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Trading fundamentals and rules
Order types, settlement, margin, short selling, the pattern-day-trader rule, risk management, trading psychology and options basics.
Orders and execution
- Stock order types explained: market, limit, stop and more How market, limit, stop, stop-limit, trailing-stop, on-close and conditional orders work in US markets, what each one guarantees, and how to choose between them.
- Market vs limit orders: price certainty vs getting filled When a market order or a limit order is the better tool, how marketable limits and partial fills work, and how to calculate slippage on a real order.
- Stop and stop-limit orders: triggers, gaps and non-fill risk How stop and stop-limit orders trigger, why a gap fills a stop far below its price, when a stop-limit never sells, shown on Meta’s July 2026 earnings gap.
- Trailing stop orders: percent vs dollar trails, with real examples How a trailing stop ratchets with the price, how percent and dollar trails differ, a step-by-step worked path, and 10% vs 15% trails tested on Tesla in 2026.
- Time in force: day, GTC, IOC, FOK and other order durations What day, good-til-canceled, IOC, FOK, all-or-none, on-open and on-close instructions do, how extended-hours eligibility works, and the traps in each.
- Bracket, OCO and OTO orders: linking entries, targets and stops How one-triggers-other, one-cancels-other and bracket orders link an entry to a profit target and a stop, worked numbers, and the broker-specific traps to check.
- Order routing and best execution: NBBO, Rule 611, PFOF and 606 Where a US stock order goes after you tap buy: the NBBO, Rule 611 order protection, FINRA best execution, payment for order flow and Rule 606/605 reports.
- Liquidity and slippage: volume, depth, spread and market impact What makes a stock liquid, how volume, depth and spread set trading costs, how to estimate slippage and market impact, and a real liquid vs illiquid comparison.
- T+1 settlement: trade date, settlement date and why they matter How US T+1 settlement works under SEC Rule 15c6-1 since May 28, 2024, how to count settlement days, and what it means for cash, ex-dividend dates and options.
Rules and regulations
- Pattern day trader rule: the legacy PDT test and the 2026 replacement How the old PDT rule counted day trades, why FINRA replaced it with intraday margin in June 2026, and how to tell which version your broker still applies.
- Cash vs margin accounts: differences, rules and which fits you How cash and margin brokerage accounts differ on borrowing, settlement, short selling, minimums and risk, with the 2026 US rules and a side-by-side comparison.
- Buying on margin: how margin loans, interest and leverage work How buying stock on margin works under Reg T and FINRA rules, what interest costs, and how leverage magnifies gains and losses, with fully worked examples.
- Margin calls: when they trigger, how to calculate them, what to do Work out the exact price that triggers a margin call, how much cash or stock cures it, and how Reg T and maintenance calls differ under 2026 US rules.
- Cash account violations: good faith, free-riding and liquidation How good-faith, free-riding and cash liquidation violations happen in a US cash account under T+1 settlement, and how the Regulation T 90-day freeze works.
- Wash sale rule: the 61-day window, basis adjustment and traps How IRC §1091 disallows a loss when you rebuy within 30 days, how the loss moves into your new basis, and the IRA, options and 1099-B traps for tax year 2026.
- Short selling explained: borrowing, fees, rules and unlimited risk How a short sale works step by step: the locate and close-out rules, borrow fees, dividends you owe, margin, and why a short position has no ceiling on its loss.
- Short sale restriction (SSR) rule: how SEC Rule 201 works What triggers the short sale restriction, how long it lasts, what "above the national best bid" means for an order, the exemptions, and a worked example.
- Short squeeze: how it works, warning signs and the GameStop case What a short squeeze is, how short interest, days to cover and borrow costs set one up, and what the SEC staff found about GameStop in January 2021.
- Trading halts and Limit Up-Limit Down (LULD) pauses explained Why US stocks get halted, how news-pending halts and SEC suspensions differ, and how LULD price bands, limit states and 5-minute pauses work, with examples.
