Trading – Where to begin? Setting the foundations before you start trading.

Trading – Where to begin ? When you start out on your trading journey it helps to understand the foundations of trading, regardless of whether you decide to trade stocks, indices, foreign exchange, energies or even precious metals and commodities. We are here to help you with that and will help to get your trading journey off to a good start.

When starting out, it is recommended to learn the trading fundamentals, as safely as possible and without having to take any risks. There are a few straight forward yet crucial concepts that you should understand to set you off on your trading experience with Squared Financial.

Every year, millions seek to successfully navigate the financial markets, yet some are more successful than others. Unfortunately, some traders loose out financially, especially if they have not mastered the fundamentals of successful trading. What these unfortunate traders usually have in common is that they have not taken enough time to grasp the basic competencies and understanding required to master the global financial markets successfully.  

At this stage, you may ask: ‘what are the basic competencies required to become a successful retail trader, especially when investing your own hard-earned capital into the markets?’

Foundations of Trading: 8 Key Factors

1. Begin trading with recognizing your financial temperament in relation to money

Before you set off on your trading experience, it is of upmost importance to understand yourself and your behaviours in relation to money and finances. Here are some questions you may ask yourself to help you find out:

What are you aiming to achieve by trading and in what time frame?

What is your attitude to risk in general? Are you inclined to invest cautiously over the long term and to potentially accept lower returns? Or is your personality more likely to manage some higher risk in the expectation of larger returns in the short term?

Does your personality and circumstances allow you to accept some initial losses, in the knowledge that in the long term there are also likely to be financial gains? If your fear of financial loss is too strong, it could negatively impact the trades you make. On the other hand, if you do not fear any financial loss at all, you may be overconfident and take unnecessary risks. It is important to find the right balance that complements your financial personality. You are likely to invest as per your financial temperament initially, so you need to be aware of your feelings in relation to money.

Having a good awareness about your financial personality is crucial, as traders frequently have to make decisions quickly when the markets move. A conscious fear of making losses could lead to indecision and this kind of hesitation could lead to diminished gains and even losses.

On the other hand, unrestrained greed and lack of self-control could lead to the trading strategy not being followed correctly in the interest of quicker profits. While in the short-term, this could lead to some short-term profits, this lack of self-control can increasingly seem like a form of gambling instead of investing.

2. Begin trading with understanding the type of trader you are

As you build your trading foundations, it is important that you understand the type of trader that you are looking to become. There are several types: scalpers, day traders, swing traders, position traders.

If your intention is to make profits from the global market, by trading for only a few minutes at a time, you would be defined as a ‘scalper’. You should take some time to gain the knowledge required to trade this way.

If your strategy is to profit by trading predominantly during a one-day time frame, you would be defined as a day trader. However, if your aim is to make gains weekly or over several days, you would be defined as a swing trader. In either case, you should learn about day trading and swing trading to develop relevant trading strategies.

If your preference is to profit from the markets over several months or years, then you would be defined as a positional trader or even an investor. You should inform yourself on the key aspects of the economy for the markets you are considering and develop a long-term trading strategy.

3. Begin trading with picking a broker for your trades

Once you have an understanding of your own financial personality and your trader type, the next step would be to identify a trading broker that you feel comfortable with, such as Squared Financial. The trading broker will allow you open a demo trading account and even a live trading account. There are several Forex and CFD brokers to choose from, but it is recommended to go for a trustworthy broker, which is also a member of a regulatory authority.

When comparing different brokers, you should consider the trading platforms on offer, the transaction and commission costs (as well as any other fees), their order execution speed, and of course their customer service. An example of a broker that ranks highly in all these aspects would be Squared Financial.

4. Begin trading with learning about the financial markets

Many new traders waste many of their trading funds by following ‘’top tips’’ or depend on other traders to share buy or sell signals with them. Often, they have insufficient expertise on what impacts price changes in the global markets.  

The fundamental problem with this approach is that any gains (and often losses), are directly impacted by someone else. Unfortunately, these influencers are followed blindly by new traders, who do not understand the fundamentals of how markets work and what influences them. This can result in the new traders lacking the ability to thoroughly analyse the credentials of their trade until it is too late. A more sensible approach would be to avoid rushing into it: educate yourself about trading, financial markets and analyse each trade thoroughly before proceeding.

