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In this guide, we’ll give beginner online trading tips for those starting on their journey.
Look for:
Low-to-zero commissions- Verifiable trustworthiness
- User friendliness
Low-to-zero commissionsWe won’t cover that again here but we will talk about the proper investment mindset, strategies, terminologies and general need-to-knows.
Below you'll find some of our top trading platforms that we've researched and tested. You'll see we recommend eToro which is perfect for beginners as it enables you to copy experts and learn how they trade online.
* eToro disclaimer: Your capital is at risk. Other fees apply. For more information, visit etoro.com/trading/fees.
** Plus500 disclaimer: 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
*** Pepperstone disclaimer: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.6% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Table of Contents:
How Do You Trade: For Beginners
MetaTrader 4 & 5 are popular trade platforms & ‘stop losses’ auto-kills trades that reach a certain loss.
If you manage it well, trading can be a lucrative use of your time. What is the easiest type of trading? We’ll talk about that too. You’ll get a basic understanding - from this guide - of what’s involved in day trading. Including ways to manage risk and create the best chance of a good ROI.
What is Day Trading? 📑
Day trading means buying and selling a security/financial instrument during the window of one trading day. As a day trader, you’ll want to complete your order positions before the day's end, in order to capture your profits.
Day traders may enter an exit on a trade several times during the same day, but even despite the defined window, it can be a risky investment strategy for beginners, without a clear strategy.
You may come across brokers who define day traders differently to the above, who might also be called ‘active traders’. Definitions will differ depending on trading frequencies inside of a single month/year. Some brokers refer to very active traders as ‘hyperactive traders’. Note that not all brokers are suited for high-volume day traders.
What happens in a day trade?
The typical strategy of a day trader is to profit on small price movements that take place in currencies or stocks with high liquidity. In this guide, we’ll give you a summary of trading basics - such as setting limit losses, charts, and patterns - and what you’ll need in order to successfully day trade in the UK.
If you’re using endpoint security to protect your identity while trading, choose a fast premium VPN.
TL;DR:
- You’ll need to self-educate, otherwise any profits you happen to make will be lost just as quickly
- Being a day trader is not a side-gig - Treat it as a full-time means of employment and be unemotional about it
- This guide will give you a basic foundation in successfully day trading in the UK and generally beginner online trading
You’ll need to self-educate, otherwise any profits you happen to make will be lost just as quicklyHow Should I Start Trading? ↩️
There’s more than just day trading. Here are 5 main day trading markets that offer potentially lucrative profits (the last two - futures and commodities - have been grouped together, though they are rather different from each other):
#1 Forex
The number one most popular currency exchange market with enormous liquidity.
In other words, money moves around this market very, very quickly. Because there’s so much volume, day traders find this a great place to make winning deals.
If you’re looking to find short-term opportunities, as well as fast learning feedback, you’ll find lots of quick-moving trades: open and close multiple times per day. Somebody with good analytical skills can exploit this platform with more success than a non-technical sort.
If you're interested in FX, make sure to use one of the best UK forex trading platforms to get the best fees and avoid losing money to brokerages that are too expensive.
Because there’s no central market, you can day trade 6 days out of the week, 24 hours a day. If you’re a beginner, the Forex is a great place to learn the principles of making money through financial instruments or you can take a day trading course to learn more about the pros and cons of trading.
#2 Cryptocurrency
Right now, Ethereum and Bitcoin are the two leading cryptocurrencies. Needless to say, this currency has an immense amount of buzz surrounding it, so there’s great liquidity in the market with many new investors adding to the growth of each day.
Brokers are taking the stance of making access to the market as smooth and fast as possible. If you want to speculate, it's becoming simpler all the while. And there are zero barriers to getting access.
#3 Stocks
Stocks are physical shares in a company, option (options are a cheaper entry into trading actual stocks, as they speculate on shares rather than actually buying them), regular and leveraged ETFs (ETF stands for ‘Exchange Traded Fund’, which treats holding multiple stocks as like holding only one), and futures.
