Trading for beginners

Trading for beginners
Trading for beginners - Educational section

Beginner's Trading Guides

Our Trading for Beginners section gives you all the information you need to start trading forex and CFDs with confidence. This should be your first stop to find out about currency pairs, how the forex market works, market analysis and CFD instruments.

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What is ...

What is Forex?

Learn about the global FX market, currency pairs and how a trade works. Here you’ll also find descriptions of some of the common online forex trading concepts such as order types, rollovers and hedging.

What are CFDs?

Contracts for Difference – more commonly known as CFDs – are an important financial instrument that allows traders to speculate on the rising and falling value of currencies, indices, commodities and stocks without owning the underlying asset. Here you can find out more about the various features of CFDs and how they work.

What Are Options?

Vanilla options are contracts giving traders the right to buy or sell a specified amount of an instrument, at a certain price on a pre-defined time. When trading currency options, the trader has the power to control not only the instrument and the amount he trades, but also when and at what price. Options can be traded for a day, a week, a few months or even a year.

What is currency trading

In this section we go a little deeper into how different currencies interact together in currency pairs – the basis of forex trading. You’ll also learn about the difference between major, minor and exotic currency pairs.

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What is the Stock Market?

What's a stock exchange? What are the primary and secondary markets? How shares are issued, bought and sold? Want to learn about the medium where shares are traded? Here you'll find information on stock market structure, main regional stock exchanges, different life cycles of issued shares, and the ways one can profit from them.

What are Financial Derivatives

Find out what derivatives are and how they could be useful to you in trading, how their value is determined by various market fluctuations in the underlying assets. Learn all about the most common derivatives, including Futures, Forwards, Options, CFDs and Swaps.

What is MetaTrader?

MetaTrader is a platform provided by MetaQuotes Software that allows online trading in the CFD, Futures and forex markets. The software is licensed to AvaTrade for your convenience. There are two types of platforms known in the trading world today MT4 and MT5.

What is a Trend

In the financial markets, there is an expression: ‘The trend is your friend’; and while this phrase might make logical sense, in practice it is as opaque as it can get. But what is a trend and how do we define it as well as trade with it?

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What is a pip?

Price moves in Forex trading are counted in pips or pipettes, but what does this mean? Pips and pipettes are smallest units of change in an exchange rate, pip is equivalent to a change of 1 in 4th decimal place, and pipette is 1/10th of a pip.

What is technical analysis

Technical analysis is an important factor in making smart trading decisions, whether you’re trading forex, commodities, stocks or indices. Find out more about the tools and techniques you need to understand and analyse live charts so that you stand the best possible chance of succeeding in the markets.

What are trading styles

Are you a day trader, a swing trader or a scalper? Explore your trading style. In this section we take a look at the various trading styles that are adopted by traders in today’s markets. Discover which is best suited to you, your risk tolerance and your knowledge of the trading market.

What is Short Selling?

Short Selling refers to a process of borrowing an asset from your broker and selling it during bearish market conditions, then buying it back at trend reversal and returning back to the broker, while pocketing the price difference as profits. Click the link for further information and a trade example.

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What is Copy Trading?

Both new and advanced traders can benefit from copy trading where trades are executed by seasoned professional traders with top track records. AvaTrade offers copy trading platforms enabling traders to take advantage of this breakthrough offering.

What is paper trading?

Paper trading also known as demo account trading allows traders new to the Forex market and CFDs the ability to trade for free on a practice account before trading for real. By building up skills and acquiring trading confidence 'paper trading', plays an invaluable role in a trader's education.

What is Leverage Trading?

Leverage trading, also known as margin trading, describes the process that allows the trader to open positions investing only a fraction of the position price, while borrowing funds from the broker to cover the rest. Leverage is expressed as a ratio between total position worth and trader's investment (i.e. ) while margin appears as a percentage if the entire position worth that the trader invests (0.5% for the same case). Leverage trading can boost trader's profits, but simultaneously increases the associated risks.

What is a trading plan?

As not every trader is the same and there is no perfect trading plan, there are universal rules and elements to consider when you are building your specific trading plan to suite your trading style. Want to know what should be included in your trading plan?

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What is money management

Knowing how to manage your money especially on the forex markets is, possibly, the very first discipline to learn before entering the markets. Here you can find valuable information on the basic terms and illustration of how to best manage your capital.

What is trading psychology

Fear, greed, hope and regret are normal human emotions, but they can seriously impact the performance of a trader. Read about the psychological aspects of trading, learn to identify and manage the emotions that can influence your decisions and develop a winning trader’s mindset.

What is trading budget

How much money do you need to start trading? What are the risks of being undercapitalized and how to avoid them? What’s the proper leverage based on your available balance? How to avoid a margin call and properly size your positions? Read our guide to find answers to these questions.

