What is the best way to start trading?
Like most journeys, there’s no right or correct place where everyone must begin, but if you wanted to take up boxing, I wouldn’t recommend you start by challenging Floyd Mayweather to a fight.
At The Chartist, it is not unusual to receive an email along the lines of the following:
- I have never traded before, can you recommend me a broker to trade leveraged CFDs?
- I am a trading beginner.
- I would like to set up a fully automated day-trading strategy.
- How can you help me with this?
These sorts of undertakings can come with a huge amount of risk or take a vast investment of time, so why would a complete beginner want to attempt this? It may be due to optimism bias, a cognitive bias that leads someone to believe they are less likely to experience a negative event. It may be due to the Dunning-Kruger effect, in which a beginner overestimates their competency, not realising what they don’t know. Another likely answer is that they’ve been misled by one of many finance “influencers” who oversimplify the process or exaggerate returns.
Whatever the answer, someone who starts like this probably won’t be in the game for long. Likely, the shock of their first loss (if they get to that stage) will see them call it quits.
But to answer the initial question, the best way to start trading is calmly, try and move past the excitement, and get your expectations in check. Dip your toe in the water before you dive in head first.