Workbook 1: Foundations · Alpha Academy

Reading about the market is step one. Doing the math yourself is where it sticks. This workbook gives you hands-on practice for the first six Alpha Academy modules — what trading is, how the market works, stocks, orders, charts, and the language traders speak.

How to use this workbook:

Work with a pencil, not a pen. Mistakes here are free — that is the whole point.
Do the exercises in order; each module section matches the module with the same number.
Finish a whole module section before checking the ## Answers at the very end. Peeking early steals the learning.

Welcome to Alpha Academy — Welcome: Your First Steps Into the Market

Calculations

You buy 25 shares of a stock at $32 each. Later you sell all 25 at $38 each. How much did you spend, how much did you get back, and how much did you make?
You buy 40 shares at $25 each. The price falls and you sell all 40 at $19 each. How much did you spend, how much did you get back, and how much did you lose?

Fill in the Blank

Practicing in a simulator with real prices and pretend money is called __________ trading.
The three skills every trader builds are understanding, __________, and __________.

Spot the Mistake

Marcus says: "Most beginners make good money in their first year, so my goal for year one is to double my account." What is wrong with his thinking?

Scenario

Tom feels 100% sure a stock is about to rise. He plans to skip paper trading entirely and start trading with next month's rent money. Name the two rules from Welcome to Alpha Academy that he is breaking.

What Is the Stock Market? — What Is the Stock Market?

Calculations

An index sits at 4,000. Over the week it rises 2%. What is its new value?
A stock closes at $45 on Monday and $49.50 on Tuesday. What percentage did it gain on Tuesday?

Fill in the Blank

The very first time a company sells stock to the public is called an __________ (initial public offering).
An __________ is a scoreboard number that tracks a group of stocks at once. You cannot buy it directly — only funds and products that track it.

Spot the Mistake

Priya buys 10 shares of a company through her app, two years after its IPO, and says: "I just gave the company $600 to help it grow." What is wrong with her statement?

Scenario

At 7:45 AM, a stock you follow jumps 6% before the open on light trading. Your friend wants to buy it immediately. Which session is this, and what warning from What Is the Stock Market? applies?

Stocks A–Z — Stocks A–Z

Calculations

A company trades at $25 per share and has 80,000,000 shares outstanding. What is its market cap, and which size bucket (small-cap, mid-cap, or large-cap) does it fall into?
You own 150 shares of a company that pays a dividend of $0.40 per share, four times a year. How much cash do you receive each quarter, and how much over a full year?
You own 30 shares at $120 each. The stock does a 3-for-1 split. How many shares do you own afterward, at roughly what price each, and what is your total holding worth?
A company earns a net income of $3,000,000 and has 2,000,000 shares outstanding. What is its EPS (earnings per share)?

Fill in the Blank

The shares actually available for the public to trade — shares outstanding minus the shares locked up with insiders and major holders — are called the __________.

Spot the Mistake

Leo says: "Company A costs $600 a share and Company B costs $15 a share, so Company A is clearly the bigger company." What is wrong with his reasoning?

Scenario

A tiny company has only 4 million shares in its float. One morning a viral post sends thousands of new buyers chasing those shares at once. What does Stocks A–Z predict will happen to the price, and why should a beginner be extra careful here?

How Trading Actually Works — How Trading Actually Works

Calculations

A stock shows a bid of $74.96 and an ask of $75.04. (a) What is the spread? (b) You buy 50 shares at the ask and immediately sell them at the bid, with the price never moving. How much do you lose?
In a margin account, you put up $2,000 of your own money and borrow another $2,000 under Regulation T, controlling $4,000 of stock. The stock falls 10%. How many dollars did you lose, what percentage of YOUR money is that, and how much do you still owe the broker (before interest)?
A famous stock costs $300 per share. Your broker offers fractional shares, and you invest $75. What fraction of one share do you own?

Fill in the Blank

A __________ order buys or sells only at your chosen price or better — never worse. It guarantees your price, but not that the trade will happen at all.
US stock trades settle one business day after the trade date. This is called __________ settlement.

