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How to Begin Financial Trading Successfully

By Will Ellis
Last Updated on January 5, 2024

Whether it’s through a traditional method like the stock market or something a bit more exciting like the cryptocurrency market, there are naturally plenty of reasons you might want to start trading.

While the allure is certainly there, especially in the case of cryptocurrencies, it’s imperative that you enter this experience carefully so you don’t lose money.

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So, throughout this article, we’ll be taking a closer look at a few key areas to keep in mind that’ll help you begin your trading journey β€” focusing on the essentials of trading, educating yourself, and knowing which trading platform is right for you.

Table of Contents:

Understanding Financial Markets πŸ€”οΈ

Naturally, the beginning of a successful trader’s career kicks off with a solid grasp of the fundamentals, so it’s necessary to cover some of the key components of how financial markets actually work.

Put simply, they’re essentially just platforms that let you buy or sell a selection of different financial assets, and you can start investing in things like stocks, crypto, bonds, and derivatives, depending on the quality of the trading platform you’re using.

Most of the time, financial traders tend to invest in short-term contracts rather than ever actually owning the underlying asset, so these markets act as a meeting point for anyone trading and investing.

Going back to the range of assets you’re able to trade on these platforms, instruments usually range from either stocks β€” usually on popular platforms like the New York Stock Exchange or London Stock Exchange β€” to foreign exchange (Forex) in the currency market, whereas commodity markets focus more on agricultural products and raw materials.

The foreign exchange (forex) market involves the buying and selling of foreign currencies. On the other hand, the commodity market deals with the trading of physical goods like agricultural products. Both these markets are crucial components of financial trading, offering diverse opportunities for investors.

So, the assets are fundamentally slightly different, but they ultimately both play significant roles in the market.

Educating Yourself πŸ“‘οΈ

It goes without saying that the only real difference between you, a novice trader, and someone who is more successful is the level of experience and education you both have.

Ultimately, this is what makes it so risky to trade financial instruments in the first place β€” you don’t start on equal playing fields; it’s retail investors entering trades on their mobile phones vs. hedge funds with seemingly limitless capital/experience.

As a result, the only way to stand any kind of chance as a successful trader without entering a financial crisis is to educate yourself about the markets β€” meaning learning a few different trading strategies and the best ways to manage risk.

For instance, whether it’s a stock, currency pair, or even a commodity, its value comes from an underlying asset, so going into any of your investments with an understanding of what actually influences this asset can obviously be a key way of predicting market movements.

Lessons From Financial History

Fortunately, you’ve got plenty of reference points from the past that you can analyse to become a better trader, so you can even study certain historical events, including financial crises/’black swan’ events, to get a feel for the market that you’re trading in.

Aside from this, time naturally plays a pretty crucial role for financial traders, given how much financial markets β€” across all kinds of financial instruments β€” demand fairly quick decision-making.

At times, there can literally be a matter of seconds between you either entering or exiting a profitable investment or losing money, so spend a bit of time getting familiar with the platform that you’re using so you know how to execute a trade as fast as you can.

Choosing a Platform ➑️

Ultimately, despite how technically skilled you might become at trading β€” whether that’s with a strong understanding of technical analysis or you play things safe β€” the trading platform that you settle on and use for investing might be even more important sometimes.

Outside of the range of features that might be missing on some of the less advanced trading platforms, think about what risks might come with depositing a large sum of money on a fairly unfamiliar service.

As such, some of the best advice we can give you before you ever think about making any investments is to first take a look at what your preferred financial institutions’ reputation and overall reliability are like.

Now, there are actually quite a few ways you could analyse this, but take, for instance, if the platform has a history of going offline during major periods of volatility during the market β€” essentially making you unable to make proactive decisions if a black swan event or any other bearish activity occurs.

In addition, make sure they’re linked to a well-established investment bank, too, since these tend to come with a much more secure environment for trading financial instruments.

Aside from this, just try to seek out a platform that comes with a relatively user-friendly interface, which means testing out a few different platforms to see which ones feel the most natural to use. You’re going to need to make rapid decisions without much time to deliberate in your trading career, so you definitely want to make sure you’re comfortable navigating the platform and can do so quickly.

Diversification and Risk Management

Experienced traders often emphasise the importance of diversification to mitigate financial risk. The best trading platforms should offer a bunch of financial assets and markets, allowing you to spread your trades out and avoid putting all your eggs in one basket.

FAQs πŸ“’οΈ

Can I Start Trading Without Any Prior Experience?

Practically speaking, yes, but seeking some kind of professional advice is definitely a better route to take if you’ve got no previous experience. Whether it’s risk management tips or learning market trends, working with financial advisors or mentors can absolutely increase your chances of becoming a profitable trader if you’re currently a novice.

Can I Trade Without Constantly Monitoring the Markets?

In general, there are plenty of different trading strategies you can tailor to your own needs β€” some investors prefer day trading and constant monitoring, for instance, but a lot of people like taking longer-term approaches, too. Furthermore, utilising certain tools like stop-loss orders helps automate some of the aspects of trading that would normally require your constant attention.

How Does Market Liquidity Impact My Ability to Buy and Sell Financial Instruments?

Market liquidity basically refers to how easily certain assets can be bought or sold without their overall value being affected. Markets with higher liquidity β€” major currency pairs, for instance β€” are usually easier to enter and exit for traders, and since this can impact your transaction costs/your ability to make trades, it’s important to understand how liquidity works.

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