A Complete Guide for New Traders Entering Financial Markets

More and more people are starting to invest and trade in financial markets self-sufficiently. According to a 2024 survey, more than half of private investors (52%) have only started investing in the last four years. However, newcomers frequently lack basic knowledge: approximately 30% of potential investors admit to not knowing what to invest in. The first steps are taken by trial and error – almost a third of newcomers immediately open an account and start trading without preparation. 

This guide will help you understand the main financial markets and explain how to get started as a beginner trader.

Financial Markets

Stock

Stocks are equity securities of companies. By purchasing a stock, an investor receives a stake in the business and expects to earn on the growth of its price (and dividends). Stocks are the most popular asset among beginners: 43% of new investors start with stocks, and 64% hold stocks in their portfolio. In the long term, stocks tend to rise, although in the short term, sharp fluctuations are possible. For example, the S&P 500 index has gained about 25% in 2024 (after +26% in 2023), although there have been falls in previous years.

Foreign Exchange Market (Forex)

Forex is a currency trading market and the largest in terms of turnover: the daily volume of transactions reaches approximately 7.5 trillion US dollars. Trading is conducted 24 hours a day, five days a week. High liquidity and leverage on forex attract traders with the opportunity to earn on small fluctuations in rates. However, the movement of currencies depends on many factors (central bank rates, economy, news), so this market is difficult for beginners. It is not surprising that ~69% of private investors are skeptical about the idea of ​​trading currencies.

Commodities

Commodities are real assets: metals (gold, silver), energy (oil, gas), agricultural products, etc. Their prices depend on global events and the balance of supply and demand. For example, gold rose to $2,700 per ounce amid economic uncertainty in 2024, while oil prices fell more than 10% in 2023 after peaking in 2022. Such fluctuations show that commodities are highly volatile. Retail traders usually gain exposure to commodities through derivatives – futures, commodity funds, or CFDs, as it is challenging to trade physical commodities directly. It is pivotal for a beginner to consider the high risk of unexpected price movements in this market.

Cryptocurrencies

Cryptocurrencies are digital assets traded on decentralized platforms 24/7. This is the youngest and most volatile segment of financial markets. Nevertheless, interest in cryptocurrencies is high: by 2024, about 562 million people in the world own crypto assets. The market is experiencing ups and downs: after the 2022 crash (the average investor lost ~$7,000), in 2023 the average profit was $887. The total capitalization of the crypto market has grown from $1.6 trillion at the beginning of 2024 to $2.2 trillion by August (+36%). However, the lack of regulation and extreme price fluctuations make this market risky. Beginners should approach cryptocurrencies with caution and only invest amounts that they can afford to lose.

Other markets

Among other segments, stock indices and bonds stand out. Indices (for example, the S&P 500) reflect the average movement of a group of shares. You can invest in an index through index ETFs or futures, receiving broad diversification – a convenient option for beginners. Bonds (debt securities) bring a fixed interest rate and are considered a more conservative instrument: their prices are less volatile than shares, although they depend on changes in interest rates. Bonds are frequently utilized to reduce portfolio risk and provide stable income.

CFD Trading for Beginners

CFD (Contract For Difference) allows you to speculate on the price of an asset without buying the asset itself. This is a derivative contract where the profit or loss is equal to the change in the price of the underlying instrument. CFDs are usually traded with high leverage, so the risks are very high. According to statistics, 51-73% of retail traders lose money on CFDs, and the average loss is around £2,200​. In some countries, such as the US, retail investors are prohibited from trading CFDs. Beginners should be careful when trading CFDs – make sure you understand the mechanics and practice on a demo account before risking your money.

Step by Step Guide for Beginner Traders

1. Learn the basics. Start by improving your financial literacy. Understand how different markets and instruments work and comprehend key concepts (lot, spread, liquidity, etc.). Without fundamental understanding, it’s simple to make mistakes. Therefore, take advantage of training classes and materials, which many brokers provide for free.
2. Choose a market and instrument. Decide what to focus on first. Each market has its own characteristics: stocks are suitable for capital growth, forex is for active speculation, raw materials are for hedging inflation risks, and cryptocurrencies are for high-risk investments. Evaluate what is more understandable and interesting to you, as well as your risk tolerance. It is better to start with more stable instruments (large stocks or index funds) and gradually master more volatile markets.
3. Find a reliable broker. Open an account with a licensed broker who offers access to the desired market. Compare commission rates, platform convenience, and accessible tools. Nowadays, many brokers allow you to start with a minimal investment, so choose the best terms for you.
4. Develop a strategy and test it. Don’t trade randomly – define entry and exit rules (when to buy and sell) in advance. Test your strategy on a demo account – this way you will hone your skills and check the effectiveness of the plan without risking real money. Make sure you feel confident before you move on to trading with real money.
5. Manage your risks and start small. Stick to the principle: firstly, save your capital, then increase it. Determine your acceptable risk per trade and always set a stop loss to limit losses. Do not invest all your funds in one asset – distribute your capital between different instruments. Start trading with a small amount you can afford to lose, and gradually increase the volume as your experience grows.

Final thoughts

Financial markets are accessible to anybody, and with the right attitude, even beginners can succeed. The most important thing is to plan ahead of time, act responsibly, and keep risks in mind. By following this advice and relying on real data, a rookie trader increases his prospects of a good start and future progress in the world of investments.