How to Trade: The 10 Steps to Beginner Trading
With the world shifting its focus towards trading and investing, it is no wonder people are looking for mentors to educate them on their financial journey. But not everyone can afford a specified mentor to provide them with the necessary trading knowledge.
For this reason, many people are finding themselves taking the self-help route to learn more about money. These 10 steps to beginner trading will help you on your way to move forward wisely.
When I started my trading journey, I was all over the place! There was so much information to begin with and I just didn’t know where to start. The process was tedious and overwhelming, to say the least. Fortunately, I stuck to it and here I am.
To make sure you don’t feel as lost as I felt as a beginner trader, I have designed this step-by-step beginner trading guide for people looking to dive into the world of trading in an easy-to-understand way.
The 10 steps to beginner trading guide will help you make sense of what really is important to know at the beginner stages and how you can take concrete steps in the right direction.
Table of Contents
Can You Learn to Trade by Yourself?
Yes, you can! It is perfectly possible for you to learn by yourself how to trade and how to operate in the trading markets, even as a complete novice. It may get confusing at times, making you want to give up. However, sticking to it will help you achieve that success you have always wanted.
Trading carries its fair share of risks. In the beginning, you may have losses but do not let that discourage you. Instead, take those losses as lessons and apply them in future trades.
Moreover, to minimize losses, you should spend a considerable amount of time practicing through a demo trading platform so that you don’t lose any real money.
How Do I Start Trading?
This is probably one of the first questions every beginner trader asks when they become interested in the world of trading. They are excited and want to know everything there is to know about trading, investing, financial markets, and so on. Unfortunately, they just don’t know where to start. Plus, with all the technical jargon thrown around in the financial world, they can easily get overwhelmed.
But I am here to tell you that you don’t have to let a few difficult words and a few complex strategies scare you. Trading is an achievable task.
The first step in learning how to trade is to read trading guides like this one and follow the steps mentioned.
Step 1: Research What Trading is and How it Works
My goal with this guide is to save you as many headaches and frustrations as I can.
To start off, I suggest reading trading books designed for beginner traders. My book Trading For Success is a great stepping stone towards laying a solid trading foundation.
Reading the right trading books will teach you about the necessary trading strategies, technical analysis, trader psychology, and many fundamental trading concepts.
Check out this curated list of the all-time best trading books available in the market for beginner traders and investors.
Step 2: Familiarize Yourself with the Market
It is crucial that you figure out what a financial market is and then familiarize yourself with it.
You need to educate yourself on things like:
- How does the market work
- What makes the price move
- What are supports and resistances?
- What are the stages of the market?
- What kind of trader personality do you have?
- How do successful traders operate and what strategies do they follow?
Finding answers to these questions will give you a vision of what really goes on between buyers and sellers and how trades are carried out in different markets.
Step 3: Which Trade is the Best for Beginners?
The type of trading you want to do depends a lot on your personality. If you don’t know what your trading personality is, my book Trading For Success provides a questionnaire prepared by a trained psychologist to help you determine the kind of trader you are.
Apart from that, there are two kinds of trading that beginners should consider:
- Intraday Trading
- Swing Trading
In day trading, you can buy financial instruments in the morning and sell them whenever you desire as soon as you make some profit. Most of these trades open and close on the same day, or sometimes the next day; it will depend on which time frame you trade in.
In swing trading, you buy a financial instrument today and sell it after a week or even months, depending on when your profit target is achieved.
In my opinion, the best trading for beginners is swing trading. This is because, with day trading, many people indulge in ego trading and become impatient for profits. On the other hand, swing trading teaches novice traders patience, among many other things.
Once you have a better idea of risk management and technical analysis, you can move on to intraday trading.
Step 4: Can I Start Trading With $100?
Yes and no.
