Understanding which markets are best suited to beginners is important for laying a strong foundation and building up your confidence.
In this guide we’ll explore some of the best markets for beginners to trade, considering factors such as liquidity, accessibility, and ease of understanding.
Whether you’re interested in forex, gold, cryptocurrencies, or stocks, this overview will help you make an informed decision about where to start your trading journey.
What are the best markets for beginner traders?
For beginner traders, deciding what to trade can feel a little overwhelming.
Each market offers its own unique characteristics, risks and rewards.
Of course, the best market for one person may not be the best for another, because we understand that all traders are different.
Also, the word ‘best’ is very subjective. Best for who, and best for what?
What do we mean by ‘the best market?’
To make things simple, we’re going to define the ‘best market’ three different ways, and then look at the trading opportunities available with these definitions in mind.
Best market to learn trading techniques: What is the best market to learn the technical aspects of trading, like learning to read trading charts and recognising chart patterns?
Best market for ease of learning: Which market has the shortest learning curve, so you can start to trade the quickest?
Best market for safety: Which market is the most forgiving and safest to start with, like a shallow baby pool when learning to swim?
Best market for learning trading techniques
The forex market is often considered an ideal market for learning technical analysis due to several factors:
- Diverse market conditions: Forex trading offers a wide range of currency pairs and diverse market conditions, providing ample opportunities to practice technical analysis skills
- Simplicity: Forex primarily reacts to global economic events and central bank policies. This allows beginner traders to focus on broader market forces and hone their technical skills, like trend identification and chart pattern recognition
- Accessibility: Forex offers the opportunity to trade 24-hours a day, 5.5 days a week, which can be ideal for beginners who are learning to trade at the same time as other life commitments such as work or study
- Versatility in timeframes: The forex market offers unparalleled flexibility to switch between different chart timeframes, from the five-minute to the daily charts, giving beginners experience with switching timeframes
- Volatility: Forex offers a moderate level of price movement, creating clear price patterns and allowing beginners to observe the practical application of technical analysis in a dynamic environment.
- Micro-lot trading: Forex trading enables the execution of trades in micro-lot sizes, catering to smaller account balances. This allows hands-on practice in proper position-sizing and risk management.
- Access to leverage: Forex trading grants easy access to leverage, offering the potential to maximise your trading potential. Leveraging ratios of 1:21, 1:50, or even 1:200 are readily available in the forex market, which can assist those with a smaller trading account
Which forex pairs should you start with?
For beginners starting their forex journey, focusing on the six major currency pairs is highly recommended.
Here’s why major pairs are a good starting point:
High liquidity: Major pairs boast the highest trading volume in the forex market. This translates to tighter spreads (lower transaction costs) and easier entry and exit from trades, minimising the impact of bid-ask differences.
Relatively stable volatility: Major pairs experience a moderate level of price movement. This allows beginners to observe technical indicators and chart patterns without getting overwhelmed by wild price swings.
Abundant learning resources: Due to their popularity, a wealth of educational materials, trading strategies, and technical analysis tools are readily available for major pairs. This provides a strong foundation for learning to trade.
What are the six major currency pairs?
- EUR/USD (Euro vs. US Dollar): This is the most traded currency pair globally, offering exceptional liquidity and stability.
- USD/JPY (US Dollar vs. Japanese Yen): The USD/JPY is often seen as a safe-haven pair, meaning it tends to appreciate during periods of economic uncertainty. This can offer valuable insights into broader market sentiment.
- GBP/USD (British Pound vs. US Dollar): Sharing some characteristics with EUR/USD, GBP/USD offers a familiar experience and is influenced by major economic news affecting both the US and the UK.
- USD/CHF (US Dollar vs. Swiss Franc): Similar to the JPY, the CHF is another safe-haven currency. Understanding the USD/CHF can provide valuable insights into risk aversion in the market.
- AUD/USD (Australian Dollar vs. US Dollar): AUD/USD is often linked to commodity prices, particularly gold. This can be an interesting learning aspect for beginners, but basic commodity knowledge might be helpful.
- USD/CAD (US Dollar vs. Canadian Dollar): The close economic ties between the US and Canada make USD/CAD somewhat susceptible to similar news events, potentially simplifying analysis for beginners.
Best market for ease of learning
For beginners seeking the shortest learning curve to start trading, indices are an attractive option.
This is because indices are relatively simple to trade, as compared to forex. You don’t need to understand pips, for example.
They can also offer a more stable trading environment with less volatility compared to cryptocurrencies or some commodities.