What are EMH and Random Walk Theory

The Efficient Market Hypothesis (EMH) is an investment hypothesis which advances the belief that the prices of financial assets reflect all the available information. Another hypothesis, similar to the EMH, is the Random Walk theory. Random Walk states that stock prices cannot be reliably predicted.

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What is Volatility?

Financial market volatility is defined as the rate at which the price of an asset rises, or falls, given a particular set of returns. It is often measured by looking at the standard deviation of annual returns over a set period of time. It has significant impact on market sentiment.

What is Carry Trade?

One of the most popular investments in the financial markets today is the carry trade. This involves selling or borrowing an asset with a low-interest rate, with the aim of using the proceeds to fund the purchase of another asset with a higher interest rate.

What is Arbitrage?

At its most basic, arbitrage can be defined as the concurrent purchase and sale of similar assets in different markets in order to take advantage of price differentials arising from local supply/demand divergences.

What is Currency Peg?

Currency pegging is when a country attaches, or pegs, its exchange rate to another currency, or basket of currencies, or another measure of value, such as gold. Pegging is sometimes referred to as a fixed exchange rate.

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What is a Currency Swap?

In finance, a currency swap, also known as cross-currency swap, is a legal contract between two parties to exchange two currencies at a later date, but at a predetermined exchange rate.

What Is Correlation?

In the world of financial trading, asset correlation establishes how and when the prices of different financial instruments move in relation to each other. With regards to currencies and forex trading, correlation is the behaviour that certain currency pairs exhibit where they either move in one direction or in different directions, simultaneously

What is Slippage?

In financial trading, slippage is a term that refers to the difference between a trade’s expected price and the actual price at which the trade is executed.

What is a Market Cycle?

While asset prices may appear to move randomly up and down, technical analysis shows that there are distinct repetitive cycles that occur. These are predominantly driven by the market moves made by large institutional investors, and in order to trade successfully, individual traders should watch these market moves, or market cycles, closely.

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What Types of Traders Are There?

The multifaceted world of financial markets offers numerous opportunities to make money by buying or selling financial assets online. Different traders use diverse strategies to pick out lucrative opportunities in the market. It is important to understand the various trading styles to determine which strategy is best suited for your trading goals.

What is Liquidity?

The Liquidity definition refers to the extent to which a particular asset can be bought or sold quickly on the market without having a significant effect on its price. Liquidity is an important factor that investors assess when making their trading decisions since it has an effect on their trades.

What are Forex Signals?

Forex signals came about as a natural innovation of the financial industry. They basically solve the most daunting activity any trader has to perform – to identify the right trading opportunities at the right time.

What is Economic Policy

As a country’s top administrative body, the government is responsible for cultivating the economy and deciding on how to handle the money-related economic operations. A government’s economic operations include the management of national revenue, national expenditure, and public investments as well as the facilitation and regulation of employment, business, financing, investments in the private markets.

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What is Consumer Price Index (CPI)

Consumer Price Index (CPI) is the main economic indicator that is used to track the inflation rate and the cost of living in a country. It comprises a basket of goods and services and calculates the basket price as a weighted average of the constituent items' retail prices.

What is Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is the total value of goods and services produced in a country. It is calculated periodically, usually on a quarterly or yearly basis, to measure how the economic value of the local production activities is changing over time.

What is Balance of Trade (BoT)

The Balance of Trade (BoT) is the difference between the total value of exports and the total value of imports of a country within a time period. It is also referred to as trade balance, commercial balance or net exports (NX). The Balance of Trade shows whether the country had achieved to sell locally produced goods and services to foreign countries (export) more than it bought products from abroad (import) in the focused period.

What are Interest Rates

Interest rates are the main tools of the central banks to control the national economy. The primary goal is to facilitate optimum economic conditions in accordance with the monetary policy goals.

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What is the Unemployment Rate

The Unemployment Rate is the percentage of the unemployed in the total workforce of a country. The total workforce is comprised of three categories: payroll- or contract-based employees, self-employed, and unemployed. People who are not employed but also ineligible to work (e.g., children and elders) are excluded from the workforce count.

What are Building Permits?

Analysts use the Building Permits data in conjunction with other prominent housing market indicators such as Housing Starts, Construction Spending, New Home Sales, and Existing Home Sales. A harmonised analysis allows drawing conclusions on the growth or stagnation of the housing market. These indicators can then be used in fundamental analysis of long-term sentiment.

Income and Wages Reports

Considering that most people rely on employment to make a living, income and wage reports emerge as fundamental measures to gauge the purchasing power of the citizens of a country.

What are Corporate Profits Reports?

As the private sector represents a significant portion of a country’s economic production and employment, its well being is vital for the national economy. Thus, the economic bodies track the private sector performance closely and make sure corporate profits are growing to enable further expansion.

What is Currency Strength?

A currency’s strength is determined by the interaction of a variety of local and international factors such as the demand and supply in the foreign exchange markets; the interest rates of the central bank; the inflation and growth in the domestic economy; and the country’s balance of trade.

