What is trading?
Written by Matt Allen - Published 28th July 2026
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KEY TAKEAWAY Trading is the act of buying and selling financial assets to profit from price movements. You can go long (backing the price to rise) or short (backing it to fall), and you profit if the market moves in your predicted direction — or lose if it moves against you. With leveraged products such as spread bets and CFDs, those gains and losses are magnified. |
What is TRADING?
Trading is the buying and selling of financial instruments with the aim of profiting from changes in their price. Trading often focuses on shorter-term price movements, though positions can equally be held for months or years — and traders can profit from prices falling as well as rising.
With Spreadex, trading is done through spread betting and CFDs. These are derivative products, which means you speculate on an asset's price without ever owning the asset itself.
What can you trade?
You can trade any market a broker offers a price on. The main asset classes are shares (individual company stocks, from UK blue chips to US tech names), indices (baskets of shares measured as a single number, such as the UK 100 — the FTSE 100 — or the US 500), forex (currency pairs such as GBP/USD), and commodities (physical goods such as gold, oil and wheat, traded via their market price).
Each market behaves differently: indices reflect broad economic sentiment, individual shares respond to company news, forex moves on economic data and interest rates, and commodities respond to supply and demand.
Who are the market participants?
Financial markets bring together a wide range of participants. Institutional participants — banks, hedge funds, pension funds and market makers — account for the majority of volume and provide much of the market's liquidity. Retail traders are private individuals trading their own money, typically through a broker. Brokers such as Spreadex provide retail traders with access to market prices and the platform to trade on them.
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QUICK FACT Traders can profit from falling prices as well as rising ones. Going short — selling a market you don't own — is a standard feature of spread betting and CFD trading. |
What do long and short mean?
Going long means opening a position that profits if the price rises. Going short means opening a position that profits if the price falls. This ability to trade in both directions is one of the defining features of derivatives trading: with spread bets and CFDs, selling short is as straightforward as buying long, because no ownership of the asset is involved either way.
In both cases the position loses money if the market moves the other way — a long position loses as prices fall, and a short position loses as prices rise.
How do traders make or lose money?
A trader's profit or loss is the difference between the price a position was opened at and the price it was closed at, multiplied by the size of the position. If you buy at 100 and sell at 105, you profit on 5 points of movement; if the price falls to 95 instead, you lose on 5 points. Trading costs — such as the spread (the difference between the buy and sell price) and any overnight financing charges — reduce the net result.
Costs of spread betting and CFD trading
Because spread bets and CFDs are leveraged, profits and losses are calculated on the full position size rather than the deposit used to open it, which is why they can accumulate quickly in both directions.
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IMPORTANT TO KNOW Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. |
Frequently asked questions
What is a financial market?
A financial market is any marketplace where financial instruments — shares, currencies, commodities, bonds and derivatives — are bought and sold. Prices move continuously as buyers and sellers respond to news, data and sentiment. What is a Financial Market
Do you own the assets you trade?
Not with spread bets and CFDs. Both are derivatives: your position tracks the market's price without any shares, currency or commodity changing hands. Pricing replicates the underlying market, so long positions on shares are credited an adjustment equivalent to dividends paid. What are derivatives?
What does going short mean?
Going short means opening a position that profits if a market's price falls. With spread bets and CFDs you can short a market as easily as buying it, because you are trading on the price rather than owning the asset. A short position loses money if the price rises instead.
