Trading Basics for Beginners

As you kickstart your trading journey, there may be a few trading tips that you may want to keep in mind.
In this detailed beginner’s guide, you will learn some of the basic tips for trading that could equip you with the needed knowledge to become a more experienced trader.

What Is Trading?

In simple terms, trading refers to the act of buying or selling certain financial instruments, such as Contracts For Differences (CFDs), with the aim of generating a profit. These instruments could be Forex, Commodities, Indices, Stocks, and more.

Things Every Beginner Trader Should Know

Develop a Trading Plan

A trading plan allows you to know when to exit or enter a trade and helps you mitigate trading risks. In addition, trading plans may also help you achieve gains or prevent further losses if implemented correctly.

As such, having and developing a trading plan becomes crucial to your overall success as a new or experienced trader. To develop a successful trading plan, you need to consider the following:

Know when to enter and exit a trade: You can track prices by referring to trading charts in order to help you to plan your entry and exit strategy. To learn more about trading charts and the different types available at Plus500, watch our Trader’s Guide video on “Types of Trading Charts”.
Identify the type of trading strategies that suit you: There are multiple types of trading strategies that can be employed. Some of the most common ones include day trading, swing trading, and position trading.
- Day Traders usually attempt to make smaller gains in the short term (for minutes or hours).
- Swing Traders opt for trades that last for days or weeks.
- Position Traders aim for bigger gains in the longer run (take more than weeks).
Other types of strategies include Fundamental Analysis, Technical Analysis, and Diversification.
- Fundamental Analysis is a trading method that uses factors like financials or price trends to evaluate the intrinsic value of a certain financial asset.
- Technical Analysis involves the analyzing and studying of an asset’s historical prices. This is achieved through the use of trading charts and technical indicators which help traders identify potential exit or entry points. Please note that past performance is not a guarantee of future success.
- Diversification uses multiple markets or financial assets in order to mitigate risk and spread it across multiple trades instead of one.
You can also watch our “Popular Trading Strategies” video to gain an in-depth understanding of trading strategies and understand your goals better.
Track your progress: Keeping track of your progress and whether or not you are making gains or incurring losses is important to your strategy and will help you know which of your trades you should sustain and which you should close.

Be Flexible

While trading plans can be helpful, it is important to keep in mind the fact that sometimes they don’t work. In such situations, developing a new plan or alternative plan may be prudent. In addition, you need to be more flexible especially when it comes to trades that are not working in your favor.

Use Risk Management Tools

It is no secret that the markets are volatile and can be unpredictable and even risky if not understood correctly. This is where risk management tools come in handy.

As the name implies, risk management refers to the set of tools or activities undertaken as a means of helping traders mitigate risk and uncertainty.

Depending on your goals and the risks you may be exposed to, you can choose between a set of risk management tools. One popular example of risk management includes Stop-Loss which predetermines the amount of risk or losses traders are willing to incur.

Other risk management tools include Guaranteed Stop and Trailing Stop and you can read about them in our “Risk Management Tools” article.

Stay Up-to-Date on Market News

Knowledge is power, and this is especially true when it comes to the rapidly changing financial markets. Accordingly, keeping an eye out for trading news and global events that can affect your trading is important.

This can be achieved through Plus500’s daily News & Market Insights articles. You can also refer to Plus500’s free Economic Calendar feature which lists some of the most important market events. In addition, you may also want to keep track of companies’ earnings reports or growth prospects.

Educate Yourself & Improve Your Skills

There are also different types of markets you may want to learn about, and the internet has a plethora of materials available at your disposal.

Plus500 also has free informative articles and videos as well as videos to keep you informed. Check out our Trading Academy and instrument category articles to learn more.

Know the Importance of Financial Literacy

Another key tip to keep in mind is developing financial literacy and knowing the trading terms and market jargon used. This, in turn, will help you navigate the markets better and with more confidence.