Rather than only buying and holding long-term, there are short-term ways to profit on shares, such as speculating on price falls. If you go for a ‘leverage’ or ‘margin’, you minimize how much you need to spend to open on a position.
This lets you quickly take advantage of new press releases, financial reports, technical signals, and product announcements.
Read our guide on how to invest in stocks for more information and tips on how to trade.
#4 Binary options
One of the least complex and most forecastable trading types for beginner online trading, as you have strong predictive powers regarding timings and ROIs.
It's simply your job to decide whether assets will increase or fall in value.
Since a number of regulatory announcements happened in the UK, binary options are more restricted to mostly professional traders.
High reputation companies and brands often offer binary options. Look at the brand and make a decision on whether it will rise or fall in asset worth.
This trading type is a useful addition to your portfolio and does not require complicated technical knowledge.
#5 Commodities and futures
Futures bet on the future price of securities or commodities. And commodities describe: food stuffs, metals & minerals, and oils & natural gases.
How Each Trade Will Look:
Somebody who trades on the FTSE as a day trader is buying and selling shares of companies, such as Apple and Sony. However, if you’re trading on the forex market, you’re trading currencies, such as the Japanese Yen and British Sterling (GBP).
For those in futures market trading, they'll be handling indexes and Commodities, which range in everything from silver to cocoa.
You may have heard of index funds, which are unsuitable for the short-term day trader’s life. These financial vehicles move slowly and function as an excellent long-term investment strategy.
As for cryptocurrencies, this deals with digital currencies, which are a potentially booming area of growth. You’ll come across a number of competing digital currencies such as Litecoin, Bitcoin, and Ethereum.
These are sometimes called ‘altcoin currencies’, and they roughly speaking have great volatility, a very unpredictable long-term future, and potentially immense ROIs.
2020 has seen a big boom in the number of day trading newbies in the UK. These beginners should take advantage of the immense wealth of widely disseminated information for getting started; curated and organized so that you can inform yourself in a structural manner.
To start with, you want to start trading with a demo account, which will give you real time feedback on your progressions. These demo accounts simulate what it is like to invest money, and some like Hargreaves Lansdown also give you automated educational advice.
Knowledge is Power
Setting yourself up on a demo account won’t teach you how to trade stocks but should be your go-to point when you are at the stage of actually moving money around in a real trading environment. You’ll first need to spend less time on Netflix and more with online resources, educational books, and stock trading courses.
- Books on online trading (beginners)
- Day trading for dummies by Ann Logue.
Day trading and swing trading the currency market by Kathy Lein.
These two books on online trading will arm you with critical, protective day trading practices. Also included are strategic tips, plus advice on how to pick stocks. Your beginner online trading journey begins with self-education: knowledge is power.
Once you have that foundation, you’ll move onto staying updated with the latest stock market news and events that might impact the value of stocks. This will range from how the economy looks to be moving to how the government plans to change interest rates.
Savings
Before you invest a penny of your actual money, have 6-12 months living expenses saved and stored away. Anything extra that you earn, you can set aside as capital to invest on trades. Have a hierarchy of trading types, beginning with longterm safe bets like indexes.
From there, any money you’ve set aside can be day traded. The rule of thumb for successful day trading is to risk under 1%-2% of your total pot. This sets a hard limit to the maximum loss that you can have per trade. Generally, it takes twice as much to re-earn what you have lost.
Time
If you're going to day trade, you’ll need a lot of time. It's not something you can treat as a side hustle or hobby. Day trading is a full-time job, and requires most of your day to do well. If you only have limited time, avoid it in favor of a longer-term strategy like index trading.
Each day, you’ll have to track how the markets move and be razor-sharp in spotting opportunities, which can pop up at any point during the trading window. Being able to move quickly is crucial.
