In order to learn online trading, beginners need access to reliable data and proper guidance, so they will ultimately manage to develop a well-suited trading strategy. This will facilitate finding highly accurate trading opportunities, regardless if it’s about Forex, stocks, indices, or commodities. That is why the current beginners’ guide will highlight 5 of the most important terms retail traders should understand during the early stages.
The FX market is the largest in the world by daily volumes, accounting for over $6.6 trillion worth of transactions. At the same time, this is the place where beginners choose to start their trading journey, mainly because price volatility is reduced and they can learn their craft without having a lot of capital at risk.
Leverage is a key tool they’ll be using when placing trades and it implies borrowing funds from the broker. Basically, the trader makes a fiat deposit and then can use those funds as collateral in order to place a larger volume on the open market. Using leverage comes in hand with higher profit potential, but at the same time, a higher risk, which brings us to risk management tools.
Stop loss/Take profit
Online trading is an activity relying heavily on probabilities, which means not even professional traders can be 100% confident on their profitability. Losses are part of the process and to manage them, stop loss and take profit represent two of the most common tools. Retail traders can thus limit the downside (with a stop loss) and select a price level where the trade will be automatically closed in profit (take profit).
Often traders will hear about technical analysis on specialized websites and this means analyzing charts, looking to understand the price action context, or spot support/resistance levels on the chart, where new trades can be placed. Technical analysis can be done in many ways, thanks to the variety of indicators now available in the market.
The main gateway to the financial markets will be the trading platform. That’s the software provided by the broker so traders can manage their trading accounts from the comfort of their place. The MT4 platform continues to be one of the most popular solutions for FX, even though companies have also developed other proprietary platforms over the past several years.
Learning how to trade will require practice and one of the best ways to develop the necessary skills without having capital at risk is by using a demo account. Most popular brokerages allow customers to trade virtually without having to deposit any funds. Trading demo is advised until the trader is able to trade profitably consistently.
These are just some of the basic terms any beginner should master before moving to more advanced trading knowledge. As most of them will end up realizing, trading is a relative world and what works for some might not work for others. This makes developing a customized trading system critical and it can’t be done without proper study and practice.