Here’s more reasons why trading indices is a good place for beginners to start:
- Clear market trends: Indices often exhibit clear and well-defined trends, making it easier for beginners to identify and follow market movements
- Less variables: Compared to individual stocks or commodities, indices trading involves fewer variables to consider, simplifying the learning process for novice traders
- Lower volatility: Indices generally experience lower volatility compared to individual stocks, reducing the likelihood of sudden and drastic price movements that could catch beginners off-guard
- Broad market exposure: Trading indices offers exposure to a basket of stocks or assets, allowing beginners to gain insights into broader market movements and trends without needing in-depth knowledge of individual companies
- Access to demo accounts: Many brokerage firms offer demo accounts for trading indices, allowing beginners to practice trading strategies and familiarise themselves with the platform risk-free before committing real capital
Which indices should I start trading as a beginner?
For beginner traders, starting with well-known and widely traded indices can provide a solid foundation for learning and understanding market dynamics.
Some of the most popular indices that beginner traders often start with include:
- US500 (S&P500): This index tracks the performance of 500 large-cap US stocks from the S&P 500, and is widely regarded as a benchmark for the overall US stock market.
- US30 (Dow Jones Industrial Average DJIA): Comprising 30 large-cap US stocks, the DJIA is one of the oldest and most widely followed stock market indices globally.
- US100 (NASDAQ 100): This index includes the top 100 technology and growth-oriented companies listed on the NASDAQ stock exchange.
- UK100 (FTSE 100): Representing the 100 largest companies listed on the London Stock Exchange by market capitalisation, the FTSE 100 is a key benchmark for the UK stock market.
- GER30 (DAX 30): The DAX index tracks the performance of the 30 largest and most liquid companies listed on the Frankfurt Stock Exchange, representing the German equity market.
- Jap225 (Nikkei 225): This Japanese index comprises 225 blue-chip stocks listed on the Tokyo Stock Exchange, offering exposure to the performance of Japan’s largest companies.
The best market for safety
For safety and minimising risks, blue chip stock CFDs are one of the most forgiving options for novice traders.
Stocks of established companies with stable financial performance often provide a relatively safe entry point for beginners, akin to a shallow baby pool for learning to swim.
Here are some reasons why you may want to consider starting with trading stocks:
Familiarity: Stocks represent ownership in companies. Beginners are likely to have some understanding of these companies through daily encounters with their products or services.
Lower volatility: Compared to some other markets, stock market blue chip shares generally exhibit lower volatility and less roller-coaster swings in direction, which can be daunting for beginner traders.
Which stocks should you start with?
Here are some suggestions for the most popular stocks for beginners to start trading:
- Apple Inc. (AAPL): As one of the world’s largest technology companies, Apple’s stock is widely followed and offers relatively stable price movements, making it attractive for beginner traders.
- Amazon.com Inc. (AMZN): Amazon’s stock is popular due to its dominance in e-commerce and cloud computing. Despite its higher price, its consistent growth and market presence make it a favourite among beginner traders.
- Alphabet Inc. (GOOG): Alphabet, the parent company of Google, is another tech giant with a strong market position. Its stock offers liquidity and relatively predictable price movements, making it suitable for beginners.
- Microsoft Corporation (MSFT): Microsoft’s stock is known for its stability and consistent growth, driven by its diverse product portfolio and strong market presence in software, cloud computing, and other technology sectors.
- Tesla Inc. (TSLA): While Tesla’s stock can be volatile, its innovative approach to electric vehicles and renewable energy technologies attracts many beginner traders seeking opportunities for high growth and momentum trading.
- Facebook (META): The parent company of Facebook is Meta Platforms Inc. It is widely traded and offers exposure to the social media and digital advertising sectors. Its stock price tends to be relatively stable, making it suitable for beginners looking for less volatile options.
All these stocks are frequently covered in financial news and analysis, providing ample information and resources for beginner traders to research and analyse before making their trading decisions.
Which commodities should you start with?
Gold
If commodities are your thing, then start with gold, rather than silver or any other base matal.
Gold is the most popular commodity for several reasons:
- Historical significance: Gold has been valued for centuries, making it deeply ingrained in human culture and history
- Global demand: Gold has universal appeal and is in demand worldwide, contributing to its liquidity and market depth
- Store of value: Gold is seen as a reliable store of value, especially during times of economic uncertainty or inflation. Investors often turn to gold as a hedge against currency depreciation and market volatility
- Diversification: Gold offers diversification benefits to investment portfolios. Its price movement often has a low correlation with other asset classes like stocks and bonds, helping to reduce overall portfolio risk
- Limited supply: Unlike fiat currencies that can be printed at will, the supply of gold is relatively finite. This scarcity adds to its allure and can contribute to price appreciation over time
- Safe-haven asset: During times of geopolitical tension or financial instability, investors flock to gold as a safe-haven asset. Its perceived stability and long-term value retention make it a preferred choice during turbulent times
All these reasons contribute to gold’s status as the most popular commodity among investors and traders alike.
Gold is traded against the value of the US Dollar, with a ticker of XAUUSD.
Oil
If you want to trade oil, start with WTI, which stands for West Texas Intermediate.
WTI is a blend of several oils drilled and processed in the United States.
It is the most common oil used for refining into petrol, and is the primary benchmark for the US and Asian spot oil markets.