Accordingly, some of the most important trading terms to keep in mind are words like “ask,” “bid,” “bullish or bearish,” and “leverage,” among others. You can get a better understanding of the main trading terminology in our Beginner’s article on “Trading Glossary for Beginners”.

Know Your Capacity & Risk Appetite

Knowing how much risk you can afford as well as setting a limit for yourself and your losses is crucial. If you feel like you are losing more than you can afford, then you may need to rethink whether trading is suitable for you.

Practice Trading

Many trading platforms offer traders access to demo accounts, which allow you to practice trading in real-market conditions for free and without having to risk your real money. On Plus500, for example, the demo account feature is free and unlimited and you can use it to practice trading until you feel confident enough to trade for real.

Common Trading Mistakes and How to Avoid Them

While there’s no clear-cut solution to trading, there are two key mistakes every trader should try to avoid:

Overtrading

Overtrading or trading excessively beyond your potential can be dangerous and can lead to substantial losses. As such, avoid overtrading and trade according to your capacity.

Emotional Trading

Emotional trading can also get in the way of your goals. Therefore, not letting your emotions get the best of you is important and can help you avoid making irrational and hasty decisions when trading. This becomes even more important given the fact that the markets are extremely volatile and can be unpredictable.

Online trading tips for beginners: How to Trade with Plus500

In case you’re interested in trading with Plus500, you may want to keep in mind the following tips:

Take advantage of Plus500’s free and unlimited demo account. This can help you practice trading as much as you’d like.
Use Plus500’s free and advanced analytical tools: Plus500’s trading charts and analytical tools can help you navigate market uncertainty with more ease.
Diversify your portfolio with Plus500: Plus500 offers over 2,500 financial instrument CFDs on various markets ranging from Forex to Indices and Stocks to Commodities. As such, you can use these to diversify your portfolio.
Stay educated: Use Plus500’s free educational resources to your advantage.

Conclusion & Additional Resources

While there’s no black-or-white solution as to how you can become a successful trader, the tips mentioned in this article are here to help you get one step closer to that goal. As such, use them as guiding principles for your trading journey.

In addition, you can refer to Plus500’s free educational resources through its

Trading For Beginners FAQs

What are the common mistakes beginners make in trading?
Not conducting enough research, not using risk management, not having a trading plan, overtrading, or engaging in emotional trading are some of the key trading mistakes made by beginners.
How much money do I need to start trading?
The amount of money needed to start trading depends on your broker and preferred trading platform.
How can I manage risk in trading?
You can manage risk by diversifying your portfolio, having a trading plan, and employing risk management tools.
Can I practice trading without using real money?
On Plus500’s platform, you can practice trading in real market conditions without using your real money. You can do so with Plus500’s free and unlimited Demo account feature.
How do I choose stocks for trading?
There are many factors that you may want to consider before choosing which stocks to trade. Some of the main stock trading tips for beginners include looking for the type of stock, the company’s earnings, and general financial performance or news. You may also want to see whether or not the stock aligns with your trading vision and goals.
What is leverage and how can it impact my trades?
Leverage allows you to increase your exposure to gains while using a smaller amount of capital. This can also lead to a potential increase in losses.
What is margin?
The amount of money needed to be available in one’s trading account in order to maintain a leveraged position. You can learn more about margins in our Trader’s Guide video on “Margin Requirements”.
How important is diversification in trading?
Diversification can allow you access to multiple markets which can help you to spread your risk and mitigate it.
What is the role of psychology in trading?
A trader’s emotional or psychological factors can influence their decisions and behavior when approaching the financial markets. As such, it is important to learn how to control your emotions when trading in order to limit the risks.
How can I stay updated with market trends?
You can keep track of market news, and financial events like earnings releases or economic data releases as well as any updates online or on the Plus500 website.
How can I improve my trading skills?
Practicing how to trade using a demo account, learning about the financial markets and how they operate, as well as reading market news and updates can help you improve your trading knowledge, hence improving your skills.