CADET · Module F01: Your First Steps · About 20 minutes
Big idea: Prices are not controlled by a green or red candle. They change as people place orders, offer prices and react to information.
Your mission today
Understand why prices move, what a quoted price means, and why buying and immediately selling can produce a loss even if the market barely moves.
1. A simple story about concert tickets
Imagine a concert has 100 tickets. Many people want one, but few owners will sell. Buyers may offer more money to convince sellers. The ticket price can rise.
Now imagine the show is cancelled or interest disappears. More owners might want to sell than there are willing buyers at the old price. Sellers may accept less money. The price can fall.
Financial markets are more complicated, but the same basic tug-of-war exists: what buyers are willing to pay and what sellers are willing to accept.
Prices also react to news, changes in company results, interest rates, fears and excitement. None of these guarantees which way the next price will go.
2. Why an app sometimes shows two prices
On many trading products, there are two quotes:
- Bid: The price at which you can usually sell right now.
- Ask: The price at which you can usually buy right now.
Imagine a screen shows Bid $99.90 and Ask $100.10. Buying one unit at the ask costs $100.10. If you instantly turn around and sell it at the bid, you receive $99.90. Your result is −$0.20, even if the two quotes have not changed.
The $0.20 difference is called the spread. Think of it as one possible cost of entering and leaving a trade. Some products also charge commissions or other fees.
Remember: the big number shown on a chart is not always the exact price you can buy or sell at.
3. Why does a price sometimes jump?
Suppose a seller is willing to sell only three concert tickets for $100 each. Someone wants to buy ten tickets right now. After taking the three at $100, the buyer may have to accept tickets offered at $102, $105 or higher. The average price is worse than the first price on the screen.
In trading this can happen when many people try to act quickly but not enough buying or selling interest is available at the closest price. The ease of finding the other side of a trade is called liquidity.
You don't need to memorise the word yet. Just remember: a number on the screen is not a promise that a large order will be filled completely at that number.
4. A quiet market and a fast market
Some prices change a little at a time. Others jump around. How much a price moves is often described as volatility.
A quiet-looking market can suddenly become fast during important news. A fast-looking market is not automatically easier to make money from. Faster price changes mean that mistakes and losses can also happen faster.
We will not try to predict news reactions in Cadet. Our task is simply to notice that the market can move without asking permission.
5. Three questions before believing a price
- Am I looking at a buying price, a selling price, or a chart reference price?
- Are there fees or a spread?
- Could the real execution price be different if the market moves quickly?
Practice mission
Draw two boxes. Label one SELL: $49.80 and the other BUY: $50.20.
- What is the spread? $0.40 per unit.
- If you buy one unit then immediately sell without other price changes, what is the result before any additional fees? −$0.40.
- Would a bigger position make the total spread cost larger? Yes.
Before your next lesson
Explain why buying and selling may show different prices. Do not worry about trading strategies yet.
Coming next: The main parts of a charting app and how to explore a demo safely.