Spot the Mistake

Ben bought a stock at $60 and set a stop-limit order with a stop of $55 and a limit of $54.80, saying: "Now my loss is guaranteed to stop at exactly $55." Name two things wrong with that sentence.

Scenario

You buy a stock at $45. You want automatic protection: if the price falls to $41, you want to sell right away, accepting whatever price the market gives you at that moment. Which order type do you place, and what does it turn into the moment $41 trades?

Reading Charts & Candlesticks — Reading Charts & Candlesticks

Calculations

A daily candle opens at $84, reaches a high of $88, a low of $83, and closes at $86. Describe the candle: the body (from where to where, and how tall), the top wick (how tall), the bottom wick (how tall), and its color.
A stock's average daily volume is 800,000 shares. Today it trades 2,400,000 shares. How many times its average volume is that, and what does that tell you about today's move?

Fill in the Blank

A candle whose open and close are nearly the same price, so the body almost disappears and it looks like a plus sign, is called a __________.
The number of shares that changed hands during a period — the bars along the bottom of the chart — is called __________.

Spot the Mistake

A stock opens much higher than yesterday's close, drifts down a little during the day, and prints a red candle — yet it still finishes up nicely on the day. Nina says: "That can't be right. A red candle means the stock is down today." What is she misunderstanding?

Scenario

You bought a stock planning to hold it for a year. Now you check its 1-minute chart every morning and panic at every tiny red candle. What does Reading Charts & Candlesticks tell you to do instead?

The Language of the Market — The Language of the Market

Calculations

Your account once peaked at $12,000. It is now worth $9,600. How many dollars have you fallen from the peak, and what percentage drawdown are you in?
You plan a trade where you could lose $150 if you are wrong and make $450 if you are right. What is your risk/reward, written as "1 to ___"?
In her paper-trading journal, Rosa won 7 of her 20 trades. What is her win rate?

Fill in the Blank

A price level where a falling stock tends to stop and bounce — a floor under the price — is called __________.
You are __________ when you own something and profit if its price rises.

Spot the Mistake

Omar won 8 of his last 10 trades — an 80% win rate — but his account is somehow DOWN money overall. He says: "That's impossible with an 80% win rate." Explain why it is entirely possible.

Scenario

After rising for months, a stock drops 11% from its recent high over two weeks. Your group chat is calling it "a total crash." Using the ladder from The Language of the Market, what is the correct word for this move, and why is it neither a crash nor a bear market?

Answers

Worked solutions, module by module. Check your arithmetic against each step — if your final number matches but your steps do not, redo it until both match.

Welcome to Alpha Academy — Welcome

1. Cost: 25 × $32 = $800. Sale: 25 × $38 = $950. Profit: $950 − $800 = $150.
2. Cost: 40 × $25 = $1,000. Sale: 40 × $19 = $760. Loss: $1,000 − $760 = $240 lost.
3. Paper trading.
4. Execution and self-control.
5. He has it backwards. Most beginners LOSE money in their first year. The realistic year-one goal is learning and survival — keeping the account alive while building skill — not doubling anything.
6. Rule one: paper trade before real money, always — no matter how sure you feel. Rule two: only ever trade money you can afford to lose completely. Rent money fails that test by definition.

What Is the Stock Market? — What Is the Stock Market?

7. 2% of 4,000 = 4,000 × 0.02 = 80. New value: 4,000 + 80 = 4,080.
8. Gain: $49.50 − $45 = $4.50. Percentage: $4.50 ÷ $45 = 0.10 = up 10%.
9. IPO.
10. Index.
11. After the IPO, shares trade between buyers and sellers. Her $600 went to the person who SOLD her the shares — the company received nothing.
12. This is the pre-market session. It is thin — few people trading — so prices jump around more and fills cost more. Beginners should stick to regular hours (9:30 AM–4:00 PM Eastern) until the basics are cold.

