When it comes to getting involved with the financial markets as an investor, it can seem a little confusing for beginners. To start with, there is the difference between longer-term investing and shorter time-scaled trading. Once you have understood the ways that these differ, there are then the myriad different individual markets to know about.
As a newcomer to trading, you may find it all a little overwhelming! Luckily, with a little education and work, this will soon go away and you will feel more confident when trading.
What is trading?
For total beginners, it is worth clarifying what is generally classed as trading compared to long-term investing. Trading is the regular buying and selling of instruments on the various financial markets to profit from the price movements on them. Trading generally sees what you invest in held for shorter periods and does not see you actually own any of the financial instruments that you speculate on. In effect, you are merely placing an informed wager on where the price may head next to profit.
Forex market – the king of trading for beginners
When it comes to trading for beginners, many now head straight to the forex (FX) market. This huge market is thought to see trillions in trades executed each day and is open 24 hours a day, apart from at weekends. When trading here, you are speculating on the price movement of the various currency pairs, such as EUR/USD, AUD/USD and GBP/EUR. You would look at the market and make an informed prediction on where the price may head next. You would put a buy trade on if you think it will rise or a sell if you feel it will fall. If you get it right, then you make some money!
Why is this market so popular? The answer to this lies in a few factors. The first is the ease of use and accessibility. There are many superb FX platforms on the net now that are simple to use and open to all. Many offer Demo Accounts to practice with before risking any real money, and you can start off for real when ready with much lower capital amounts than stocks and shares. The other great thing about the FX market is that it is very liquid, which means that you can make some nice profits every day of the week.
What other options are there for beginners?
Of course, you may not fancy taking advantage of the FX market or be looking for additional trading options to take on. Here are some other great options for beginners:
- Stock market – alongside the FX market, the stock market is another great financial market for beginners. With this market, you would buy shares in listed companies on the stock exchange in the expectation that they would rise in value. Although stocks are usually held for longer periods, many people do trade them on a shorter timescale.
- Futures market – another type of market that is good for beginners to trade on is the futures market. This sees you investing in a certain commodity such as grain or oil and speculating on whether it will fall or rise in value in the future. Many beginning investors love to trade this market as it can offer amazing returns on your initial investment as well as being easy to understand.
- ETFs – one superb market for any beginner to trade is ETFs. This stands for Exchange Traded Funds, and they consist of different stocks or securities all bundled together in one basket. This basket is then tracked against well-known indices such as the S&P 500. By buying into an ETF that tracks a sectors index, you are diversifying your portfolio compared to merely buying individual shares in companies.
Education is key for beginners
With any kind of trading that you choose to try out, education is vital. Making sure that you fully understand how the market that you will trade in works, who the best brokers are to use, and what strategy you will adopt is crucial to success. As a beginner, you need to give yourself the best chance of winning.
The FX market is a classic example of this. It may seem simple and can be traded as such, but to win out in the long term, you need to dig deeper. The forex trading course by Forexfraud.com is an example of how getting educated can seriously help you make better trading decisions.
Everyone starts somewhere
We all know what it’s like to start off in a sector that we know nothing about. That beginner’s feeling has been there for all the famous traders, such as George Soros or Warren Buffett. This should give you heart that, with some careful research and education, you can soon be trading like a pro.