Central Bank Meetings

The central bank meetings are lagging economic indicators, as the monetary policy decisions reflect the bank’s outlook on the future while the economy is evaluated in retrospect. Investors trust the central banks as a key source of information for their respective economies and seek to position themselves advantageously before the central bank expectations are realised.

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European Central Bank (ECB)

The European Central Bank (ECB) is the top monetary institution in the European Union (EU), governing the Euro currency (EUR) and the monetary and financial affairs in the region. It was established on June 1, 1998, as one of the seven EU institutions which were agreed upon in the Treaty of Amsterdam.

Frederal Reserve System (FRS)

The U.S. Federal Reserve System (FRS), also called the Federal Reserve or simply the Fed is the Central Bank of the United States of America. It was established to provide a flexible, secure, and steady system for national monetary and financial affairs.

Bank of England (BOE)

The Bank of England (BoE) is the United Kingdom’s central bank and serves the U.K. government as the official banking institution for monetary affairs. As the top monetary and financial authority in the United Kingdom, the Bank of England assumes the role of guarding the wellbeing of the British economy as well as the financial system.

Bank of Japan (BoJ)

The Bank of Japan (BoJ) is Japan’s central bank and the country’s highest monetary authority. The bank is headquartered in Nihonbashi, the business district of Chūō, Tokyo. It was established under the 1882 Bank of Japan Act and began operating on October 10, 1882, before issuing its first currency notes in 1885.

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The Reserve Bank of Australia (RBA)

The Reserve Bank of Australia (RBA) is the central bank of Australia, whose express function is to support and enhance the economic and financial stability of the country. RBA derives its mandate from the Reserve Bank Act of 1959 that granted the bank powers to contribute to the stability of the Australian dollar, to achieve full employment and to drive economic prosperity.

The People’s Bank of China (PBOC)

The People’s Bank of China (PBOC) is the central bank of the People’s Republic of China. Like other central banks, the PBOC has the dual mandate of fostering financial stability and enhancing economic prosperity in China. The bank has undergone a series of reforms and now enjoys a great deal of autonomy by Chinese standards.

The Reserve Bank of New Zealand (RBNZ)

The Reserve Bank of New Zealand, also referred to as the RBNZ, is one of the leading apex banks in the world. It is the central bank of New Zealand, and it was created by the New Zealand government with the purpose of maintaining the stability of the country’s financial system.

The Swiss National Bank (SNB)

The Swiss National Bank (SNB) is the central bank of Switzerland, and it has the responsibility to formulate the country’s monetary policy as well as administer Swiss franc banknotes. Read on how to use it's announcements in fundamental analysis

The Bank of Canada (BoC)

The Canadian central bank was founded in 1934, and it is responsible for promoting a safe and sound financial system within Canada as well as for formulating the monetary policy of the country.

Trading platforms comparison

AvaTrade provides its clients with a range of trading platforms, proprietary and third party. Read the review and features of the available trading platforms in order to choose the best forex trading platform for your needs. Compare the industry standard Metatrader 4 vs. other platforms available at AvaTrade. Learn the features of other manual and automated trading solutions available to our clients, including ZuluTrade, Duplitrade etc.

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How to ...

How to read a forex chart?

Learn about the different types of price charts - line, bar and candlesticks charts to better understand the information represented in this form. Assess market conditions such as buying/selling pressure, highs and lows of the price during the given time frame directly by analysing the graphs. Get to know important graphical analysis patterns and their meaning to become a better trader.

How to Trade Online?

Learn how to trade forex online. AvaTrade have all the basics covered as well as a step-by-step trading guide for beginner traders.

How to trade stocks?

The rise in popularity of online CFD trading has made it simpler and more convenient to trade the rise and fall of major global companies, such as Apple, Google and Alibaba. In this section you can read an overview of how CFD share trading works and learn more about the factors to consider when trading stocks.

How To Trade Cryptocurrency?

At Avatrade you can trade a range of popular cryptocurrencies, including Bitcoin & Bitcoin Cash, Litecoin and Ethereum. Learn how to trade cryptocurrency without the need for maintaining e-wallets and without the exposure to cyber threats associated with cryptocurrency exchanges. Read on about cryptocurrency CFD trading.

How to Trade Indices

Offering lesser risk than individual stocks alongside a more diverse portfolio with smoother price movements, stock market indices around the world are powerful indicators for both global and country-specific economies. Read on to learn more about some of the most popular indices trading strategies.

How to Trade Rising and Falling Markets

Today, we wanted to focus on one of the main advantages that trading CFDs offers: the opportunity to open either ‘long’ or ‘short’ positions, according to the market conditions and your trading strategy. In a nutshell, CFDs offer traders an opportunity to profit (but also to lose) from price movements in the financial markets without owning the underlying asset. Learn more here.

Keep on learning

Get deeper into trading concepts and analysis as well as using our trading platforms with our collection of free forex tutorial videos.

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