The amount you can start trading with largely depends on what your broker allows and the strategy you plan to use. Some brokers allow you to start with an initial capital of only $100. This is a great option for beginners. However, you cannot make high profits with a small investment even though you are using leverage, unless you are happy gaining a profit of $1 per trade. If you are taking trading seriously, then besides knowing how to trade and having a proven strategy that gives you great profits, then you can start trading in a real trading account with an amount of $500 or more.
Step 5: Find a Mentor to Follow
As a beginner trader, you should look for a successful trader or mentor to follow. Being alone as a beginner trader can be counterproductive to your growth. Having a mentor will help you avoid many roadblocks and having to learn every lesson the hard way.
Ideally, look for mentors whose interests and philosophy align with yours. Do not shy away from asking them as many questions as you need to. Be aware that some mentors expect that you at least know the basics. Most mentors focus on teaching strategies; they do not go into the basics. I have been in the process, so I know. Mentors will be able to provide you with personalized support if it is relevant to the teaching they offer. For this reason, hiring a mentor will be the best investment you will make in the long run. Be clear on what you want to learn, so that the mentor and you are on the same page.
Step 6: Try Different Trading Strategies to See What Works for You
You will likely spend the first few months of your trading journey exploring the different trading platforms and strategies.
As a beginner, you should not start with one strategy and just stick to it for the rest of the ride. Instead, try out different strategies and platforms and identify what works best for you.
For instance, maybe you can only trade in swing trading or position trading, because you have to go to work, which won’t leave you any time to trade later on in the day. In that case, swing trading can come in handy for you.
Try and get a feel of how each strategy resonates with your lifestyle. Once you find a trading strategy that you like, stick to it.
Step 7: Practice! Practice! Practice!
Practice makes perfect!
Instead of jumping head-first into the trading world, practice doing it on demo platforms. Explore, learn, practice, and perfect your strategy.
Keep on practicing until you have a proven consistency. From there, you can begin real trading with a good understanding of risk management.
Steep 8: Identify Your Trading Style
As a beginner trader, you should try to identify and establish a trading style that suits your personality.
Maybe you are one of those people who do not like the anxiety associated with scalping and therefore prefer swing trading or intraday trading. Or maybe you perform better in day trading than any other trades.
A good practice is to write down how you feel while partaking in every trade. This will help you self-evaluate and find the best trading style for you.
Step 9: Record Your Progress
This step may not seem important but trust me: you will thank me later.
Record your progress. Specify a date, time, action, entry, exit, result, comments, evaluation, and most importantly, predominant emotions related to every trade.
This will provide you with a clear understanding of how you have improved, what strategies have worked more often than others, what you should work on, and how you can improve tomorrow.
Step 10: Build Your Trading Plan
Every trader has a trading style and trading plan that are specific to them and how they choose to work in the market.
Your trading plan is going to be your map. In it, you should include the following points:
- How you will trade
- What you will trade in
- Why you will trade
- When you will trade
and much more!
If you don’t have a trading plan, you are going to be all over the place and undisciplined in your trading.
With trading, discipline is essential. You have to follow a clear-cut and concise trading strategy. Otherwise, you will end up improvising and leave everything to luck. This is dangerous and should be avoided at all costs. Check out this post article about how to create your trading plan.
Trading can be an intimidating topic for people who are new to the world of finance and investing. As a result, you might end up getting discouraged and miss out on a great chance to generate amazing profits. With this easy-to-follow beginner trading guide, my goal is to break down the vast topic of trading into simpler concepts. The key is to be patient and start small instead of making a big commitment.
With enough time and effort, you will succeed!
To gain in-depth knowledge on trading and start your career as a trader, check out my book Trading For Success.
You can also follow my blog for weekly tips and tricks on how to navigate the financial aspects of your life
If you enjoyed this article on How to trade: The 10 Steps to beginner Trading or have any questions for me, please feel free to leave them in the comment section below!
Recommended Resources: If you’re interested in learning more about online trading, check out my book “Trading for Success; 8 secrets why women are better forex traders” and take a deep dive into my blog.