Are you just starting out on your trading journey and looking for trading lessons for beginners?
The financial markets offer endless opportunities for profit, but navigating them requires knowledge, skill, and discipline.
To help beginner traders, we’ve compiled this list of 10 of the most important trading lessons for beginners to assist you on your journey.
These trading lessons are a summary of more than 30-years of forex and CFD trading which Sam Eder and I have between us.
Once you’ve absorbed these vital lessons, check out our other trading course for beginners plus find advanced forex trading tutorials.
Top 10 online trading lessons for beginners
1. Preserve your trading capital
The No. 1 rule for all traders is preserve your trading capital.
This rule sits above all others, because if you run out of trading capital, it’s game over.
You can preserve your trading capital by using risk management techniques, such as only ever using 2% of your trading capital on any one trade.
Having a trading plan that uses sound money management techniques will also help to ensure your trading journey is a long and satisfying one.
2. Never trade with money you can’t afford to lose
Never trade with money that you can’t afford to lose.
By this, we mean don’t trade using funds in your everyday account that you need to pay your rent or mortgage, buy food with or pay your utility bills.
If a trade goes the wrong way, it should never result in you facing dire financial hardship.
The money you use to trade should be kept in a separate trading account, completely distanced from your everyday living funds.
3. Always stick to your trading plan
Your trading plan is a roadmap to guide you in your trading journey. All beginner traders should have one before they start trading.
It should tell you exactly how to choose a trade, how to set it up, and how to execute your trade.
A good trading plan will also set out the money management and risk reduction strategies that you are going to use.
Here’s our free MarketMates Trading Plan Template plus other useful resources.
Never ignore your trading plan or go against the rules you have established for your trading.
4. Keep it simple, and only trade one asset at a time
As a beginner it’s easy to get carried away as you learn to trade forex, and make things too complicated.
Stick to one form of trading, and keep your trading system simple at first.
There’s always time to add more entry rules or discover advanced trading techniques later on.
At first, keep it simple and stick to trading one market at a time with a clear entry and exit strategy.
5. Carefully plan every trade you make
Experienced and successful traders carefully plan each trade they make.
When placing trades, they have a clear understanding of why they are making that trade.
You should know what your entry and exit points are, and how much you stand to gain or lose, depending on which way the trade goes.
Every trade you make should be planned in advance with a good risk/reward profile in mind.
You should ALWAYS have a stop loss order in place to get out of the trade if it is unsuccessful.
6. Start small and build up slowly
It’s a great idea to start small when beginning to trade CFDs, and gradually build up your knowledge and confidence.
If you are only risking a small loss on each trade you make at first, you’ll feel less pressure.
Take your time practicing opening and closing trades until you feel comfortable with the process of trading.
Gradually build up the size of your trades as you gain experience.
7. Accept that losses are part of trading
Many trades you place will not go in the direction you plan.
Experienced traders understand this, and treat losing trades as a ‘cost of doing business’.
Accept that trading losses are inevitable. Being comfortable losing money is an essential part of a successful trader’s mindset.
Try not to see losses as a ‘failure,’ but rather as part of a series of trades, some of which will be winners, and some losers.
8. Have realistic expectations
Trading is not a ‘get rich quick’ game, and it takes time to learn to become an experienced and successful trader.
It’s important to maintain realistic expectations when you first start to trade.
Success in trading takes time, effort, and a commitment to learn and improve.
However, by having realistic expectations about your trading, you can avoid disappointment and gradually build up your skills and experience as a trader.
9. Don’t be afraid to step away if something doesn’t feel right
If you have allocated a set time of the day or week to trade, there can be an expectation to get on and trade, even if something doesn’t quite feel right.
Never feel pressured to place a trade if something’s not quite right.
Maybe the rules of your trading plan haven’t been met, or the setup isn’t quite right? Or perhaps you have a headache or don’t feel well?
If something doesn’t feel right, don’t be afraid to step away from your trading desk and make no trades that session.
The financial markets are not going anywhere, and they will always be there for you tomorrow.
10. Keep a trading diary or journal to document your progress
Keeping a trading journal or diary is an excellent way to record your progress as a trader, or to remind yourself about things that didn’t go to plan.
This is an important part of your learning journey, and will help you continuously improve your knowledge and skills as a trader.
Regularly looking back over your trading diary can be a fun way to remind yourself of the progress you have made from a beginner trader, to a more confident and experienced trader.
It can also help you avoid repeating common trading mistakes.
How to improve your trading skills as a beginner trader?
The best way to improve your trading skills as a beginner trader is to apply these lessons every time you trade.
- Take time to plan your trades carefully, and check that your position-size is within your acceptable and affordable risk limits
- If you are not confident, take a step back, decrease your trade size, and build into your trade slowly
- When you trade, it’s important to be comfortable with the fact that not every trade is going to be a winner
- Learn from your losses, and don’t beat yourself up. If you do this, then over time you will have fewer losses and bigger winners. That’s why recording and reviewing every trade you make is essential
Remember that learning to trade is a marathon, not a sprint.
The most frequent mistakes that beginner traders make
Now that we’ve looked at the most important trading lessons for beginners, it’s time to look at the most common mistakes that novice traders make.
I’ve taught a lot of people how to trade since I first began trading in 2008. In my experience, the most common mistakes that beginner traders make are:
- They don’t thoroughly plan their trades carefully enough (which is why we here at MarketMates encourage a ‘rules-based trading‘ approach)
- They don’t automatically set up a stop-loss order for each trade they place, and let their losses build up
- They don’t have an ordered set of rules for when to exit a trade, so they tend to get out too quickly, and potentially cut their profits short
- They don’t understand the relationship between position-size and risk. They often open positions that are too large for the size of their trading account
- They use too much leverage on their trades, and so take too much risk on just one trade
- They don’t back-test their trading system sufficiently (or even worse, start trading without a trading system at all)
- They don’t record their trades accurately enough to allow for reflection and learning from past mistakes
- They don’t plan for emergencies, and so get caught unawares when a major unplanned event does take place
- They trade in adverse conditions, or when feeling unwell or stressed, and so end up making poor trading decisions
- They don’t step back and reflect after a series of losses, to give themselves time to emotionally calm down and centre themselves again
Final thoughts
I believe that by following these lessons for beginner traders, and avoiding the most common mistakes, you’ll be setting off in the correct direction at the beginning of your trading journey.
Also, it’s worth recording and remembering the most frequent mistakes beginner traders make, so you don’t end up repeating the same mistakes.
It is by learning from our past mistakes that we grow, both as people and as traders.
I always remember the wisdom shared by John C. Maxwell in his book The Difference Maker when he said:
“A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.”
Till next time, happy trading!
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.
- Christopher Tate – The Art of Trading https://www.tradinggame.com.au/product/trading/the-art-of-trading-2nd-edition/
- Jack D. Schwager – Market Wizards: Interviews with Top Traders https://www.amazon.com.au/Market-Wizards-Interviews-Top-Traders-ebook/dp/B006X50OPWhttps://jackschwager.com/books-by-js/
- Dr K. Van Tharp – Super Traders https://vantharp.com/vans-books/
