What Type of Trading is Best for Beginners? A Complete Guide to Getting Started

Starting your journey in the trading world can feel overwhelming. With so many options, strategies, and asset classes available, it’s easy to get lost and make costly mistakes. I’ve put together this comprehensive guide to help you understand which types of trading are most suitable for beginners and how to start on the right foot.

The Most Important Points for Beginner Traders

Before diving into specific trading types let’s cover some essential points

• Trading involves buying assets at a low price and selling them at a higher price to make a profit
• Beginners should start with familiar assets and simple strategies
• A demo account (paper trading) is crucial for practice before using real money
• Realistic expectations and proper money management are vital for success
• Not everyone is emotionally suited for active trading

Understanding Different Types of Trading

Trading styles differ mainly in their time frames and approaches. Here are the main types that beginners should know about

1. Long-Term Investing (Position Trading)

This approach involves holding assets for months or years, making it the least time-intensive option.

Pros for beginners:

• Less stressful and time-consuming
• Doesn’t require constant market monitoring
• Focuses on fundamental analysis which is easier to understand
• Lower trading fees due to fewer transactions

Cons for beginners:

• Ties up capital for longer periods
• May not provide the excitement some traders seek
• Still requires research and analysis

For beginners who want to dip their toes into trading while maintaining their day jobs, long-term investing is often the best starting point.

2. Swing Trading

Swing trading involves holding positions for several days to weeks, aiming to capture “swings” in asset prices.

Pros for beginners:

• Provides a good balance between time commitment and potential returns
• Doesn’t require constant monitoring throughout the day
• Allows time to make decisions without excessive pressure
• Can be done alongside a full-time job

Cons for beginners:

• Requires more active management than long-term investing
• May involve more risk due to shorter time frames
• Needs basic understanding of technical analysis

Swing trading is particularly suitable for beginners who can dedicate a few hours each evening to research and place trades.

3. Day Trading

Day traders open and close positions within the same trading day, never holding overnight.

Pros for beginners:

• No overnight risk exposure
• Can provide quick feedback on strategies
• Potentially exciting and engaging

Cons for beginners:

• Requires significant time commitment (often full-time)
• High stress and pressure
• Needs advanced knowledge of charts and market behavior
• May require larger capital due to pattern day trader rules (in some countries)

Despite its popularity, day trading is generally not recommended for absolute beginners due to its complexity and time requirements.

4. Scalping

Scalping involves making numerous very short-term trades (seconds to minutes) to capture small price movements.

Pros for experienced traders:

• Multiple profit opportunities throughout the day
• Small risk per trade

Cons for beginners:

• Extremely time-intensive and stressful
• Requires split-second decision making
• Needs sophisticated tools and low-latency connections
• Trading fees can quickly add up

Scalping is the least suitable trading style for beginners, as it demands advanced skills and experience.

Best Asset Classes for Beginner Traders

Choosing the right asset to trade is just as important as selecting your trading style. Here’s what beginners should know:

1. Stocks

Shares of publicly traded companies are the most common starting point for new traders.

Why stocks are great for beginners:

• Easy to understand conceptually (you own part of a company)
• Extensive educational resources available
• Can start with familiar companies you know as a consumer
• Good liquidity for major companies
• Suitable for both fundamental and technical analysis

Most successful traders began with stock trading before expanding to other asset classes.

2. ETFs (Exchange-Traded Funds)

ETFs contain multiple stocks or other assets and track indices like the S&P 500 or DAX.

Benefits for beginners:

• Instant diversification reduces risk
• Lower volatility compared to individual stocks
• Lower costs than traditional investment funds
• Suitable for various strategies from long-term to day trading
• Less research required than picking individual stocks

ETFs are extremely beginner-friendly and make an excellent starting point for new traders.

3. Forex (Currency Pairs)

The foreign exchange market allows trading currency pairs like EUR/USD.

Considerations for beginners:

• Highly liquid market with 24-hour trading
• Can start with small amounts of capital
• Good for technical analysis strategies
• But: Always involves leverage, which multiplies both profits and losses
• Requires understanding of global economic factors

While forex is popular among beginners, the use of leverage makes it riskier than stocks or ETFs. It’s better approached after gaining some trading experience.

4. Commodities

Trading in raw materials like gold, oil, or agricultural products.

For beginners:

• Tangible assets that can be easier to understand
• Good volatility for trading opportunities
• Can be accessed through ETCs (Exchange-Traded Commodities) rather than complex derivatives
• Suitable for trend following strategies

Commodity ETCs provide a simpler way for beginners to gain exposure to these markets without dealing with complex futures contracts.

How to Choose Your Trading Approach as a Beginner

To find the best fit for your trading journey, consider these factors:

1. Time Availability

Be honest about how much time you can dedicate to trading:

• A few hours per month: Long-term investing
• A few hours per week: Swing trading
• Several hours daily: Day trading
• Full-time commitment: Scalping

2. Starting Capital

Different approaches require different amounts of capital:

• Long-term investing and swing trading can start with smaller amounts
• Day trading often requires more capital due to regulations and strategy requirements
• Consider what you can afford to lose without affecting your lifestyle

3. Personal Temperament

Not everyone is psychologically suited for all trading styles:

• Are you patient enough for long-term investing?
• Can you handle the stress of day trading?
• Are you disciplined enough to follow trading rules?
• Do you make emotional decisions under pressure?

4. Learning Curve

Each trading style has a different learning curve:

• Long-term investing: Gentler learning curve, focuses on fundamental analysis
• Swing trading: Moderate learning curve, requires understanding of both fundamental and technical analysis
• Day trading: Steep learning curve, requires advanced technical analysis skills
• Scalping: Extremely steep learning curve, requires expert-level skills

My Recommendation for Absolute Beginners

Based on years of experience working with new traders, I strongly recommend this approach for beginners:

1. Start with stock or ETF swing trading – The perfect balance of time commitment, learning curve, and potential returns
2. Begin with a paper trading account – Practice without risking real money
3. Focus on 3-5 assets maximum – Learn their behavior thoroughly instead of jumping between many different ones
4. Develop a simple, rule-based strategy – Remove emotion from your decisions
5. Keep position sizes small – No more than 2% of your capital per trade when you transition to real money

This approach provides the best foundation for learning trading fundamentals while minimizing risk and time pressure.

Common Beginner Mistakes to Avoid

Many new traders fall into these traps:

• Starting with complex strategies – Master the basics before attempting advanced techniques
• Ignoring money management – This is often more important than your actual trading strategy
• Trading with money you can’t afford to lose – Creates emotional decision-making
• Chasing hot tips – Develop your own analysis instead of following others blindly
• Expecting to get rich quickly – Trading is a skill that takes time to develop

Final Thoughts: The Best Path Forward

The most suitable approach for most beginners is to start with swing trading stocks or ETFs. This provides:

• A manageable time commitment
• A good balance of action and analysis time
• The opportunity to learn both fundamental and technical analysis
• Lower stress levels than day trading or scalping
• A solid foundation of skills that transfer to other trading styles

Remember that successful trading is a marathon, not a sprint. Take your time to build skills, start with a demo account, and only risk real money when you’ve demonstrated consistent success in practice.

The fact is, most people who attempt trading will ultimately fail to make profits. By choosing the right trading style for your situation, practicing extensively before risking real money, and maintaining realistic expectations, you’ll give yourself the best possible chance of being among those who succeed.

Have you started your trading journey yet? What style seems most appealing to you based on your situation? Whatever you choose, remember that discipline and proper risk management will always be more important than finding the “perfect” trading style.

Yes, you can start day trading with $100, but it’s more of a tool for learning and practice than a serious income generator.