Start trading can be exciting but also overwhelming. That’s why we’ve compiled a comprehensive guide covering everything you need to know for your trading journey, including trading stocks and forex for beginners.

1. What is trading?

Trading involves speculating the price movements of an asset without actually owning it. In simple terms, trading means predicting whether the price of a financial asset will rise or fall.

There are many financial markets that you can trade, such as stocks, forex, commodities, indices, bonds, and more. We offer more than 13,000 CFD markets for you to speculate on, such as Meta shares, crude oil, the FTSE 100, and the US dollar against the British pound.

When you trade, you use a platform like ours to access these markets and decide whether you think the price will rise or fall. If your predictions are correct, you will make a profit; if it’s incorrect, you will incur a loss.

The financial instruments you use to trade on an asset’s price movements are derivatives. This means that the instrument’s price is “derived” from the underlying asset’s price, such as a company share or an ounce of gold. As the price of the underlying asset changes, so does the value of the derivative.

To help you understand this concept, let’s consider an example of speculating on shares. If the price of a share rises from $100 to $105, the value of the derivative will increase by the same amount. If you had bought the derivative at $100, you could now sell it at $105. Although you never own the share, your profit or loss will mirror its price movements.

So, why use a derivative?

There are two ways to go about derivatives trading. You have the option to profit whether the market price rises or falls, as long as your prediction is correct. However, you will incur a loss if the market moves against your speculation. It is important to note that trading differs from owning the actual financial asset. If you own something outright, such as gold, you will only make a profit if the gold price climbs.

One of the reasons why people choose to trade with derivatives is leverage. With leverage, you only have to put down a fraction of the total value of your trade as a deposit, known as a margin. This can stretch your capital further, allowing you to open larger positions with a smaller initial amount.

It is important to note that when you are using leverage, your profits or losses are calculated based on the entire position’s value, not just the amount you paid to open the position. While you can make far more than the initial margin amount you paid to trade, you can also lose far more. This means that leverage has built-in risk.

If you are interested in derivatives trading but find the terminology overwhelming, we have created a table with five key trading terms every beginner should know. Additionally, you can practice trading with a free demo account.

Interested? Practice trading with a free demo account.

2. 5 keyword trading terms

  • CFD Trading: CFDs, or contracts for difference, are a type of financial derivative that allows you to speculate on the price movements of an underlying asset. This is accomplished by agreeing to exchange the difference in the asset’s price from when you open your position to when you close it. Your profit or loss will depend on the difference between these two points.
  • Going long, going short: When trading in the financial markets, ‘going long’ means buying with the expectation that the market price will increase, while ‘going short’ means selling with the expectation that the market price will decrease. However, short selling can be risky since losses can be unlimited if the risks are not appropriately managed. This is because there’s no limit to how much a market’s price can rise, which can lead to significant losses if not handled with care.
  • Margin tradingMargin trading, which means opening a position for less than the total value of your trade, is commonly referred to as a ‘leveraged’ trade. For instance, if you purchase 10 CFDs on shares worth $100 each, then the total value of the position would be $1000. With a margin deposit of 20%, you can initiate a trade of this value by depositing only $200.
  • Risk: Margin trading is a high-risk venture as it puts your initial deposit at risk, and you could lose much more than your margin amount. The term “risk” refers to the possibility of suffering financial losses. Therefore, it is crucial to be aware of the risks of trading, especially when trading on margin. However, we provide tools to help you manage these risks effectively.
  • Volatility: Volatility refers to the times when the financial markets experience rapid movements, usually due to market sentiment, events, or announcements. Although it comes with higher risks, opportunities can be found if you have a well-developed trading plan incorporating comprehensive risk management measures.

3. Financial markets for new traders

What is share trading?

Share trading involves speculating whether the price of a public company’s shares will increase or decrease. This means you can take a long position if you believe the price will go up or a short position if you think it will go down. If your speculation is correct, you can profit, but you may incur a loss if it is incorrect.

What is forex trading?

Forex trading involves the exchange of one currency for another. It is the world’s largest and most liquid market, decentralized and operational 24/7. 

Currency pairs are traded in forex, with two currencies traded against each other. Hundreds of different pair combinations are available, including some of the most popular ones, like the EUR/USD, USD/JPY, and GBP/USD.

When trading forex, you’ll be speculating on the price movement of one currency against another. For instance, you might predict whether the USD will rise or weaken against the EUR.

If your prediction is accurate, you’ll make a profit, but if it’s incorrect, you’ll incur a loss. You can go long or short when trading, similar to other markets.

What is index trading?

Index trading involves speculating the price movements of a group of underlying assets combined into one entity. When you trade on an index, you are trading on all its constituents simultaneously.

Examples of types of indices you can trade*1:

  • Equity indices
  • Sector indices
  • Bond indices
  • Commodity indices
  • Real estate investment trust (REIT) indices

An index’s components are grouped together based on a common trait. For instance, the S&P 500 index groups the 500 largest US-listed companies by market capitalization.

What is commodity trading?

Commodities trading involves predicting the market prices of natural resources, such as gold, sugar cane, and Brent crude oil.. There are two categories of commodities: ‘hard’ and ‘soft’. ‘Hard’ commodities are mined substances, such as precious metals, diamonds, oils, gases, and similar resources. ‘Soft’ commodities are resources like grains, sugar cane, coffee beans, cattle, and other livestock.