Top Strategies for Day Trading ↗️
(It Begins With Mindset)
The strategy is essential, and there’s absolutely no shortcut with day trading. This trading form is characterized by high risk and high potential upside. You have to pursue mastery. From time to time, you will see somebody boastful or enthusiastic on a forum that claims to have found an infallible template.
This person forsakes a comprehensive strategy for momentum and a copy/paste tactic. They’ll inevitably bleed out money. Sensible trading is governed by concrete strategies that give the trader an edge when applied over time and proper due diligence.
Ask yourself whether you can spend hours working in a logical manner, over weeks and months as a beginner online trading starter. Emotional trading is bad trading. And your wins are characterized mostly by minuscule edges that add up over time. You have specific day trading strategies for the type of trade you are doing.
Top Tips for Day Trading
The key to good day trading is accurate information, organized in spreadsheets and charts. Common ways traders create and replenish strategies:
- Scalping
- Swing trading
- Trading on volume
- Arbitrage Trading
- Using news
- Cut-and-dry day trading exit systems
- Swing trading
Stick to the plan, whatever it is, ignoring emotions and you’ll have the best results. Remember: minor losses accrue just as well as minuscule edges.
Best Online Trading Beginners Accounts 🧍
Before you can start day trading, you’ll need an account. Three common types:
Cash accounts
Sometimes called ‘without margin’ accounts. You're limited to trading only money you have in the account, which places a ceiling on your profit potential, but also on how much you could lose. This is a safe way to place surplus money you have on the line while keeping the rest of your savings safe.
Margin accounts
Involves borrowing money from your broker, which boosts how much you could potentially make but also how much you could lose. This is more regulated, and not suitable for a beginner day trader. Even if you choose this option, you’ll need to set a minimum investment before you can trade on margins.
Professional accounts
If you have experience and a particular amount of capital to invest, you have more freedom in how you can do retail traits, with fewer restrictions from European regulations. This typically means greater leverage levels for forex and cryptocurrency markets, among others.
Beginner Online Trading - Jargon and Terminologies Section
Automated Trading
Programs that preload rules and criteria on your behalf, automatically letting you open and close trades based on them. Sometimes these are called algorithmic trading systems, bots, or trading robots.
Beta
A numerical signal that indicates how much a stock has fluctuated in comparison against the market.
Bear
Also known as being bearish. This means you expect a stock to decrease in price.
Bull
BullAlso known as being bullish.
The opposite to the above: taking a bullish position when you’re day trading means you anticipate the stock to rise in price.
Entry point
Goes by other names but describes what price you ended your position at (made your buy or sell order).
Exit point
The opposite of the above: the price you exited on your position or order.
Float
Describes the number of shares that can be traded in total. For example, if a company offers an IPO of 10,000 shares to the public, the total float is 10,000.
Hotkeys
This pre-programmed key algorithm lets you buy and close on a trade very quickly, useful if you want to close out on a losing position as soon as you can.
Initial public offering
Also known as an IPO, describes a company deciding to sell a specific number of shares in the trading market in order to increase their capital.
Leverage rates
The rate your broker can multiply your deposit by. The greater the rate the more your buying reach.
Market trends
What direction does a given security seem to be moving towards, over a specific amount of time?
Penny stocks
Name given to stocks valued under £1 at the time of their trade.
Pot
How much money you have to spend in total for your day trade, ie. how much capital you have in your account.
Profit/loss ratio
Calculation given in a percentage that measures a strategy or system’s capability in trading profits rather than losses.
Stop-loss
The amount of loss you will allow before the top online trading platform automatically kills the trade, preventing further losses.
Specific terminology lingo related to accurate predictive powers (graphs, patterns, charts & strategy)
Bollinger bands
These give you pattern-recognition signals that let you see the high/low price points of trade in the past, compared to now. This can help you to make an informed decision at a strategic level.
Moving averages
A staple of buy and sell signals. You won't be able to know what will happen next other than by inferring as to the general motion of prices, but it can give you potentially vital insights into trends.
Moving average convergence-divergence
The MACD is another technical indicator that gives you a calculation of the difference between a securities two exponential moving averages.
