How to Start Trading: What Trading Is and How to Learn It Step by Step

Trading is buying and selling financial instruments, such as currency pairs, indices, commodities or shares, over short periods to profit from changes in their price. Learning to trade is a sequence, not a single course. First you learn what you are actually buying and selling, then how to read a chart and the news, then how to limit losses, and only then do you place trades: first on a demo account, later with real money in small size. This guide goes through those steps in order, says what to read at each one, and answers the questions beginners ask most: how much money you need, how long it takes and whether you can learn on your own. It is educational material, not investment advice.

What trading is and how it differs from investing

Trading and investing both mean buying financial instruments in the hope that their price will change in your favour. The difference is the time horizon and the tools. An investor buys shares, funds or bonds and holds them for years, collecting dividends or interest along the way and ignoring most daily price moves. A trader opens and closes positions over minutes, hours, days or weeks, profits only from the price change itself, and can profit from falling prices as well as rising ones by selling first and buying back later.

Retail traders in the EU usually trade through contracts for difference (CFDs): you do not own the currency, index or share, you trade its price movement, and you use leverage. With leverage, a EUR/USD position worth €30,000 can be opened with €1,000 of margin. Leverage multiplies gains and losses equally, which is why trading carries a much higher risk of loss than long-term investing in the same markets.

A trader, then, is not a profession with a diploma. It is anyone who runs this process: picks a market, analyses it, decides when to enter and exit, sizes each position so that one loss cannot do serious damage, records the results and reviews them. Professional traders at banks and funds do the same with other people's money and a risk department looking over their shoulder. A private trader has to be their own risk department, which is what most of this guide is about.

The regulators' numbers are worth knowing before you spend a single hour on study. When the European Securities and Markets Authority (ESMA) reviewed CFD trading across EU countries in 2018, national regulators found that 74–89% of retail accounts lost money, with average losses per client between €1,600 and €29,000. At ABF Trade, 66.7% of retail investor accounts lose money when trading CFDs. The same ESMA measures cap retail leverage (30:1 on major currency pairs, 20:1 on other pairs, gold and major indices, 10:1 on other commodities and indices, 5:1 on shares), require brokers to close positions when the margin level falls to 50%, and protect retail clients from losing more than the balance on the account. These rules shape everything below. The aim of learning is not to find a method that always wins, because none exists. The aim is to lose little while you are inexperienced, so that you are still trading when skill starts to matter.

Step 1. Learn how the markets and the instruments work

Before charts and indicators, learn the vocabulary of a quote. Every later step depends on it.

• Currency pairs and pips. EUR/USD at 1.0850 means one euro costs 1.0850 US dollars. A pip is the fourth decimal place for most pairs. A standard lot is 100,000 units of the base currency, so one pip on one lot of EUR/USD is worth $10; on the minimum size of 0.01 lot it is worth $0.10.
• Spread and swap. The spread is the difference between the buy and sell price and is your cost of entering a trade. The swap is the charge or credit for holding a position overnight. Both are listed per instrument in the contract specifications.
• Margin. The deposit the broker sets aside to keep a position open. At 30:1 leverage, one lot of EUR/USD (€100,000) needs €3,333.33 of margin. Margin level is equity divided by margin; at ABF Trade a margin call is triggered at 100% and positions are closed automatically at 50%.
• Other markets. Indices, gold, oil and shares are also traded as CFDs, but with different contract sizes, trading hours and leverage caps. Learn one market well before adding others.

Read: What is Forex Trading All About, The principles behind lots trading and pips calculation, What Is a CFD and How Does CFD Trading Work? and the glossary for any term you meet twice without understanding it.

A simple test of this step: you should be able to explain, without looking anything up, why a 20-pip loss on 0.10 lot of EUR/USD costs $20 and how much margin that position uses.

Step 2. Learn to read a chart and the economic calendar

Technical analysis is the study of price itself. A beginner needs a small set of tools, used well: Japanese candlesticks and what one candle says about buyers and sellers; timeframes and why the same pair looks different on the hourly and the daily chart; support and resistance; trend and how a moving average shows it; one oscillator such as the RSI to see when a move is stretched. Collecting more indicators does not add information, it adds noise.

Fundamental analysis for a beginner means the economic calendar. Interest rate decisions, inflation figures and employment reports move currencies and indices within seconds of release, and the calendar shows their time, expected impact, forecast and previous reading. You do not need to trade these events. You need to know when they happen, so that you are not holding a position with a tight stop five minutes before one.

