Why do you need a Forex account to trade?
A Forex trading account, or Forex account, is used to hold and trade currencies. Generally, you open a Forex account, deposit money in the currency of your home country, and then buy and sell currency pairs.
Your goal, of course, is to make money on your trades. Unfortunately, most traders lose money. The average duration of a Forex trading account is only about four months.
This is not to say that Forex is a scam, as some have argued, but Forex scams abound.
Making money on highly leveraged foreign exchange is more difficult than it looks and requires at a minimum to develop expertise that some traders do not want to take the time to learn and acquire.
Ava Trade, is a regulated broker in France and worldwide since 2006.
The accounts are segregated in the largest banks in the world.
Forex online Account
The requirements to open a Forex account have become simpler since the growth of Forex online trading.
Today, opening a Forex account is almost as simple as opening a bank account (see faster).
All trades pass and are managed by your Broker, who may be a Broker specialized in Forex or the same broker that you use for investments and trading on the stock market for example.
In parallel with your Forex trades, you will also be able to trade more than 100 stocks and 250 financial instruments like crypto currencies, and indices with Ava Trade with only one Forex account.
You will need to complete a brief questionnaire about your financial knowledge and your intentions in terms of trading.
You will also need to provide a login and the minimum deposit required by your Forex account institution. That’s all.
You are now free to trade. Incidentally, many Forex brokers will take your credit or debit card instead of money, so you really do not need to deposit money – it’s not a good idea.
If you do not have the money now, how will you pay for the losses later? Credit card debt bears interest rates.
2 types of Forex account exist at Avatrade
Instead of using your bank to buy currencies (or others) that normally charge high fees and commissions, as well as the exchange rate, you can trade Forex at your broker Avatrade, forex broker and CFD regulated since 2006.
To open a Forex Account and start safely, start by opening a demo account as explained below:
- Forex demo account
- Forex Real Account
What is a Forex Demo account?
A demo account is the best way for novice traders to explore Forex trading in virtual mode. The operation of the Forex demo account is similar to that of the real forex account, except that you trade with virtual money and do not take any risk.
Once your Forex Demo account has been created, download and launch the Metatrader4 platform and log in with your credentials.
Trading on a forex demo account provides you with the necessary Forex trading experience and gives you the best conditions to learn.
You can trade in demo time and learn how to analyze currency markets using technical indicators without risking your money.
Avatrade also allows you to improve through a free Forex trading training as well as an Ebook on Forex Trading. Thus you will have better chances to succeed and accumulate the gains on your trading account.
What is a Real Forex trading account?
When the time comes, when you have read the trading platform, you will be able to switch to a real trading account with just 100 euros.
You will put into practice the knowledge and experience gained on Metatrader 4, and apply the successful strategies of your account.
Opening a Forex account at Ava Trade can be a wise choice. Indeed, Ava Trade is a large Forex broker submitted to 6 jurisdictions on 5 continents and recognized worldwide.
Like almost all major Forex Brokers, Ava Trade offers you a free demo account where you can try out potential trades without risking your capital.
Before finalizing your search, compare commission rates. Transaction costs are an important factor in the profitability of trading activities.
At Ava Trade, you will not be charged commissions on your transactions when you trade currencies (we are paid through Spreads).
To read and understand forex, it is helpful to become familiar with the terminology. It all starts with a currency pair, which tells you the currencies involved in the trade. (ex: EUR / USD)
In a trade, the currency pair is often followed by a bid and ask price, which reveals the spread and the number of Pips (the smallest unit) between the bid and ask prices.
Understanding these terms a little more in depth can help you prepare for setting up your first trades.
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Learn the basic terms of Forex
A Forex quote always consists of two currencies, a currency pair consisting of a base currency and a quote currency (sometimes called a “counter currency”). These pairs represent the currencies you trade.
The first part of the pair is called the base currency and the second part is the quote currency.
The most used and frequently used base currencies are EUR (Euros), GBP (British Pounds) AUD (Australian Dollars) and USD (US Dollars).
The quote currency can be any currency, including another common base currency, as in this example:
EUR / USD = 1.3600
Here, EUR is the base currency and USD is the quote currency. If you translate this pair, it means that a euro is worth US $ 1.36.
Regardless of the base currency used (USD, EUR or any other base currency), the base currency is always equal to 1. The amount shown, 1.3600 is the amount of the currency currency, USD, equal to 1 unit of the base currency EUR.
The Forex convention is that when these two currencies are compared, the EUR is still the base. If instead, USD was the base currency, the quote would be:
USD / EUR = .7352
The meaning of this hypothetical quote is that 1 USD equals 0.7352 EUR. If you divide 1 by 0.7352, the result is 1.36; the two results are different, but the relationship between the two currencies remains the same.
The meaning of supply and demand
Contrary to what you may think when you start exploring the forex market, a bid price is not the price you are going to bid when you want to buy a currency pair.
Instead, both terms are used from the point of view of the forex broker. From a broker’s point of view, when you are the potential buyer, the broker will ask for a little more than he would be willing to bid if you sold. In the example given, as you are interested in buying the euro, the base currency, you will pay the ask, the price asked by the broker, which is 3,3605.
If you sold, you would accept the broker’s offer, namely 3.3600.
If you find these terms confusing at first, it is helpful to remember that the terms supply and demand are those from the dealer’s point of view and not yours. When you buy, you pay what the broker asks for the currency; when you sell, you must accept the broker’s auctions.
The difference between supply and demand is called the gap. Propagation is simply the commission of the broker on the trade.
Pips in forex trading
One of the terms that you often hear in currency contexts is the pip. A pip is a unit of measure, and it is the smallest unit of value of a forex currency price. So, in the example
EUR / USD = 1.3600 / 1.3605
the difference between the offer of 1.3600 and the offer of 1.3605 is 5 pips.
The first number, 1.3600, represents the price of the offer, while the 1.3605 represents the selling price. Propagation is the difference of 5 pips.