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Understanding how trading works across different asset types: stocks, ETFs, ETPs, tokens, and more
What is Trading?
Trading is the act of buying and selling assets in financial markets. Unlike investing (which focuses on long-term growth), trading involves more frequent buying and selling to profit from price movements.
Trading connects buyers and sellers through exchanges, allowing people to exchange different types of assets: stocks, bonds, ETFs, commodities, and cryptocurrency tokens. Each asset type has its own characteristics, trading hours, and settlement processes.
Types of Tradable Assets
Ownership shares in publicly traded companies. When you buy a stock, you own a piece of that company.
A basket of stocks, bonds, or other assets that trades like a single stock. Provides instant diversification.
A broader category including ETFs, ETNs (Exchange-Traded Notes), and other exchange-traded instruments.
Digital assets on blockchain networks representing ownership, utility, or governance rights.
Physical goods like gold, oil, or agricultural products, often traded via futures contracts or ETFs.
Debt securities representing loans to companies or governments that pay interest.
ETFs (Exchange-Traded Funds)
ETFs are investment funds that hold a basket of assets (stocks, bonds, commodities) and trade on stock exchanges like individual stocks. They provide instant diversification and are one of the most popular trading instruments.
ETFs combine the diversification of mutual funds with the tradability of stocks. You can buy and sell ETFs throughout the trading day at market prices, unlike mutual funds which only trade once per day.
ETFs that hold a basket of stocks, tracking an index like the S&P 500 or a specific sector.
ETFs that hold a portfolio of bonds, providing exposure to fixed income markets.
ETFs that track the price of commodities like gold, oil, or agricultural products.
ETFs that hold cryptocurrency or track crypto prices, providing traditional market access to crypto.
ETFs focused on specific industry sectors like technology, healthcare, or energy.
ETPs (Exchange-Traded Products)
ETP is a broader category that includes ETFs plus other exchange-traded instruments:
Hold actual assets (stocks, bonds, commodities). Most common type.
Unsecured debt notes that track an index. No actual asset ownership.
Track commodity prices, often backed by physical commodities.
All ETPs trade on stock exchanges like stocks, but they have different structures and risk profiles.
How Trading Relates to Money
Trading is essentially the exchange of different forms of value. Here's how different asset types relate to the concept of money:
When you trade, you're using money (fiat currency) to buy assets. The assets themselves can also function as stores of value or mediums of exchange.
Stocks represent ownership in companies. When you buy a stock, you're exchanging money for a claim on a company's assets and future earnings.
ETFs let you trade a basket of assets as if it were a single asset. You're essentially trading "diversified money" - exposure to many assets in one trade.
Crypto tokens are digital assets that can function as money, ownership, or utility. They're programmable and can represent almost anything on a blockchain.
Traditional vs Crypto Trading
Limited to market hours (9:30 AM - 4:00 PM EST, weekdays). After-hours trading is limited and expensive.
24/7 trading, no market hours. Trade anytime, anywhere in the world.
T+2 settlement (2 business days). You pay for stocks today, but they settle 2 days later.
Near-instant settlement (seconds to minutes). Transactions settle on-chain immediately.
Commission-free trading common, but may have fees for options, margin, or international stocks.
Low fees (0.1-0.5% typically). Gas fees on blockchain, but often lower than traditional markets.
Requires brokerage account, KYC/AML verification, minimum deposits, geographic restrictions.
Can trade with just a wallet. Some exchanges require KYC, others are permissionless.
High liquidity for major stocks/ETFs. Lower liquidity for small-cap stocks or bonds.
High liquidity for major tokens (BTC, ETH). Lower liquidity for smaller tokens.
Many brokers now offer fractional shares. ETFs allow small investments.
Native fractional ownership. Can buy tiny amounts (e.g., 0.001 BTC).
Held by broker (street name). You own the shares, but broker holds them.
Self-custody possible. You control private keys. Or use exchange custody.
Limited. Can set limit orders, stop losses, but no complex automated strategies.
Highly programmable. Smart contracts enable automated trading, DeFi protocols, yield strategies.
Where Trading Happens
Traditional markets like NYSE, NASDAQ where stocks and ETFs trade.
Platforms for trading crypto tokens, available as CEX (centralized) or DEX (decentralized).
Intermediaries that connect you to exchanges (for stocks, ETFs, bonds).
Key Trading Concepts
Buy or sell immediately at the current market price. Fast but price may vary.
Set a specific price. Only executes if price reaches your target. More control.
The time it takes for a trade to finalize. Traditional: T+2 days. Crypto: seconds.
How easily you can buy/sell without affecting price. High liquidity = easier trading.
The difference between what buyers will pay (bid) and sellers want (ask). Lower is better.
Entities that provide liquidity by always being ready to buy or sell. They profit from spreads.
Key Takeaways
Trading is fundamentally about exchanging one form of value (money) for another (assets like stocks, ETFs, tokens).
ETFs let you trade entire portfolios as single assets, providing instant diversification and easier access to markets.
Traditional markets have trading hours and settlement delays. Crypto markets are 24/7 with instant settlement.
Crypto trading is global and permissionless. Traditional trading has geographic and regulatory restrictions.
Each asset type (stocks, ETFs, tokens) has different characteristics, risks, and trading mechanics. Understanding these helps you trade better.
🎮 INVESTMENT SIMULATOR
Experience real-time investing with candlestick charts! Choose between stocks or crypto, deposit money, and watch your investments move with market conditions.
Choose an asset type and experience the ups and downs of investing!
Watch real-time candlestick charts and make investment decisions. Stocks follow market hours (9:30 AM - 4:00 PM), while crypto trades 24/7.