Trading for beginners - How to get started in trading

Make reliable money on the stock market from the comfort of your own home. What sounds too good to be true is possible - but requires specialist knowledge and a lot of discipline! In this guide, you will learn how trading for beginners can succeed and what you should definitely pay attention to! 

How trading works for beginners

When trading (whether beginners or professionals), we try to make a profit by regularly trading on the stock markets. 

• We trade in products ("assets") such as Stocks, ETFs or bonds. 
• We can also use derivatives such as futures or Trade optionsthat are based on other values. 
• Through a Short sale we can make a profit even when prices are falling. 

The basis of trading is the fluctuating prices on the stock market: the price of an asset, for example a share, changes as a result of supply and demand. 

Our aim is always to buy for a low price and sell for as high a price as possible - the difference is our profit. 

However, this is easier said than done! Price trends are difficult to predict. Traders therefore draw on a variety of key figures, use the Chart analysisrely on signaling services such as Traderfox and much more. 

Which input is suitable for trading decisions, which assets you should use and other important questions depend on your chosen strategy. 

A suitable strategy is the be-all and end-all of trading for beginners! Anyone who buys and sells assets without a concrete plan, on the other hand, is doomed to failure!

• The time required and the necessary Start-up capital there are massive differences. 
• There are hundreds of strategic approaches, which are often subdivided into further subcategories. 
• The requirements are extremely varied. Some strategies are ideal for beginners, while others are aimed at professionals!
• Trading strategies can differ, for example, in terms of the time frame: very short-term strategies such as the Scalpingshort to medium-term Day trading strategies or longer forms such as Swing trading. 
• The chosen strategy determines which assets are suitable.
• The time required and the necessary Start-up capital there are massive differences. 

You can trade with these products

One difficulty with trading for beginners is the wide range of assets you can use for trading. Millions of stocks, ETFs and bonds are available, as well as a variety of options, futures and other derivatives whose price is based on other assets. 

Below we present some particularly important asset classes and look at how suitable they are for beginners: 

1. shares

Stocks are undoubtedly the best-known stock market products and one of the most important asset classes of all. They are shares in companies. When we buy a share, we acquire a fraction of a company. 

• The vast majority of traders start with equity investments and later switch to active trading. 
• Almost all market participants have extensive experience with shares. They are therefore ideally suited to trading for beginners.
• There are no plans to hold the shares for the long term - instead, the sale is already foreseeable. Long-term forecasts, dividend growth, etc. therefore hardly play a role.
• Instead, traders are interested in the expected development over the planned period. For example, if you Day trading with shares especially look at the forecasts for the next few days ... 
• Shares can serve as an underlying for options and other derivatives. 

Because shares are so well-known and easy to understand, they have become a real standard in trading for beginners.  

2. investment funds

Many investors do not want to decide for themselves which shares and other products they should buy. With a Investment Fund we can pass this selection on to professionals: These are compilations of various investments selected by analysts and fund managers. 

• When you invest in such a fund, you receive a share of all the securities, real estate or other assets it contains - depending on what is in the respective investment fund. 
• You can easily choose a fund from the extensive range that suits your objectives. 
• Some are riskier than others, but also promise higher returns. 
• Some funds invest exclusively in equities, others mix the portfolio well.

As professional managers take over the selection here, investment funds are popular with private investors who do not want to look after their assets themselves. However, such products are hardly suitable for trading for beginners, as we are not really trading with them - it is more of an investment. 

An annual fee is also payable, which is used to pay the fund managers, among others. This can significantly reduce profits. 

3. ETFs

The idea of combining several investments in a single asset is as simple as it is ingenious, and the basic concept of ETFs. 

• This asset class contains dozens or even thousands of shares. 
• The selection is based on indices such as the S&P 500, DAX, Nasdaq and many others. 
• No fund manager is required, as the composition follows predefined rules. This means that the costs for ETFs are significantly lower than for comparable investment funds!
• As they contain several shares, ETFs are considered less volatile. The reduced price fluctuations make them ideal for trading for beginners. 
• ETFs can be used as underlyings for futures, options and other derivatives. 

The selection of exchange-traded funds has grown massively in recent years. Today, they are suitable for almost any strategy. 