Another, less-traded oil option is BRENT, which is oil drilled from below the North Sea. Brent crude oil is the benchmark for spot oil prices in the Middle East, Europe and Africa.
The production and supply dynamics for WTI are primarily influenced by factors within the United States, while Brent crude is more influenced by global geopolitical events.
Traders may prefer to focus on WTI due to its lower exposure to geopolitical risks outside the U.S.
Which asset class is best for beginners?
There are several different choices to start trading as a beginner.
While they all have different pros and cons, it’s often best to start with what you know or have an interest in.
For example, if you have a relative who works in a gold mine, and you like to follow the price of gold, then you could start trading gold.
If you are based in the UK, you could start with GBP/USD, as you may know about Brexit implications, and how the pound stirling reacts to market news.
If you have particular industry knowledge or experience, then you may want to trade something related to your employment.
For example, a trader I taught worked in the medical imaging field as a radiographer. As he had a lot of knowledge about medical companies, he enjoyed trading stocks in the Health Care sector.
When you start, it’s best to keep it simple and not over-complicate your trading by following too many markets.
Stick to one area that you enjoy or have some interest in, and get to know that one area intimately.
Now, it’s over to you to select the market you want to begin with!
If you’d like further information and assistance, read our trading course for beginners.
Till next time,
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Glossary
Here’s an explanation of some common FX trading words:
ASX – the Australian Securities Exchange, Australia’s stock market
BC – base currency, the first currency in a pair
Brokerage fee – a fee you pay to a stock broker or brokerage site each time you use their platform to buy or sell an asset
Bear market – describes a market environment in which the majority of prices are falling
Bull market – an optimistic market in which most prices are rising
Cable – a slang market term for one of the most popular currency pairs – GBP/USD
Carry trade: A strategy where a trader borrows in a currency with a low interest rate and invests in a currency with a higher interest rate to profit from the interest rate difference
CC – counter currency, the second currency in a pair
CFD – a ‘Contract for Difference,’ which is a type of derivative financial product that is traded based on the value of an underlying asset such as a currency pair or company share or cyptocurrency
Correlation: The statistical relationship between two assets, for example two currency pairs, indicating how they move in relation to each other – either positively, negatively, or not at all
Cryptocurrency – a form of virtual currency which only exists in the cyber world. Cryptocurrencies can also be traded online through CFDs in a similar way to standard FX trading
CPI – Consumer Price Index, which reflects the inflation rate of a particular country, and is a very important market indicator in FX trading
Day trading – a trading strategy that involves buying and selling shares in one day, and closing all positions before the end of the trading day
Derivative – a financial product that is based on the underlying value of another asset. CFDs, options and futures are all examples of derivatives
Forex brokerage: A company or platform that provides access to the forex market, facilitating the buying and selling of currencies for traders
Forex or FX trading – foreign exchange trading, converting one currency to another in order to profit from price changes
Futures contract – a contract to buy or sell an asset at a specified future date for a specified price
Greenback – a FX slang term for the American dollar, based on the colour of American $1 notes
Hedge – an investment strategy designed to offset or reduce your exposure to risk. It is related to the phrase ‘hedging your bets’
Leverage – using ‘borrowed’ money to invest so you can trade a larger position with less initial outlay. Most FX brokers offer leverage starting from 5% up to 60% or more
Loonie – the slang FX market term for the Canadian dollar (because Canadian dollar coins formerly pictured a loon on them)
Margin: The amount of money required to open and maintain a leveraged position, often expressed as a percentage of the total trade size
OTC – ‘over the counter’ – which describes the global forex market method of operation, where there is no centralised exchange, but rather trades take place directly between two parties through an electronic network connecting traders all over the world
Share trading – buying and selling shares in public companies through a stock exchange
Short trading: Selling an asset with the intention of buying it back later at a lower price to profit from a reduction in the price
S/R – support/resistance. This describes specific price levels using technical analysis on a trading chart. Support is a level below the current price which has previously acted as a floor or lowest selling point. Resistance is a price level above which the price has previously shown reluctance to climb
Slippage – The difference between the expected price of a trade and the actual price at which it is executed,with the difference often due to market volatility or delays
SL Order – Stop loss order – a type of trading order which automatically kicks in at a certain price and closes a trade to prevent catastrophic loss
Sterling – another name for the British pound
Swap fees: Costs incurred when holding a position overnight, related to the interest rate difference between two currencies in a forex pair
Take a Position – this describes the action of opening a trade – you are said to ‘take a position’ when you choose to open a trade
TP Order – Take profit order – a price order which is set which automatically closes a position to take the profit made on that trade
Volatility – a measure of how much the value of a particular asset fluctuates on a regular basis
Sources
Marketmates uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial guidelines to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
- Investopedia – Commodities Trading: An Overview https://www.investopedia.com/investing/commodities-trading-overview/
- Gold – World Gold Council https://www.gold.org/gold-market-structure/global-gold-market
