Learn to trade

What’s on this page?

1. What is trading?
2. Getting started with trading basics
3. How to choose a trading broker
4. Learn about risk and money management
5. Create a trading plan
6. How to start trading with us
7. Tips from our analyst for trading beginners
8. Online courses on learning how to trade

What is trading?

Trading is ‘buying’ and ‘selling’ financial instruments with the aim of generating a profit. When you trade, you’re speculating on the price movement of a certain asset – whether it’ll go up or down – without buying and owning the underlying instrument.

If you’re bullish, you’d buy (or go long); whereas you’d sell (or go short) if you’re bearish. If the market moves in your trade’s favour and you close your position, you’ll make a profit. If the market moves against your position and you close your position at an unfavourable price, you’ll incur a loss.

Trading is typically done over the short term as opposed to investing – ie buying and owning – which is usually done over the long term.

Getting started with trading basics

Ensuring that you have a solid grasp of trading basics is important – not only to heighten your chances of making a profit, but also to build on that knowledge effectively with related concepts.

Share dealing vs trading using leverage

You can buy shares and funds outright (invest) using a share dealing account. This is where you buy these assets in the hopes that the price will rise over time so that you can sell your holdings for a profit. You could also get returns from dividends, if offered. When investing, you need to put down the full value of the position upfront.

More experienced individuals may want to trade using leverage. With us, you can do this using leveraged derivatives like spread bets and contracts for difference (CFDs).
You’ll have access to assets such as stocks, indices, foreign exchange (forex), commodities, exchange-traded funds (ETFs) and bonds.

Trading using leverage enables you to get amplified exposure – you’d pay an initial deposit upfront, called margin, to open a position of a higher value. Both your potential profits and possible losses are magnified to the full value of the trade. The use of leverage could lead to rapid losses, which can even exceed the deposit paid to open your position.

Ways to trade and invest

To speculate on the price direction of financial markets without outright ownership with us, you’d open a spread betting or CFD trading position. To buy and own shares or funds, you’d use share dealing.

Spread betting: staking a certain amount of money per point of price movement in the underlying asset. Free from tax¹

CFD trading: exchanging the price difference of the underlying asset between the time of opening the trade and when you close it. Potential profits can be offset against losses for tax purposes¹

Learn more about the differences between spread betting and CFD trading

Share dealing: investing in assets outright; holding them with the intention to sell them for a higher price at a later date. You can only make a profit if you sell your shares or funds for more than the original buy price. Plus, you could earn dividends (if offered)

Markets to trade

You can choose from over 17,000 assets across a selection of markets that are available to trade on our platform. Below are some of these markets. Some of the main drivers of price movements they have in common are supply and demand as well as market sentiment, geopolitical events and economic conditions. Others are more specific to a given market, eg company financial results in the stock market.

Stocks: represent units of ownership in a single-name stock. Share prices vary based on factors such as company news and performance, and industry trends

Indices: reflect the performance of a stock market or sector by measuring the aggregated prices of various stocks. For example, the FTSE 100 includes the 100 largest companies that are listed on the London Stock Exchange (LSE)

Forex: involves exchanging one currency for another based on the prevailing relative value. Some factors that influence forex rates are macroeconomic indicators like inflation, interest rates as well as imports and exports

Commodities: raw metal, energy and agricultural assets such as gold, oil and wheat. Natural resources that are mined or extracted from the earth are called hard commodities; ones that are grown and harvested are referred to as soft commodities

ETFs: funds that are listed and traded stock exchanges in the way that single-name stocks are. There are different types of ETFs, depending on which assets’ prices they track, eg sector and industries, indices, commodities and currency pairs

How to choose a trading broker

A trading broker is like a gateway for you to getting exposure to the markets. We’re a trading broker, enabling you to speculate on instruments without any ownership aspect. If you want to buy and own, you can do this via our investment offerings.

Below are some of the key factors that can be useful to consider when you’re looking for a trading broker that suits your needs and goals.

Regulatory compliance: regulations set by financial authorities are there to protect you as a consumer to ensure that you’re treated fairly, among other mandates. You can do research on whether brokers adhere to these regulations and whether they have measures in place to protect your money

Variety of markets: considering the number of asset classes and instruments can give you an idea of where you’re likely to find more opportunities. There’s more for you to choose from in different market environments with a broker that has more markets available for you to trade

Trading platforms: to gauge what the user experience on different brokers’ trading platforms could be like, you can evaluate aspects such as useful features, whether you can open a demo account, accessibility on different devices, linked third-party platforms and latest awards won

Trading hours: you can plan to trade during your preferred times by comparing brokers’ trading hours, including taking positions outside of regular market hours. Longer trading hours accommodate different levels of flexibility in schedules

Leverage and margin: understanding the impact of leverage and margin is vital. Even though you’d only need to pay the initial margin to open a bigger position, you could lose more than this amount as potential profits and possible losses are calculated based on the full trade value

