|Instrument:||An asset or derivative that can be invested in or traded, such as currency pairs (forex), commodities, shares or bonds. Agreements to buy or sell are also considered instruments. Instruments can be cash-bound (securities, bonds, bills, shares, loans and deposits), or derivatives (futures, options, swaps and forwards).|
Intro to Trading
Intro to Trading - text
The Trading Platform
Since the rise of the internet the financial markets have become much more accessible for individual, retail traders. We can now use online brokers (such as AVA Trade) to open and close trades in these financial instruments using a trading platform provided by our broker.
Brokers have evolved to offer platforms for tablets and apps for smart phones so we can always have access to our trading account wherever we have an internet connection.
Our trading platform will consist of all the live prices of the various instruments we can trade, their relevant charts which show their price movements over time and the ability to buy or sell an instrument with the click of a button. We can also choose the size of the position we would like to buy or sell and set price levels where our positions will automatically open or close.
Ava Trade allows us to open a demo or practice trading account before we open a real account. A demo account will have most of the same functions and features as a live account and most importantly have the correct live prices. Becoming familiar with the trading platform is essential so we are comfortable trading on it with a live account.
Cost of Trading – The Spread
The cost of placing a trade with our broker is called the spread. Our broker receives a spread for providing us with the services of their trading platform, software and access to the market. All instruments will quote two slightly different prices depending on whether we are buying or selling the instrument. When we want to sell an instrument we are offered one price and when we want to buy we are offered another slightly higher price. This difference between the buy and sell price is the spread. The spread is usually quite a small difference but the cost to us will depend on the size of our position. Larger positions will mean a larger monetary amount. We will discuss spreads again in greater detail but for now all we need to know is that this is the cost of placing a trade.
Due to the high level of leverage offered on various financial instruments, we do not need a large amount of capital to start trading. Most brokers allow us to open a trading account with as little as $/ €/ £ 100 although most traders will start with a few thousand so they can cope with the volatility in certain markets.