Stocks A–Z — Stocks A–Z

13. Market cap = $25 × 80,000,000 = $2,000,000,000 = $2 billion. That lands at the bottom edge of mid-cap (about $2 billion to $10 billion).
14. Each quarter: 150 × $0.40 = $60. Over a year: $60 × 4 = $240. (And remember: dividends are never guaranteed — this math assumes the company keeps paying.)
15. Shares: 30 × 3 = 90 shares. Price: $120 ÷ 3 = $40 each. Total: 90 × $40 = $3,600 — exactly what you had before (30 × $120 = $3,600). A split changes slice count and price per slice, never your total value.
16. EPS = $3,000,000 ÷ 2,000,000 = $1.50 per share.
17. The float.
18. Share price alone says almost nothing about size — you are missing how many shares exist. Size is market cap: share price × shares outstanding. A $15 stock with hundreds of millions of shares can be far bigger than a $600 stock with few shares.
19. Expect wild, jumpy price action. With only 4 million shares available to chase, a wave of buying has very few shares to buy, so the price can explode upward — and crash just as fast when the crowd leaves. Small float = touchy stock, and beginners get hurt mistaking that excitement for opportunity.

How Trading Actually Works — How Trading Actually Works

20. (a) Spread: $75.04 − $74.96 = $0.08. (b) You lose the spread on every share: 50 × $0.08 = $4.00 lost, with the price never moving at all. That is the hidden cost of a wide spread.
21. The $4,000 position falls 10%: $4,000 × 0.10 = $400 lost. As a share of YOUR money: $400 ÷ $2,000 = 0.20 = 20% of your money gone on a 10% move. You still owe the full $2,000 loan, plus interest. That magnification is leverage working in reverse.
22. $75 ÷ $300 = 0.25 — you own a quarter (0.25) of one share.
23. Limit order.
24. T+1.
25. Wrong twice. First, a stop-limit order only sells at the limit price or better — if the stock gaps straight through $54.80, the order may never fill at all, so nothing is "guaranteed." Second, even a plain stop order does not promise an exact exit price: once triggered it becomes a market order and fills at the next available price, which can be well below the stop in a fast drop.
26. Place a stop order (stop-loss) at $41. The moment the stock trades at $41, it wakes up and becomes a market order, selling at the next available price — about $41, possibly a little lower in a fast fall.

Reading Charts & Candlesticks — Reading Charts & Candlesticks

27. Body: from the open $84 to the close $86 — $2 tall. Top wick: from $86 up to the high $88 — $2. Bottom wick: from $84 down to the low $83 — $1. Color: green, because the close ($86) is above the open ($84).
28. 2,400,000 ÷ 800,000 = 3 times average volume. A move backed by triple the usual crowd has real conviction behind it — far more weight than the same move on thin volume.
29. Doji.
30. Volume.
31. A red candle only compares that candle's close to that candle's open. This stock opened high and drifted down a little, so the candle is red — but measured against yesterday's close, the stock is still up on the day. Color says nothing about yesterday.
32. Match the timeframe to the plan. A one-year hold lives on the daily, weekly, and monthly charts. The 1-minute chart is noise for that plan — staring at it only shakes you out of a trade you meant to keep.

The Language of the Market — The Language of the Market

33. Fall from peak: $12,000 − $9,600 = $2,400. Drawdown: $2,400 ÷ $12,000 = 0.20 = a 20% drawdown.
34. $450 ÷ $150 = 3. Risk/reward = 1 to 3.
35. 7 ÷ 20 = 0.35 = a 35% win rate.
36. Support.
37. Long.
38. Win rate alone does not decide success — the SIZE of wins versus losses does. If Omar's 8 wins averaged +$20 each (+$160 total) but his 2 losses averaged −$150 each (−$300 total), he is down $140 despite winning 80% of the time. Risk/reward matters as much as how often you win.

39. It is a correction — a drop of about 10% or more from a recent high. It is not a bear market, which takes roughly 20% down, and not a crash, which is a sudden, violent fall arriving in days with panic in the air. A two-week 11% slide is a correction: serious, but normal market weather.