4. bonds and government bonds

Who in Bonds invests, lends money to an institution, for example a company. In return, you usually receive a rather modest interest rate. With government bonds, we make our capital available to a state. 

• This form of investment is considered particularly safe, as industrialized nations in particular almost always pay their debts. 
• However, we can certainly use bonds in a way that generates attractive profits - but then the risk is also higher. 
• Bonds always have a term - usually several years - at the end of which the amount is repaid. 
• As the products are listed on the stock exchanges, the prices change during this period. 

In addition to the interest that the bond issuer promises us, we can also profit by selling the bond before maturity. Bonds, and government bonds in particular, tend to be passive investments and are often used to hedge larger assets. 

They hardly play a role in trading for beginners. Bond prices move very slowly and lack the volatility required for active trading. However, some newcomers use this asset class for precisely this reason and hope to learn how to trade for beginners thanks to the slow movements. 

5. raw materials 

Almost all important commodities can be traded on the stock exchanges in different ways. This means we can profit from grain, coffee, oil, soybeans, wood and much more. But don't worry: you don't have to store 100 tons of grain in your cellar! 

• There are products such as options or certificates that allow traders to make profits without coming into contact with the commodity. 
• Such derivatives allow you to make a profit on rising or falling prices. 
• Some commodity derivatives are very complex for beginners. An ETC (an exchange-traded product similar to an ETF that contains a single type of commodity) may be a simpler alternative. 

Many commodities have high liquidity and good volatility. They are therefore quite suitable for implementing trading strategies for beginners. 

7. forex currency pairs

Trading in foreign currencies, better known as Forex ("Foreign Exchange Market" or Foreign exchange market), is a very popular and lucrative form of trading.

• In forex trading, we trade currency pairs and profit from price changes. 
• Popular currencies include the euro, US dollar, yen and pound sterling. 
• Liquidity is very high. Trading is also possible around the clock, which benefits beginners and professionals alike. 
• The price changes often amount to only a fraction of a percent and are summarized by Pips shown. 
• Due to these minimal movements, leverage is always used for forex trading. 
• Forex prices are difficult to predict. This is why so-called Forex signals for use. 

Forex trading is basically also suitable for beginners and offers a wide range of possibilities, such as the carry trade strategy; however, the use of leverage can cause confusion, especially at the beginning. 

Leverage is created by the trader borrowing additional capital from his broker (this is a form of Debt capital trading). This allows him to open a larger position than would be possible with his own assets alone. After completing the trade, he returns the borrowed amount to his broker. 

This approach multiplies both profits and losses. The exact factor depends on how much capital you have borrowed. Above all, the risk of losing large sums in a short period of time is intimidating for beginners in trading. However, traders must sooner or later master the use of leverage in order to achieve higher returns. 

Create successful trades: How to succeed in trading for beginners

You now know how trading works in principle, how profits are made on the stock market and which assets you can trade. But how does a beginner trader select the right assets and create positions that generate profits?

There is no single, universal answer to this question! Traders have to select suitable sources from a wide range of available information. Below we present the most important methods that you can use to create successful trades. 

1. fundamental analysis

Fundamental analysis is only used for shares and derivatives based on them. It is an examination of the underlying company data with the aim of discovering a worthwhile investment. 

Fundamental analysis definitely plays an important role in trading for beginners:

• Equities are by far the most popular asset class for beginners, as they usually already have a great deal of prior knowledge. 
• Prospective traders are also usually very good at fundamental analysis, as this plays an important role in long-term equity investments. 
• The information available on stock corporations is very good, making fundamental analysis easy. 
• There is extensive teaching material and professional analyses that you can use as a guide - so you don't have to reinvent the wheel. 
• Newcomers can take their time to familiarize themselves with the most important key figures and make well-founded decisions. 

Fundamental analysis is only of interest for medium to long-term trading strategies: if you are only invested in a company for a few minutes or hours, you do not need to worry about its future prospects over the next few years. 

Unfortunately, there are no instructions à la "these 3 values must fit". Instead, you look at various figures in context. It is also necessary to look at the business environment, the sector, the region and the current economic situation. 

2. technical analysis

Technical analysis looks at current and past market data to predict possible developments. This approach is particularly popular with beginner traders, as insights can be quickly and intuitively gleaned from the graphs. 