- Market-wide circuit breakers: the 7%, 13% and 20% halt rules How US stock market circuit breakers work: the three S&P 500 trigger levels, the 3:25 p.m. rule, the four March 2020 halts, and the history back to 1987.
Risk management
- Position sizing: how many shares to buy for a set risk How fixed-fractional position sizing turns a risk budget and a stop distance into a share count, with worked examples, ATR-based sizing and the common traps.
- Risk-reward ratio and R multiples: the math of a trade What the risk-reward ratio and R multiples measure, the break-even win rate for any ratio, and how to compute expectancy from a win rate, wins and losses.
- Stop-loss placement: volatility, structure and time stops Where traders place stop-losses (ATR multiples, chart structure, percentages, time) and why a stop order never guarantees its price, shown on a real AAPL gap.
- Trading plan and trading journal: what to write down What a written trading plan contains, which fields a trading journal should record, and how to review results with win rate, average R, profit factor and drawdown.
- Common trading mistakes and the math behind them Overtrading, averaging down, trading without stops, oversizing, revenge trading and ignoring costs: what each mistake costs, worked through with numbers.
- Volatility and the VIX: historical vs implied volatility explained How historical and implied volatility differ, what the Cboe VIX measures and how it is built, what its 1990–2026 history shows, and why VIX products behave differently.
Trading styles
- Day trading vs swing trading vs position trading compared How day, swing and position trading differ in holding period, time, costs, taxes and US rules, with what the research says about day-trader results.
- Trading psychology: loss aversion, overconfidence and other biases The biases behind costly trading decisions, including loss aversion, overconfidence, the disposition effect and recency bias, and the tools traders use to manage them.
- Gap trading: price gap types, gap fills and what the data shows What price gaps are, the four classic gap types, how often gaps fill based on two years of data for 10 large US stocks and ETFs, and the risks of trading them.
- Trading earnings season: implied moves, IV crush and earnings gaps How earnings season works, how to read the market’s implied move from options, why implied volatility collapses after reports, and what real earnings gaps look like.
Options basics
- Options basics: how calls and puts work, with payoff diagrams What call and put options are, how strike, expiration and premium fit together, what buyers and sellers owe each other, and how to read a payoff diagram.
- Option moneyness: in, at and out of the money explained How to tell whether a call or put is in, at or out of the money, and how to split any option premium into intrinsic value and time value, with worked tables.
- Option premium and time value: decay, volatility and Black-Scholes What drives an option premium, why time value melts faster near expiration, what implied volatility measures, and the intuition behind the Black-Scholes model.
- Option Greeks: delta, gamma, theta, vega and rho with examples What each option Greek measures, how to read delta, gamma, theta, vega and rho on a real position, and worked examples computed from the Black-Scholes model.
- Covered calls: how they work, payoff, and assignment risk How a covered call combines owned shares with a sold call, what it can earn and lose, why the upside is capped, and what happens when the shares are called away.
- Cash-secured puts: mechanics, payoff and the obligation to buy How selling a cash-secured put works, what it can earn and lose, what the obligation to buy shares means in practice, and how it compares with a covered call.
- Vertical spreads: bull call, bear put and credit spreads explained How vertical option spreads work, how to compute maximum profit, maximum loss and break-even for debit and credit spreads, and the risks that remain.
- Option exercise and assignment: how it works and when it happens How option exercise works, how OCC assigns sellers at random, the expiration-day cut-off and auto-exercise rule, early assignment before dividends, and pin risk.
- Options risks and approval levels: what brokers check and why How US brokers approve options accounts under FINRA Rule 2360, what approval tiers usually allow, and the main risks: leverage, undefined loss and liquidity.
Educational content, not investment advice. Finabase Learn explains how markets and tools work. It does not recommend any security or strategy, and examples are for illustration only. Investing involves risk, including the loss of principal. Rules and figures are for the United States unless stated and can change — check the cited source before you act.