FAQs

Forex is the market where one currency is exchanged for another, and it is the largest financial market in the world. Trading it means speculating on whether one currency will strengthen or weaken against another. Buy EUR/USD and you profit if the euro rises against the dollar; sell it and you profit if the euro falls. You never take delivery of the currency — you are trading the price movement through a CFD.

Every forex price quotes two currencies. In EUR/USD, the euro is the base currency and the dollar is the quote currency, and the price tells you how many dollars one euro is worth. A price of 1.0850 means one euro buys $1.0850. Majors are the most heavily traded pairs and all involve the US dollar; minors and exotics trade in lower volume with wider spreads.

A pip is the smallest standard price move in a currency pair — the fourth decimal place for most pairs, or the second for pairs quoted in Japanese yen. If EUR/USD moves from 1.0850 to 1.0851, that is one pip. On a standard lot of 100,000 units, one pip is worth about $10, which is how a move that looks tiny on the chart becomes a real number in your account.

A lot is the size of your position. A standard lot is 100,000 units of the base currency, a mini lot is 10,000 and a micro lot is 1,000. Position size is the single biggest control you have over risk: the same 20-pip loss costs roughly $200 on a standard lot and $2 on a micro lot. Beginners are far better served trading small than trading often.

The spread is the gap between the buy price and the sell price, and it is the main cost of a trade. If EUR/USD is quoted 1.0850 / 1.0853, the spread is 0.3 pips and your position starts marginally in the red until the market moves your way by that much. Tighter spreads mean less distance to cover before a trade turns profitable.

Leverage lets you control a large position with a small deposit. Margin is the portion of your balance held aside to keep that position open. At 1:500, controlling $100,000 requires $200 in margin. The critical thing to understand is that profit and loss are calculated on the full position size, not on your margin — so a 1% move against a fully leveraged position can wipe out far more than 1% of your account.

If losses erode your account until the equity can no longer support your open positions, you receive a margin call — a warning to deposit more or close something. If it keeps falling, positions are closed automatically at the stop-out level to prevent your balance going negative. Both are avoidable by using stop losses and keeping position sizes modest relative to your balance.

Holding a position past the daily rollover means paying or receiving interest on the difference between the two currencies’ rates. This is the swap. It can be a small credit or a small debit depending on the pair and your direction, and on Wednesdays it is usually charged at triple rate to account for the weekend. Swaps are negligible on a day trade and material on a position held for weeks.

Twenty-four hours a day, five days a week, following the sun through four sessions: Sydney, Tokyo, London and New York. The busiest and tightest-spread hours are when London and New York overlap, roughly 1 PM to 5 PM GMT. The market closes Friday evening and reopens Sunday evening, which is why weekend news can produce a gap in price when trading resumes.

A market order executes immediately at the best price available. A pending order sits and waits for a price you nominate — a buy limit below the current price, a buy stop above it, and the mirror image for sells. Pending orders let you plan a trade without watching the screen, which is the practical difference between trading a strategy and reacting to a chart.

A stop loss closes your position automatically once the price moves against you by a set amount, capping the loss. A take profit closes it once the price moves in your favour by a set amount, banking the gain. Setting both as the order goes in is the habit that separates traders who survive a bad week from those who do not — it decides your risk while you are calm rather than while you are losing.

Technical analysis reads the price chart itself — trends, levels, patterns and indicators — on the basis that price already reflects what the market knows. Fundamental analysis reads the drivers behind the price: interest rates, inflation, employment data and central bank policy. Most traders use both, letting fundamentals set the direction they favour and technicals set the entry and exit.

Trading CFDs carries significant risk and is not suitable for everyone. You can lose your entire deposit, and if you are classified as a professional client you can lose more than your initial investment. Never fund an account with money you need for anything else, and treat every position as capable of going wrong — because a proportion of them will, no matter how good the analysis was.

Yes. A demo account runs on live market prices with virtual money, so you can learn where every button is, test a strategy across a few weeks, and discover your own habits without paying for the lesson. Move to a live account once you can follow a written plan for a month without abandoning it — the psychology is the part demo trading cannot fully teach.