• Simple upward and downward trends are easy to recognize, for example, but should always be placed in a larger temporal context. 
• More complex shapes such as resistance lines, candlestick formations, pennants, rectangles, wedges ... offer further opportunities for in-depth analysis. 
• Key figures such as trading volume or liquidity are also part of technical analysis and provide additional insights. 
• Technical analysis is particularly useful for short-term Day trading strategies but hardly allows for longer forecasts. 

Even when trading for beginners, looking at the graphs is highly interesting and a good way to familiarize yourself with the movements of the stock markets. You can find additional information on technical analysis in our Guide to chart analysis. 

3. trend following

The trend following strategy is often ridiculed by many traders, but has proven itself time and time again, especially when it comes to trading for beginners. Here we follow current trends and buy corresponding shares, ETFs, ETCs etc.. We speculate that the current trend will continue and sell later at a higher price. 

• There are numerous sources that show possible trends. From financial portals, forums and discussion platforms to paid services such as TraderFox. 
• The trend-following strategy benefits massively from your personal expertise: The better you can assess the markets, the more effectively you can assess and exploit possible trends. 
• Trend following becomes particularly interesting when the development has not yet occurred, but is merely assumed. 

Although trend following seems very attractive and is particularly suitable for beginners, you should be careful: We recommend that you always form your own opinion and consult several sources. It also makes sense to combine it with other analysis methods (fundamental analysis, technical analysis)! 

4. signaling services

Active trading is not only extremely popular with beginners. Due to the great interest, it is not surprising that various service providers offer active trading support!

• So called. Signal services provide information to help you execute successful trades. 
• The offer varies greatly and ranges from free tips to professional signal providers that are associated with high costs. 
• We strongly recommend putting such service providers through their paces before active use! 
• Also look at the previous results of the services. If these cannot be viewed, this is a clear warning signal. 

Traderfox is one of the most popular signal services. We took a close look at the provider for you and published our findings in the article "Traderfox: How good is the service for stock analysis and trading signals?" summarized.

Tips for the right start

The start of trading is a particularly critical phase for beginners: small mistakes can quickly cause large losses if the trader lacks experience. We have therefore put together some practical tips that are particularly helpful in the initial phase: 

1. realistic expectations

Earning money with trading in the long term is a difficult task that only a few traders succeed in. It is therefore particularly important for beginners to have realistic expectations. 

To make a profit, you need to invest a lot of time and energy, build up the necessary expertise and accept setbacks. You should be aware beforehand that your chances of success are rather low and thus avoid disappointment. 

2. check personal suitability

Only a few people are suitable for active trading! Those who are prone to short-sighted reactions or act emotionally have little chance of success. Greed or financial pressure ("I MUST earn money with trading!") are also highly unsuitable. 

If you are one of those people who cannot keep a cool head, other forms of investment are probably better suited to you. Even with a long-term equity investment, investment fund or the CapTrader Managed Accounts excellent returns can be achieved!

3. money management

Money management is extremely important when trading for beginners: how much capital you invest per trade is crucial to your success and possible losses! This also includes hedging mechanisms that take effect in the event of falling prices. 

In our contribution to Money management you will learn how to use your assets safely and successfully. 

4. use demo account

Probably the most important tip is not to use your own capital at the beginning! Instead, use a Paper Trading Accountwhere you can trade with play money. Here you can experience trading in a realistic environment and test your strategy. 

Only when you are making reliable profits there is it worth switching to a "real" Depot useful. However, the paper trading account is not only indispensable for beginners: professionals also use this trading environment to perfect strategies or test new concepts. 

Conclusion: Trading for beginners is not rocket science

Trading on the stock market is both tempting and intimidating at the same time. In fact, trading involves considerable risks for beginners, but can also offer attractive profits if successful!

First of all, it is important to have a basic understanding of the respective asset classes such as shares, funds, ETFs, bonds, commodities and precious metals. Based on this, you should find a trading strategy that suits you and your circumstances.  

You then examine the possible investment products to find promising candidates. Fundamental analysis or technical analysis can be used here, for example. But we can also simply follow the trends that we ourselves or other stock market experts identify. 

Before you start trading as a beginner, you should set realistic expectations and check whether you are emotionally suitable. You can then develop your strategy on a Paper Trading Account in a safe environment before you invest real capital.