Because of the meta value of this signal, beginners find this very useful for making buy and sell trading decisions.
Resistance levels
If prices reach this level, it means there’s enough demand for that security that selling it will eliminate any increase in price.
Relative strength index
The RSI gives you signals for comparing the gains and losses of security over a given period of time.
You’ll be able to see how quickly prices have moved so that you have context for the current price of the security and its possible performance in the future. This is a primary tool for evaluating whether a security is reaching saturation.
Online Stock Trading Beginners - Buying Guide 📓
Day Trading vs Longer Trades
Which one should you use for beginner online trading? Besides placing trades over a single day, but there are other options to go for:
#1 Swing Trading
You’ll adjust your position over the course of several days, or even weeks - rather than a single day. This can be a good way to diversify.
#2 Traditional Investment
A much more secure way of diversifying your portfolio. The money goes into real estate, bonds, and stocks with longer growth frames. Typically, you’ll need to wait at least a year to see a 5-7% growth.
This is a way to secure money once you already have a good degree of security and want some way to let the rest of it grow somewhat (rather than just letting it sit in a bank account). Check out our guide on the best investment platforms for the best investing experience.
#3 Robo Advisors
With the growth of artificial intelligence, you have the option to let algorithms do the hard work on your behalf. This is another option that’s too slow to be useful for daily trades. You can insert how much risk you’re willing to take and what time frame you want to invest in.
#4 Social Trades
If you don’t want to spend time researching how to learn trading, copy the trades of successful users on specific platforms who are operating at your funding level.
The highest amount of time you’ll have to invest on the front end - in this case - will be in finding the most suitable trader to copy.
Even if you want to do day trading, we recommend that you also diversify this with a long-term strategy that operates in different industries, markets, and geolocations.
Stock Screeners
OK, let’s say you're playing a slightly longer game… Many beginner traders use a herd mentality, looking for big brand names for their investments. This means they miss out on the hundreds of quiet securities/stocks that are consistently given experienced traders reliable profits.
If you only use the news, you'll probably be too late to join the party. New potential winners could be identified by using a stock screener. This software picks up on signals before they break into the news headlines, so that you can figure out what the top gainers and losers are. A valuable beginner online trading tool.
Stock Platforms
Some of the most useful stock screeners are FinViz, Zacks, and MarketWatch. Depending on the platform you choose, that may be a native screening software.
You can filter for specific Industries and share prices. imma still touring options include market caps, average trading volumes, and by analyst ratings.
Other analytical software include broker integrations, which are directly linked to brokerages and automatically execute on trades, putting an extra layer of separation emotionally between you and trading.
Automatic pattern recognitions cancel out specific signals.
And genetics and neural applications have interesting predictive powers that use algorithms.
How Do I Start Trading Options?
Options trading means to buy and sell options, which are financial contracts that allow you to buy or sell an underlying asset based on the movement of its price. It's cheaper than buying shares themselves. You place a bet on what point the price of an asset will reach, at which point you make a profit if successful.
Hedge funds, which is a type of managed portfolio similar to mutual funds (a type of traditional investment), may use options as one of its securities. Because there’s a slightly higher risk than mutual funds, the management is more aggressive than for mutual funds.
The typical positions are taken on globally cyclical once or by exploiting dwindling markets. And the fees are far greater than for mutual funds.
Online Trading for Beginners: Helpful Resources
Of course, the best, and the only real way you can become an expert stock trader from being an absolute beginner is studying. Yeah, I know it sounds boring, but there's no substitute for knowledge and experience.
YouTube Channels to Learn From
First of all, I recommend watching trading YouTube channels such as Bulls on Wall Street, Investopedia, and Warrior Trading, which are basically the big three of trading for beginners.