Read: Japanese Candlestick Basics, Support and Resistance Lines, Moving Averages, Introduction to Technical Analysis, The concept of Fundamental Analysis and How to Read an Economic Calendar.

Step 3. Learn risk management before you learn a strategy

Most beginners do this in the opposite order. They look for a strategy with a high win rate and treat risk management as a detail for later. A strategy tells you when to enter. Risk management decides whether you still have an account after ten losing trades in a row, which happens to every method sooner or later.

• Risk a fixed, small share of the account per trade. Many traders use 1% or less. On a $1,000 account that is $10. If your stop loss is 20 pips away, the position that risks $10 is 0.05 lot (pip value $0.50 × 20 pips = $10). The stop goes where the chart says the idea is wrong; the position size is then calculated from the stop, never the other way round.
• Every trade has a stop loss attached when it is opened, not added later. Markets gap and move while you are away from the screen.
• Know your risk-to-reward ratio. If you risk $10 to make $15, you can be wrong more often than right and still not lose money over time. If you risk $30 to make $10, one loss erases three wins.
• Set a daily and weekly loss limit in advance, in money, and stop trading when it is reached. The decision has to be made before the losing day, not during it.
• Understand margin call and stop-out mechanics on your account, so that an automatic close never surprises you.

Read: Intro to Money Management, Money Management Main Guidelines, Trade Diversification and Risk Management Strategies, Margin Call Meaning and Negative Balance Protection.

Step 4. Practise on a demo account in MetaTrader 5

A demo account gives you the live price feed and spreads with virtual money. At ABF Trade it is free, it does not expire, and it runs on the same MetaTrader 5 platform as a live account, on Windows, macOS, web, iOS and Android. Treat it as a training ground with a syllabus, not as a game:

1. Set up the terminal. Open Market Watch, add the instruments you study, open a chart, switch timeframes, add a moving average. Learn where the account balance, equity, margin and free margin are shown.
2. Place every order type at least once: market order, buy limit, sell limit, buy stop, sell stop, each with a stop loss and take profit attached. Then modify and close them.
3. Calculate position size by hand before each trade and compare your number with the margin the terminal shows. Do this until the two always agree.
4. Trade one instrument on one timeframe with the rules from your plan (Step 5), and record every trade.
5. Review once a week: which rules you broke, which trades you should not have taken, what the journal shows.

What a demo cannot teach is how you behave when the money is real. Fear and the urge to win a loss back do not appear with virtual funds. For that reason, decide in advance when the demo period ends: for example, after 50 trades in which every rule was followed, regardless of the result. Moving to a live account because the demo was profitable is the wrong criterion; moving because you can follow your own rules is the right one.

Open a demo account: Demo Account.

Step 5. Write a trading plan and keep a journal

A trading plan is one page that answers, in advance, every question you would otherwise answer under pressure:

• Which instruments and which trading session you trade, and when you do not trade (news releases, the first minutes after an open).
• What a valid setup looks like, in terms specific enough that another person could recognise it on a chart.
• Where the entry, the stop loss and the take profit go, and how the position size is calculated.
• The maximum risk per trade and the daily and weekly loss limits.
• What you do after the limit is reached: close the terminal, no exceptions.

The journal records what actually happened: date, instrument, direction, size, entry, stop, exit, result in money and in R (multiples of the amount risked), the setup it was based on, and one honest line about whether you followed the plan. After 30 or 40 trades the journal tells you things no course can: which setups actually work for you, at which time of day you lose, and whether your results come from the method or from breaking it.

Step 6. Go live with a small account and small positions

The first live months are still part of learning, so they should cost as little as possible. At ABF Trade the Start account opens from the equivalent of €500, and the minimum trade size is 0.01 lot, which makes small risk possible in practice: with 1% risk on a €500 account you risk €5 per trade, and a 25-pip stop on EUR/USD fits a 0.02-lot position.

Keep the same rules, the same risk percentage and the same journal as on the demo. Do not increase the size because of a good week; increase it only when the account has grown, so that the percentage risk stays the same. Expect the first live trades to feel different from the demo even when the chart is identical. That is the part you are now learning, and it cannot be learned any other way.

How much money do you need, and how long does it take?

Money: only the amount whose loss would not change anything in your life. The minimum deposit is a starting point, not a recommendation. A larger account lets you place stops where the chart needs them without exceeding 1% risk; a smaller one forces you into the smallest sizes, which is acceptable while you learn. Never trade with borrowed money or money set aside for bills.

