, and the trader knows that cost before placing the order and sets the loss through the position size and the stop-loss. Over many trades, a tested method and a risk fixed in advance give the result a structure that a bet does not have.

A trader who enters on a hunch, raises the size after a loss and ignores the costs is placing bets through a trading platform.

Binary options are the trading product most often compared to gambling. They work like a bet, and in the US they may be offered only on an exchange regulated by the CFTC or the SEC, while the UK, among other countries, bans them for retail clients.

For someone with a history of problem gambling, trading can trigger the same behavior, the chase of a loss and the pull of the next position, and that history is a reason to stay away from trading altogether.

The six common trading mistakes are listed below.

• Overtrading: opening positions without a real reason, out of boredom or the wish to be in the market, so that costs pile up and each decision gets less thought.
• Chasing losses: raising the size to win back a loss, which turns one losing trade into a larger loss.
• Moving the stop-loss: widening the stop as the price approaches it, so that the loss decided before the trade grows into one the trader never planned.
• Abandoning the plan: dropping the rules after one loss or a short losing run, when a run of losses is a normal part of any method.
• Ignoring costs: watching the price move and not the spread, the commission and the margin interest, which decide whether a small gain is a gain at all.
• Skipping the record: trading without writing anything down, which leaves no way to learn what works and what does not.

The five steps of a trading performance review are listed below.

1. Log every trade: write down the setup, the plan, the result, the costs and any rule broken in a trading journal, at the moment the trade closes.
2. Review weekly: read the week's trades together, on a fixed day, away from the hours the market is open.
3. Read the figures: calculate the win rate, the average win against the average loss, the costs paid and the number of rule breaks.
4. Change one rule at a time: adjust the distance of the stop, or the market traded, so that the following weeks show its effect.
5. Judge on many trades: draw conclusions from dozens of trades, not from one week, because past results describe what happened and do not predict what comes next.

The six common myths about trading are listed below.

• The 90-90-90 rule: the claim that 90% of new traders lose 90% of their money in 90 days has no source behind it. The measured figure is the share of retail accounts that are not profitable, which US retail forex dealers have to publish every quarter.
• Trading as a salary: a salary arrives every month, and trading results do not. Losing months are part of every method, while the trader pays the costs of trading and of living in all of them.
• Winning most trades: profit does not require being right most of the time. A trader who wins 40% of trades can be profitable if the wins are larger than the losses: with wins twice the size of the losses, four wins in ten leave the account ahead before costs.
• More trades, more profit: the evidence points the other way. Barber and Odean found that the households that traded most earned the least, because each extra trade added costs and few added returns.
• Past results as proof: a run of winning trades, a strategy's record or a screenshot of someone else's profits does not show what the next trades will do. Past performance is not a reliable indicator of future results.
• Leverage as extra money: margin is a loan, not extra money. A deposit of $5,000 on margin at 2:1 controls a position of $10,000, the broker charges interest on the $5,000 it lends, and the loss on the whole position is the trader's own.