Helpful Resources, Websites, and Tools to Use
Next, we have a list of trading resources and tools you'd seriously want to have in your proverbial arsenal:
Yahoo Finance - Using both Yahoo Finance website and app will allow you to keep an eye out for stocks you're interested in, explore trends and stock history, and, most importantly, be up to date with the latest news in the world of finance. You can set special notifications for stocks you're interested in and ensure you get the latest news as soon as possible.
YCharts - If you're looking for market research and super detailed analysis, it doesn't get better than YCharts. Although it's not free, it's very well worth the monthly subscription.
Aside from an enormous amount of research within your grasp, you'll also be provided with beginner training, specialized resources not available elsewhere, integrations with other programs you're using, and much more.
Money Tree Investing podcast - Podcasts aren't for everyone, but we seriously recommend this one if you're looking to know everything there is about making money stock trading.
More detailed than the YouTube channels listed above, you'll have the opportunity to listen to various guests, all successful investors, sharing their experience and advice on making it with the top stock trading apps.
Trading Books for Beginners
Finally, take a look at some book recommendations we have:
FAQs 🕵️
Which online trading company is best for beginners?
eToro stands out as a great-value trading platform for beginners. Its CopyTrader Raider feature lets you mimic the decisions of successful users, each of whom has a profile. It's a good platform for social trading, as opposed to going it solo.
If you want to go solo, Hargreaves Lansdown has interesting self-education automation. You’ll get automatic nuggets of information on various aspects of training as you go on your journey, all inside of the app.
Can I start trading with £100?
Yes, depending on the broker that you choose. Look at the capital that needs to be in your account. For some, £100 will not be a large enough minimum. Also keep in mind that if £100 is all you have as savings, online trading is probably not a good use of that money.
There are no shortcuts with trading online: beginner's luck may not occur, or run dry when you least expect it.
If you're just looking to use the money as an experiment in beginner online trading, you may gain the most amount of information if you choose securities with high gains, which also means higher volatility and a shorter time-window.
The currency (forex) market is the largest in the world, and so has the biggest amount of liquidity (money moves fast). Using the forex may be the most appropriate for that level of capital.
What is the easiest type of trading?
This question should really be what sort of trader do you want to become. You should look at your personality, skills, and how much technical data you can tolerate crunching through in order to be able to make each trade.
Also: how much time do you have, would you prefer to have your money managed over a long period of time, or do you want to be in control of every single trade and have a fast turnaround time?
When it comes to online trading, there is no easy market… Let’s rephrase that: the greater the upside you want, the more the learning curve and degree of personal involvement. This also means the more levels of frustration you’ll have to get past in order to become skilled enough to consistently win.
Also, if you're looking for the physically easiest type of trading, you should look at the best stock apps that you can run on your mobile phone and keep trading on the go.
Final Words ⌛
The key to being successful at online trading lies in roughly 3 dimensions:
#1 Not having a comprehensive training plan
Depending on the type of trading you’re doing, this will require less or more research and self-education. To day trade, you need to treat it as a full-time job and employ the same degree of self-education a programmer would to learn coding.
Whatever position you do take, never enter a market without a well-thought-out trading strategy, otherwise the odds are you’ll have a small or massive loss. Trading isn’t about reacting, it's logic and planning.
#2 Not keeping a trading journal
What you track, you can optimize. Using a trading journal can streamline your mastery of whatever training protocol you’re using. Keep a note of all of your trades and the strategy behind them. Note how the trades turned out so you can crunch the data into a post-trading analysis.
#3 Not sticking to a trading plan
The biggest beginner’s error is starting out doing a specific strategy and then becoming fast and loose with things. Perhaps they lose a little bit of money or make a mistake and this motivates them to try to make fast recuperation.
Deviating from a concrete strategy, however, will only mean you never master any sound practice and accrue even more losses.
Finally, AVOID the quick easy wins! (They don’t exist.) More about that in our guide on whether online trading is safe.
They are leveraged products and carry a significant risk of loss to your capital, as prices may move rapidly against you and you may be required to make further payments to keep any trades open. These products are not suitable for all clients, therefore please ensure you fully understand the risks and seek independent advice.