Time: there is no fixed term, and anyone who names one is selling something. Progress is measured in trades reviewed, not in weeks. A realistic sequence is a few weeks of theory (the beginner course and the money management course below are 10 short chapters), several weeks on the demo until the rules are followed without effort, and then months of live trading in small size while the journal fills up. Trading is a skill with a long feedback loop, because a correct decision can lose and a wrong one can win. Only a series of trades shows which is which.

Free learning resources at ABF Trade

Seven mistakes that end most beginner accounts

1. Trading without a stop loss, or moving it further away when price approaches it.
2. Position sizes chosen by available margin instead of by risk per trade. Leverage lets you open a position that one normal move can close.
3. No written plan, so every decision is made under pressure and differently each time.
4. Trading to win back a loss. The second loss is usually larger than the first.
5. Changing the method after three losing trades. Every method has losing streaks; the journal, not the mood, decides whether it works.
6. Holding positions through high-impact news without knowing it was scheduled.
7. Treating a profitable demo as proof. A demo proves that you can follow rules; it says little about the method and nothing about your nerves.

Frequently asked questions

Can I learn trading on my own?

Yes, and most traders do. The theory is free and well documented; what you cannot get from reading is the practice, which the demo account and the journal provide. A structured programme or a mentor can shorten the path by correcting mistakes earlier, but neither replaces the trades you review yourself.

How much money do I need to start trading?

Technically, the minimum deposit of your account type: at ABF Trade the Start account opens from the equivalent of €500. Practically, only money whose loss you can accept, and enough that 1% of it covers a sensible stop at the minimum size of 0.01 lot.

How long does it take to learn to trade?

There is no fixed term. Count in trades and reviews rather than months: a few weeks for the theory, several weeks on a demo, and then a long period of live trading in small size. Most of the learning happens in the journal.

How much do traders earn, and do most people make money trading?

There is no typical income, and most retail traders do not make money at all. ESMA's 2018 review found that 74–89% of retail CFD accounts lost money, with average losses of €1,600 to €29,000 per client, and at ABF Trade 66.7% of retail investor accounts lose money when trading CFDs. Anyone quoting a monthly return for beginners is selling something. Those figures are the reason this guide puts risk management before strategy.

Is trading legal?

Yes. CFD and forex trading by private individuals is legal across the EU and is regulated. Brokers need a licence from a national regulator (ABF Trade is authorised by the Cyprus Securities and Exchange Commission, licence 171/12), and the retail rules on leverage, margin close-out and negative balance protection described above are in force in every member state: in Poland through the KNF product intervention decision of 2019, in the Czech Republic through the ČNB measure of 2019 and in Hungary through the MNB decision of 2020, each of which also binds brokers licensed elsewhere in the EU that serve clients in that country. Polish rules additionally define an "experienced retail client" category with a 1% margin requirement on major currency pairs, available only to residents of Poland with a documented trading history. What is illegal is offering these services without a licence, which is why the first check on any broker is its regulator's register.

Is trading hard?

The mechanics are not: placing an order takes a few clicks and the theory fits into a few short courses. What is hard is doing the same simple things consistently when real money is moving: cutting a loss at the planned level, not increasing size after a win, not trading when the plan says no. That is a skill of discipline rather than intelligence, and the journal is the tool for building it.

Do I pay tax on trading profits?

In general, yes: profits from CFD trading are taxable income for a private individual in their country of tax residence, and a broker based in another EU country does not withhold the tax or file the return for you. In outline, for the 2025 tax year:

• Poland. Income from derivatives, including CFDs, is taxed at a flat 19% and declared on form PIT-38 by 30 April of the following year. A foreign broker does not issue a PIT-8C, so you calculate the result yourself from your account statements. Losses reduce gains in the same year and can be carried forward for 5 years, with at most 50% of a loss deducted in any one year.
• Czech Republic. CFD profits are generally treated as other income under Section 10 of the Income Tax Act and taxed at 15%, with 23% on the part of income above the high-income threshold. The exemptions that apply to securities (the three-year holding test and the CZK 100,000 limit) do not apply to CFDs, and a net loss for the year is disregarded: it cannot be carried forward or set against other income.
• Hungary. Trading through a broker supervised in an EEA state (a CySEC broker qualifies) falls under the controlled capital market transaction regime: 15% personal income tax, no social contribution tax, self-assessed in the annual return from the broker's statements, with losses of the current year and the two previous years usable against the tax through tax equalisation.

Rules change, so check the current guidance of your tax authority or an adviser before trading with real money, and keep your account statements.

Where can I learn trading for free?

