The episode opens with Aang pacing up and down nervously on Appa. Sokka tells to him down, because if they hit a bump, they'd go flying. He then asks Aang "what's bugging him anyway." Aang replies that it what Avatar Roku says, and then proceeds to worry about mastering all the elements in time. Katara offers to teach him Waterbending, but notes that they'd need a good source of water first. Sokka says that they may be able to find a "puddle they can splash in."
Cut to a waterfall with a large body of water beneath it.
"Nice puddle" Sokka notes. After a short debate it's agreed that Sokka will wash the mud (and bugs) out of Appa's feet while Katara and Aang Waterbend.
It's to Prince Zuko's ship, where he is training. Suddenly, his ship changes course. Angered, he demands why the course has been changed. Iroh tells him that he has lost a vital game piece (the lotus tile) for his game of Pai Sho. He says that there should be one in the nearby markets. Zuko is characteristically not impressed by this and breathes fire. Before disappearing in smoke, Iroh ironically says that it is nice to have such an understanding nephew.
Katara demonstrates her various bending moves, all which Aang perfects on his first try. This annoys Katara and she appears to be jealous. She shows Aang a move that not even she has fully learned yet, but Aang shows a natural ability for it. He asks what else Katara knows. Eyes narrowed slightly, she tells him that they've done enough practicing for today. Having managed to "practice their supplies down the river" they need to find somewhere to replenish their food.
Next time we see Aang, Katara and Sokka, they are in a market. Whilst Sokka and Katara seem a little off-put by the hustle and bustle, Aang seems delighted, and spends a copper piece on a bison whistle that doesn't seem to work. Katara kindly tells Aang that she will hold the money from now on. With their remaining two copper pieces, they continue to look around. A man comes up to the group and advertises his merchandise: exotic curious. When Aang asks what curious are, the man confesses that he isn't entirely sure, but "we've got 'em!"
Intrigued, Aang, Katara and Sokka look aboard the ship. After seeing many things that catch her eye, Katara notices a Waterbending Scroll with advanced techniques. When Aang asks the Captain, where he got the scroll, the man replies "Let's just say I got it up North, at an extremely reasonable price. Free."
Sokka susses out that the guys on the boat are pirates. The salesman tells him that he prefers to think of them as 'high-risk traders'
Katara wants to know how much the Waterbending scroll is. The Captain tells her he already has a buyer for 200 gold pieces. Aang (hilariously) tries to haggle with the Captain to sell them the scroll for one copper piece. The Captain laughs and refuses. "Okay…two copper pieces!" Aang says.
Getting annoyed, the Captain refuses again. Katara asks Aang if they can get off the ship, which they quickly do.
Before they can go anywhere, the pirate from before runs after them, shouting at them to come back. The other pirates jump off the ship, brandishing knives and other weapons. Needless to say, Katara, Sokka and Aang run off, with the pirates chasing them. After a lengthy chase scene (which features the now legendary figure of the Cabbage Guy: "My cabbages! This place is worse than Omashu!") Aang tells Katara and Sokka to hold onto his glider, and they fly away.
When they land, Katara reveals that she stole the Waterbending scroll, much to Sokka's outrage. He tells her that she put their lives in danger so she could learn some "fancy splashes". She replies that these are real Waterbending moves that could help Aang. Sokka walks off, muttering "whatever". Aang tells Katara that now they have it they might as well learn from it.
Meanwhile, in the same market, after his uncle says that he couldn't find a lotus tile anywhere, Zuko angrily states that "It's good to know that this trip was a complete waste of time for *everyone*!"
Iroh tells him to the contrary, and both watch as three soldiers carry goods that Iroh bought onto the ship. Zuko isn't impressed.
They walk along to the pirate ship, and Zuko overhears one pirate telling the captain about the "Water Tribe girl and the bald monk she was traveling with". Zuko enquirers about the monk.
Katara tells Aang she wants to try one move (the water whip) then the scroll is all his. She tries the move and ends up smacking her forehead. Sokka laughs and tells her she deserves it. He tells Aang that Katara only wants the scroll for herself, something she angrily denies. After a couple more tries of the water whip (hitting Momo in the process) Katara still can't get it. Aang tries and, of course, executes the move perfectly. When he tries to give her advice, Katara yells at him to "Shut your air hole! Believe it or not, your infinite wisdom gets a little old sometimes! Why don't we throw the scroll away since you're so naturally gifted!?"
She then sees Aang's look and apologizes guiltily, saying that she didn't know what came over her. Katara gives the scroll to Aang.