Luckily, the internet offers plenty of online courses for all levels of traders, as well as webinars, news, and articles. We recommend that you start with a well-structured course that covers the fundamentals of trading, like the free Training Guides, Video Guides and Ebooks that we offer at Squared Financial. These are highly informative and helpful for new and experienced traders alike. Once you feel comfortable with the fundamentals of trading, you should continue to learn about the global markets, trading strategies and about any trades you may be considering in the future. At this stage we also recommend that you open a free demo account, so that you can combine the theoretical principles that you have now learnt, with your potential trading strategies in the risk-free demo environment.    

We strongly suggest that you continue to educate yourself on the global financial markets as much as possible, as a broad financial trading background will naturally assist you when making daily trading choices. The time you spend on this will be well worth it and ultimately you are investing in your successful trading future.

5. Begin trading with Analyzing Trades

Being able to analyse the state of a market, the value of a particular asset, stock, or share, which you may be considering trading will be a key factor to your trading success. You will need to understand the basics of fundamental and technical analysis in relation to this:

Fundamental analysis involves evaluating a security’s value by looking at existing economic and financial factors. For example, it would include things like the economy, the political climate and current industry conditions (macroeconomic factors), as well as things like the effectiveness of a company’s management (microeconomic).

Technical analysis involves evaluating patterns in historic market data to identify future trends. Using this data, one can predict the likelihood of a certain event happening again. Advanced market analysis tools are usually required for this and often displayed using graphs. 

Having good understanding of these types of analysis, should help you become a more effective trader. We suggest that you put your analysis to the test using the Squared Financial demo account and see if your expectations bare fruition. Combining the demo account with a trading journal, can be a useful tool in tracking your trading performance and analysis skills over time.

To become truly successful, you are likely to invest some time in analysis and will review hundreds of price charts, which would compare to different times in history. You will then also gain an understanding of the different types of news that can affect the prices of trades and how they impact your profits and losses.

6. Designing your trading plan

Your trading plan is made up of your trading strategies and goals. These should be structured to enable you to achieve your realistic goals, based on your resources and personal circumstances.

When preparing your trading plan, it is crucial to think about the following points:

  • What outcome are you hoping to achieve by trading on the global financial markets?
  • Are you trading for fun, looking for a little extra income, or aiming for a main source of income?
  • How much capital are you able to set aside to trade with?
  • What are your goals for the short-term, as well as the long-term?

Your trading strategies should complement your trading temperament and the type of trader you intend to be, yet it also needs to consider your daily life and daily commitments:

  • How much spare time will you have to analyse trading charts, price action and to analyse?
  • What time of the day are you likely to be available to sit in front of your trading platform to buy and sell your financial trades? For example, different stock markets will have different trading times, so the times you are available could impact the trades you are able to make.

Make sure you have a clear understanding of your risk tolerance and stick to it. Evaluate carefully how much money you are prepared to devote to each trading position. We recommend including a detailed risk management strategy in the trading plan to ensure you can take calm, collected and balanced decisions, no matter the situation. This should help you keep control of your emotions, which is extremely important to trade effectively.

7. Benefits of using a demo account

There are several key benefits to using a demo account. Like much in life, practice makes perfect and the demo account allows you to refine your trading skills without taking any risk at all. This is known as virtual trading or practice trading.  

Demo accounts simulate the appearance and feel of the actual trading platform, giving you the opportunity to put your trading abilities to the test, risk-free. Using real-time market prices, you are able to make virtual buying and selling decisions and see how your trades would have developed over time in the actual financial markets. Having a clear performance track record with the risk-free demo account, should give you an indication of your trading abilities, before trading with real capital in the real financial markets.

8. Maintain a trading journal

We suggest maintaining a training journal once you are ready to trade with real capital. You should document the motivations that led you to entering or exiting a trade position, as well as the amount traded and finally the outcome of the trade.

Making a record of any losses helps you realise your weaknesses and enables you to improve on future trades. Similarly recording your gains, enables you to build on your strengths and perfect your trading methods. The key thing is to keep learning from your past trades, as this trading experience will enable you to become a more advanced trader.

Now that you know the first steps, open your demo or live trading account and get started on your trading journey with Squared Financial today.

Now that you understand the key principles, why don’t you open your demo trading account or even a live account if you prefer! Let us help you begin your successful trading experience with Squared Financial today!


RISK WARNING: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 56.82% of our retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please refer to our Risk Disclosure SquaredFinancial (CY) Limited is regulated by CySEC under license No. 329/17 . SquaredFinancial is owned and operated by SquaredFinancial (CY) Limited, Cyprus. SquaredFinancial uses the domain