The Learning Centre on this site has a beginner course, courses on candlesticks, indicators and money management, a 30-term glossary and the free e-book "How to Trade Forex". Together with a demo account, that covers the theory and the practice at no cost. The "First Steps in the Markets" programme is a separate educational programme that you apply to; places are limited.

Is a demo account enough to learn trading?

It is enough to learn the platform, the order types, position sizing and your own rules. It is not enough to learn how you react when money is at stake, which is why the move to a small live account is a step of the learning, not the end of it.

What should a beginner trade first?

Whatever you can study properly, which usually means one liquid major currency pair on one timeframe. Major pairs have the tightest spreads and the deepest liquidity, so each trade costs less and prices move in a more orderly way than in thinner markets. Add markets only when the journal shows consistent rule-following on the first one.

Do I need to trade the news to make progress?

No. Many traders use the economic calendar only to stay out of the market around releases they cannot interpret. What a beginner needs from the calendar is the timing of volatility, not a reason to trade it.

Sources

• European Securities and Markets Authority (ESMA): press release of 27 March 2018 on product intervention measures for CFDs and binary options, including national regulators' findings that 74–89% of retail CFD accounts lose money, with average losses of €1,600 to €29,000 per client: https://www.esma.europa.eu/press-news/esma-news/esma-agrees-prohibit-binary-options-and-restrict-cfds-protect-retail-investors
• ESMA: final product intervention measures of 1 June 2018, with leverage limits from 30:1 to 2:1, the 50% margin close-out rule and negative balance protection: https://www.esma.europa.eu/press-news/esma-news/esma-adopts-final-product-intervention-measures-cfds-and-binary-options
• ABF Trade, Trading Account Types: Start account from €500, minimum trade size 0.01 lot, margin call 100%, stop-out 50%: https://abftrade.com/eu/en/accounts
• ABF Trade, Demo Account: free, no time limit, same price feed and spreads as a live account, MetaTrader 5: https://abftrade.com/eu/en/accounts/demo
• ABF Trade, Trading Platform: MetaTrader 5 on Windows, macOS, web, iOS and Android: https://abftrade.com/eu/en/platform
• ABF Trade, First Steps in the Markets educational programme: modules, handbook, application process: https://abftrade.com/eu/en/research/training-course
• ABF Trade, Learning Centre: beginner course, candlesticks, indicators, money management, glossary, e-book: https://abftrade.com/eu/en/research/learning-centre
• ABF Trade, Contract Specifications: margin requirements and the margin calculation example for 1 lot of EUR/USD at 30:1: https://abftrade.com/eu/en/trading/contract-specifications
• MetaTrader 5 Help: basic principles of trading operations, order types, Stop Loss and Take Profit: https://www.metatrader5.com/en/terminal/help/trading/general_concept
• Komisja Nadzoru Finansowego (KNF): decision of 1 August 2019 on product intervention for CFDs offered to retail clients in Poland, including the experienced retail client category: https://dziennikurzedowy.knf.gov.pl/DU_KNF/2019/27/akt.pdf
• Česká národní banka (ČNB): measure of general nature of 25 July 2019 restricting CFDs for retail clients in the Czech Republic: https://www.cnb.cz/export/sites/cnb/cs/legislativa/.galleries/opatreni_obecne_povahy/oop_rozdilove_smlouvy_20190725.pdf
• Magyar Nemzeti Bank (MNB): decision H-JÉ-III-10/2020 restricting CFDs for retail clients in Hungary: https://www.mnb.hu/letoltes/decision-no-h-je-iii-10-2020-cfd.pdf
• Polish Ministry of Finance: guide to form PIT-38 for the 2025 tax year (19% rate, filing deadline, loss carry-forward, income from derivatives without a PIT-8C): https://www.podatki.gov.pl/media/g5ebnm2e/broszura-do-pit-38-za-2025-r.pdf
• Czech Income Tax Act No. 586/1992 Coll., Sections 10, 16 and 38g (other income, 15% and 23% rates, filing thresholds): https://www.zakonyprolidi.cz/cs/1992-586
• Hungarian Personal Income Tax Act (1995. évi CXVII. törvény), Section 67/A on controlled capital market transactions: https://net.jogtar.hu/jogszabaly?docid=99500117.tv

Related reading in the Learning Centre: What is Forex Trading All About, How to successfully choose a broker, Trade Timing Tactics, Forex Trading Sessions, and in the blog: What Is a CFD and How Does CFD Trading Work?, How to Read an Economic Calendar

66.7% of retail investor accounts lose money when trading CFDs with this provider. Assess if you're comfortable with this level of risk.