Zuko (on his mini-boat, seen in the last episode) and the pirates (on their ship) are on a river. The Captain asks if they should stop to search the woods. Zuko replies that there is no need. If they stole a Waterbending scroll, then they'll be on the water.
It's now night, and Katara is the only one awake (apart from Momo) by the fire. She gets up and retrieves the Waterbending scroll from Sokka's bag, telling Momo to go back to sleep. She walks down to the river and practices the water whip. Frustrated that she still can't get it, she begins to yell at the water.
Zuko and the Captain hear her voice and look at each other.
Hearing a noise, Katara peers through the bushes. To her horror, she sees the pirates ship. Moving backwards, she bumps into a pirate, who tries to restrain her. She bends water into the pirates face, and runs ahead.
Straight into Zuko.
Clutching her wrists so she can't escape, he tells her that he'll save her from the pirates.
It's a few minutes later and Katara is tied to a tree by the river, surrounded by Zuko, his uncle, the pirates, and some of Zuko's crew.
Zuko tells Katara to tell him where the Avatar is, and he won't hurt her or her brother. Katara angrily suggests he "go jump in the river!"
Changing tack, Zuko circles her almost menacingly, telling her that he needs to restore his honor by capturing the Avatar. In return, Zuko could restore something that Katara has lost. He holds up Katara's mother's necklace to her neck. Shocked, Katara asks how Zuko got the necklace. He says that he didn't steal it, if that's what she was wondering. After ordering her again to tell him where the Avatar is (she obviously refuses) the Captain tells Zuko that he promised him a scroll. Zuko retaliates by wondering how much the scroll is worth, then lighting a fire underneath the scroll. The pirates react the way Zuko wants them to in fear. Zuko tells the Captain that if he helps them find what he wants, then Zuko will give them the scroll back. He orders the pirates to search the woods for the Avatar and then meet back.
Sokka and Aang wake up to discover Katara missing. They barely have time to speculate as to where she's gone when they are attacked by the pirates and Aang is captured in a net. Sokka sarcastically asks if he isn't good enough to kidnap, before an identical net snares him.
Soon everyone is reunited, and Zuko congratulates the pirates on their good work. Katara apologizes to Aang, saying this is all her fault. Aang replies that it isn't. Iroh, however, tells her "Yeah, it kind of is."
Sokka asks the pirates if they're really going to trade a scroll for the Avatar, who is worth much more. The pirates decide Sokka is right, that they will keep Aang, which does not bode well with Zuko.
Cue fight scene.
The pirates throw a smoke bomb, encasing the scene so that no one can see. Using this as an advantage, they fight the Firebenders and protect Aang and Sokka. Meanwhile Momo frees Katara by biting off the ropes binding her hands. Aang too is freed.
Zuko and the Captain soon start fighting, and, using this distraction, Aang, Katara and Sokka escape on the pirate ship by Aang and Katara using their combined Waterbending skills.
Iroh interrupts Zuko and the Captain's fight by asking if they have not noticed their own ship is setting sail. Zuko angrily tells him that this is no time for his proverbs, before he and the Captain notice the pirate ship halfway down the river. Zuko starts to laugh, but abruptly stops when the pirates steal his boat. Iroh muses that maybe it should be a proverb, before running after his nephew.
The pirates catch up to Aang, Sokka and Katara and another fight soon begins, in which Katara uses the water whip successfully for the first time. Momo takes care of the Captain's pet reptile-bird, and Aang takes care of a few pirates. However, they have bigger problems, in the form of the huge waterfall they're about to go over. Producing the bison whistle he bought previously, Aang blows on it. When the whistle seems to have no effect, Aang and Katara use their Waterbending again to slow the boat down. But soon the boat begins to break in half, and they have no choice but to jump over the waterfall. Just in time, Appa flies in and saves them from a potentially rocky/watery death. Aang notes he knew the bison whistle would come in handy.
Zuko, already annoyed by the fact his boat got stolen, gets even more angry when Iroh sheepishly reveals that the lotus tile was in his sleeve the whole time. Snatching the lotus tile, Zuko hurls it into the water, hitting a pirate on the head.
Katara tells Aang that she owes him an apology for being competitive, and that she didn't need the scroll anyway. Sokka chooses this time to produce the scroll, but won't give it to Katara until she tells him what she learned.
"Stealing is wrong." She dutifully says. Sokka gives her the scroll, and then she mischievously adds, "Unless it's from pirates!"