Spread and commission: depending on the product or underlying market you choose; you’ll pay a certain spread or commission fee. The amounts vary among brokers – they tend to be lower with execution-only brokers as they don’t provide any advice and you make all the decisions regarding the positions you take

Deposits and withdrawals: checking how straightforward the deposit and withdrawal processes are and what costs are involved could help you in making a more informed decision when choosing a trading broker. Additional charges that might not seem obvious at first may apply across your trading journey

Educational tools: as you build up knowledge, skill and experience, there’s always room to increase your probability of success. Learning about trading isn’t only for beginners; instead, it’s like a journey of steppingstones that can equip you with the foresight to help you reach your financial goals

Customer service: comparing the channels through which you can reach trading brokers as well as the times they’re available is worth considering. Whatever assistance you might need, knowing that the trading broker you’ve chosen offers reliable support in the ways that suit you can be reassuring

Learn about risk and money management

To be able to manage your trading funds wisely, it’s important to have a good grasp of the risk and complexity of leveraged derivatives like spread bets and CFDs. Sticking to your risk management strategy, eg setting stop-loss orders and only risking a small percentage of your portfolio on any single trade are just some ways of managing your risk.

Approaching trading in a disciplined way consistently can be crucial for success in reaching your goals. You can aim to do this by building a solid understanding of how trading psychology can influence financial decisions and how you can apply these principles to maintain self-control, even in challenging situations.

Create a trading plan

Developing and adhering to a well-thought-out and detailed trading plan can provide you with a clear framework to navigate the financial markets in a way that’s conducive to your chances of success.

Some of the key aspects to consider when drawing up your trading plan are:

• Define goals: be clear about what you want to achieve and how you plan on doing it. Make sure that each goal is specific, measurable, attainable, relevant and time-bound (SMART). Place each goal within a duration category: short-, medium- or long term
• Select a trading style: learn about different trading styles like position trading, swing trading, day trading and scalping, and how they work. Then compare them to find the one that suits you best
• Establish entry and exit rules: set clear criteria for when to enter and exit trades. This may depend on your trading style – eg whether you open and close positions within the same day (ie day trading) or whether you keep them open for a few days
• Utilise analysis: use technical and fundamental analysis to identify potential future market movements based on price performance as well as financial statements (in the case of stocks), external events and influences, and industry trends
• Outline your risk management strategy: determine what your overall risk tolerance is and how much you’re willing to risk on a single trade. Detail the techniques you’ll implement to ensure that you’re not taking on more risk than what you’ve made provision for
• Plan how you’ll manage emotions: both making a profit and incurring a loss can be overwhelming at times. By coming up – and following through – with ways of handling these situations, you can avoid making decisions that may have unfavourable outcomes
• Keep records: track your progress on a regular basis and document all your trades. Review your trading plan when needed to make any changes or refinements

How to start trading with us

1. Create a live account
2. Deposit funds into your account when you’re ready
3. Learn about how trading works and the risks involved
4. Analyse the markets you’re interested in carefully and select your preferred opportunity
5. Buy if you think that market’s price will rise or sell if you think it’ll fall
6. Select your position size and manage your risk
7. Open, monitor and close your position

Tips from Chief Market Analyst Chris Beauchamp for trading beginners

Making trading decisions typically involves performing due diligence. As part of this, some traders often use market analysts’ insights and predictions to gauge prevailing sentiments in ever-changing market conditions. News and trade ideas by analysts can provide more opportunities for you to assess and mitigate risk.

Below are tips that analysts commonly give trading beginners.

• Starting capital and risk management: start with an amount you can afford to lose, considering the significant risk involved in leveraged trading. Your account should cover trading costs (margin, spread/commission and potential losses). Limit risk by committing only a small percentage of your capital per trade, eg 10% of your account balance or less, to minimise potential losses and avoid overexposure to the higher risk from leveraged trading
• Risk-reward ratio: putting a number to how much you’re willing to lose compared to the profit you’re aiming for on a trade can be useful as there are no guarantees in the trading environment. By setting a suitable risk-to-reward ratio – that fits into your overall risk tolerance – for each trade, you can ensure that you either lock in profits or avoid further losses
• Using stop-loss order: while this can be an effective risk management tool, it’s worth considering where you place your stop loss. If it’s too far out, there’s the possibility of bigger losses if the market moves against your position. Whereas, your trade could be taken out too early – and you could miss out on an opportunity to profit – if the stop loss is too close
• Recommended markets for beginners: when trading with real money as a beginner, markets with low volatility and lower spreads could be a good place to start. It might also help to practise on a risk-free demo account using virtual funds. You can continue to use your demo account once you start trading in your live account

Online courses on learning how to trade

For training on how to start trading, employing strategies, increasing your probability for success and more, you can explore detailed courses on IG Academy.

FAQ

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