This trading FAQ for beginners is a starting point, not a substitute for the full guides. Each answer is kept short on purpose; follow the links for the detail, the worked examples and the risks. If your question is not here, the glossary may define the term you are stuck on.
Two principles run through every answer below. First, understand how you could lose money before thinking about how you might make it. Second, check the firm before you check the opportunity. Most of the painful stories we hear from readers began with a missed step on one of those two.
How to use these answers
Start with the question closest to your situation, then read the full guide it links to before acting on anything. Markets, rules and fees differ between countries, so where an answer quotes a rule, such as a leverage cap, it names the places it applies. If you live elsewhere, look up your own regulator's version.
Numbers in these answers are either rules set by regulators and protocols, or clearly labelled illustrations. None of them is a forecast, and none is a suggestion to buy or sell anything.
Where to go next
If you are new to all of this, the most useful order is: how markets differ, then the market you are most interested in, then costs, then broker checks, then scams. The calculators let you test the arithmetic at each stage without risking money.
Related reading: how the major markets differ, how forex trading works, the stock market for beginners and how crypto works.
Reader questions
Is GalaxyHedge a broker or an exchange?
No. GalaxyHedge is an independent information website. We do not open accounts, accept deposits, execute trades, hold crypto or manage money, and nobody from GalaxyHedge will contact you with an investment offer. If someone uses our name to sell you trading or account management, they are not connected to us and you should treat the approach as a scam.
What is forex trading?
Buying one currency while selling another, usually through a broker, in the hope that the exchange rate moves in your favour. Most retail forex trading is done through spot forex or CFD accounts and is leveraged, which magnifies both gains and losses. Our forex guide walks through a full example, including margin and overnight costs.
What is a pip and what is it worth?
A pip is the standard unit of movement in an exchange rate: 0.0001 on most pairs and 0.01 on yen pairs. On pairs quoted in US dollars, one pip on one standard lot of 100,000 units is worth $10.
How much leverage can a retail trader use?
In the UK and EU, retail CFD leverage is capped at 30:1 on major currency pairs, 20:1 on gold, non-major pairs and major indices, 10:1 on other commodities, 5:1 on individual shares and 2:1 on crypto. US retail forex is capped at 50:1 on majors and 20:1 on others.
Is investing in shares the same as trading CFDs on shares?
No. Buying a share makes you a part-owner of the company, entitled to any dividends and usually a vote. A CFD is a leveraged contract with a broker that tracks the price, with daily financing costs and no ownership. For long holding periods, those financing costs make CFDs far more expensive than owning the shares.
What is USDT?
A stablecoin issued by Tether that aims to be worth one US dollar. It is not a bank deposit, it can trade below $1, and it can be frozen. Sender and receiver must use the same network, such as TRC20 or ERC20.
Why is Bitcoin's supply limited?
Its software caps total supply at 21 million coins and halves the reward for new blocks roughly every four years. The reward has been 3.125 BTC since April 2024.
How do I know whether a broker is legitimate?
Search for it on your national regulator's own register, confirm the website and contact details match, check the regulator's warning list, and test a small withdrawal before depositing more. Also find out which legal entity would hold your account, since one brand can operate several companies under different regulators.
What is the clearest sign of a trading scam?
Unsolicited contact promising high, steady returns, especially when you are asked to pay in crypto or to pay a fee before you can withdraw. Treat such offers as fraud until proven otherwise, and be equally wary of anyone who later offers to recover lost money for an upfront fee.
Do costs really matter for a long-term investor?
Yes. A 1% yearly charge on a hypothetical $10,000 growing at 6% a year before costs reduces the value after 20 years from about $32,071 to about $26,533.