Certain commodities, like gold, are often considered a safe haven during challenging times and are frequently used to hedge against inflation and macroeconomic volatility. Commodities trading speculates on the market price of natural resources such as gold, sugar cane, and Brent crude oil. There are ‘hard’ and ‘soft’ commodities. Hard commodities are like precious metals, diamonds, oils, and gases. Soft commodities are resources like grains, sugar cane, coffee beans, cattle, and other livestock.

Some commodities, like gold, have a reputation for being a safe haven in troubled times and are often used as hedges against inflation and macroeconomic volatility.

4. Trading for beginners: where to learn more

Once you have familiarized yourself with the fundamentals of trading, you can explore the “analyze and learn” section of our website, which is a treasure trove of resources. Here, you’ll find strategy and planning articles that will help you perfect your trading techniques, news and trading ideas to keep you up to date on current market trends. You’ll also find trading podcasts, seminars, and tips on risk management.

However, as we all know, practice is critical to becoming a successful trader. That’s why we recommend using our free demo account to put all the theories you’ve learned into practice. With this account, you’ll get to trade with $50,000 in a demo account in a risk-free environment, allowing you to refine your techniques and build your confidence before trading with real money.

5. Your first trade: how to do it

Once you have gained enough knowledge about trading, it’s time to make your first trade on our live platform. In case you still want to learn more about entering the trading world, please refer to our “How to get into HYCM’s trading” page.

Here’s how to make your first trade:

  • Open and fund your live account
  • After careful analysis of the market, choose your position
  • ‘Buy’ if you believe the market’s price will increase, or ‘sell’ if you believe it will decrease.
  • Select your deal size
  • Consider major steps to manage your risk
  • Open your position by selecting ‘place deal’ and keep on monitoring it

6. Why trade with us?

Numerous trading platforms are available, so why should you choose us? At HYCM, we have been a market leader since 1977, and we are dedicated to the success of our clients, which is why we offer a range of educational resources and more.

Here are just a few additional reasons why you should consider trading with us:

Deal with the best: Our award-winning platforms are built to empower the pursuit of financial freedom

Access hundreds of markets: Trade your favourite CFD markets, including stocks, forex, indices, commodities and cryptocurrencies

Enjoy 24/5 support: Contact us by phone, email, or WhatsApp. We’re here 24 hours a day, five days a week, from Monday till Friday.

Learn and build your skills: Draw from our decades of industry experience through educational resources

7- Risks and benefits beginner traders should know

You need to evaluate the risks and rewards of any trade before opening a position. Here are some primary risks and benefits that beginner traders should be aware of:

Risks While Learning to Trade:

Leverage: All CFD trades are leveraged. This means that profits and losses can be much higher than your initial margin, and losses can occur quickly.

Short selling: Trading in unpredictable markets can lead to a higher risk of losses. If the market price increases, losses can be unlimited since there is no limit to how high the market price can climb.

Volatility: Markets can be volatile and move unexpectedly due to events, announcements, or trader behaviour.

Margin call: You need to maintain a certain amount of margin in your account to keep your trades open.

Benefits:

Leverage: Since leveraged trades only require a fraction of the total position’s value, you can use less capital while potentially increasing profits.

Short selling: By taking a short position, you can profit or lose from both rising and falling markets, effectively doubling your trading opportunities.

Volatility: A trader who implements a solid strategy with proper risk management measures in place can find opportunities to trade on market volatility.

Margin call: You can use stop orders and alerts to manage risks and limit losses caused by margin requirements.


FAQs about Learning to trade


Can I teach myself to trade forex?

Many successful forex traders have started by teaching themselves. The key to self-learning in forex trading lies in leveraging a wealth of online resources such as educational websites, trading forums, online courses, webinars, and e-books, all dedicated to learning to trade. It’s important. Let’s begin with the basics of forex trading, including understanding currency pairs, market analysis (both technical and fundamental), and the mechanics of how trades are executed. Practicing with a demo account is also highly recommended, as it allows you to experience the forex market without risking real money. Self-education also involves keeping up-to-date with global economic news and understanding their impact on currencies. Remember, learning to trade in forex is ongoing, as the market is dynamic and ever-evolving.

How do beginners learn forex trading?

Individuals new to forex trading should begin by establishing a solid foundation of knowledge regarding the forex market. This involves comprehending the fundamentals of currency pairs, market analysis, and how trading functions. To learn how to trade, beginners can access a wide range of online resources specifically designed for learning, including free online courses, tutorials, webinars, and trading communities. Moreover, many brokers offer educational resources and demo accounts to enable beginners to trade in a real market environment without risking any actual capital. It’s also essential for beginners to track forex market news and learn how to analyze economic indicators since these factors play a vital role in making informed trading decisions. The key to success in forex trading is patience and continuous learning since the process involves a steep learning curve.

Is $100 enough to start forex trading?

Starting forex trading with $100 is possible, thanks to the availability of online brokers and leveraging. Many brokers offer micro or mini accounts that allow traders to begin trading with a small amount of capital, like $100. Although this amount may restrict the potential for significant profits, it’s an excellent opportunity for beginners to gain practical market experience without exposing themselves to significant financial risks. However, having realistic expectations and understanding that trading with a small account requires careful risk management is crucial. Traders should use appropriate leverage, set stop-loss orders, and avoid the temptation to overtrade. Starting small can be an excellent way to learn trading dynamics without facing the stress of potentially losing large sums of money.


*1: Not available if you like to trade it with HYCM