If you are new to trading, it can feel overwhelming. Charts, candlesticks, indicators, and strategies often confuse beginners. But with the right knowledge, you can build a strong foundation and avoid costly mistakes. At Backtest Academy, we believe every trader should master the basics before entering the live market.
In this blog, let’s explore the 5 most important things you must know before you start trading.
1. Understand How the Stock Market Works
The stock market is a platform where buyers and sellers trade shares of companies. Prices move because of supply and demand. When more people want to buy a stock, its price rises. When more want to sell, the price falls. As a trader, your goal is to take advantage of these price movements to make profits.
👉 Tip: Don’t think of the stock market as a “money machine.” It’s a marketplace that rewards knowledge, patience, and discipline.
2. Trading vs. Investing – Which One Suits You?
- Investing is long-term. Investors hold stocks for years, focusing on company growth and dividends.
- Trading is short-term. Traders aim to profit from daily, weekly, or monthly price movements.
👉 If you love quick decision-making and can handle risks, trading might suit you. If you prefer slow growth and stability, investing is better. At Backtest Academy, we help you understand both so you can choose wisely.
3. Learn to Read Charts and Candlesticks
Charts are a trader’s best friend. They tell you the story of price movement.
- Candlesticks show four things: Open, High, Low, and Close (OHLC).
- Patterns like Doji, Hammer, and Engulfing help you predict possible market direction.
👉 Before trading real money, practice reading charts daily on platforms like TradingView.
4. Risk Management is the Key to Survival
Many beginners lose money not because of bad strategies, but because they ignore risk management.
- Never risk more than 1–2% of your capital on a single trade.
- Always use a stop loss to protect yourself from big losses.
- Remember: Trading is not about winning every trade, it’s about protecting your capital.
👉 With proper risk management, even if you win only 50% of your trades, you can still be profitable.
5. The Power of Backtesting
Backtesting means testing your trading strategy on past market data before using it live. This helps you:
- See how your strategy would have performed historically.
- Understand win rates, risk-reward ratios, and drawdowns.
- Build confidence in your system.
At Backtest Academy, we specialize in teaching traders how to design, backtest, and refine strategies so that they enter the live market prepared.
Final Thoughts
Trading is a skill, not gambling. It requires discipline, education, and practice. Before you place your first live trade, make sure you:
- Understand how markets move
- Decide whether you’re a trader or investor
- Learn chart basics
- Master risk management
- Backtest your strategies
If you’re serious about trading, Backtest Academy can guide you every step of the way. Remember, successful trading is not about predicting the future, but about preparing for it.
