Forex prices compare one currency with another. Learn how quotes, volume, leverage and trading costs work before considering a first trade.
Practise the process on a demo first. Virtual trading does not reproduce every live-market condition.
What forex trading is
Every forex trade involves two currencies, written as a pair. In EURUSD the euro is the base currency and the US dollar is the quote currency. A price of 1.0850 means one euro costs 1.0850 US dollars.
Buying a pair expresses a view that the base currency will strengthen; selling expresses the opposite view. Either direction can lose money. A forex CFD provides price exposure rather than delivery of the currency.
Reading a quote
Every pair shows two prices. The sell price (bid) is what you get when you sell. The buy price (ask) is what you pay when you buy. The gap between them is the spread, and it is part of what each trade costs.
EURUSD
Euro vs US dollar
SELL · BID
1.08412
SPREAD
0.2
PIPS
BUY · ASK
1.08414
You receive this when you sell
You pay this when you buy
Not live prices.8
Pips and lots
A pip is a conventional unit of forex price movement. It is usually 0.0001, or 0.01 for yen-quoted pairs. EURUSD moving from 1.0850 to 1.0851 moves one pip. Check the symbol specification.
Trade size is measured in lots. In a 100,000-unit forex contract, 0.01 lot represents 1,000 units. Contract size and minimum volume must be checked for the exact symbol.
| Volume | Units of the base currency | One pip on EURUSD |
|---|---|---|
| 1.00 lot | 100,000 | $10.00 |
| 0.10 lot | 10,000 | $1.00 |
| 0.01 lot | 1,000 | $0.10 |
For pairs quoted in US dollars, such as EURUSD and GBPUSD. For other pairs the pip value converts at the current rate. Pip calculator
Leverage and margin
Leverage lets you open a position larger than the money you put up. The money set aside to keep the position open is the margin.
Margin = trade size ÷ leverage × price
1 lot of EURUSD at 1.0850 with leverage of 1:100 needs 100,000 ÷ 100 × 1.0850 = $1,085 of margin.
Risk warning
Leverage magnifies gains and losses alike and may change without prior notice. Losses may exceed deposited funds.
Watch your margin level: equity divided by used margin, multiplied by 100. Our account thresholds are 50% margin call and 20% stop-out. Automatic closing does not guarantee a maximum loss.
What a trade costs
- Spread
- On every account. Classic spreads start from 1.5 pips, with
no commission.3 - Commission
- Pro and VIP spreads start from 0.0 pips, plus a commission on forex and metals: $3 (Pro) or $1.50 (VIP) per lot, per side.3
- Swap
- A charge or credit for each night you hold a position past the daily rollover, with a triple swap on Wednesdays for forex.
When you can trade
Check the exact symbol’s session and the time zone used in the schedule. Daily breaks, holidays and clock changes can affect access. Use your platform’s current symbol specification.
Selected currency pairs
Major pairs combine the US dollar with another large currency: EURUSD, GBPUSD, AUDUSD and USDCHF. Crosses such as EURGBP leave the dollar out. See the pairs you can trade
Practise the order process
Open a demo account. It comes with $100,000 in virtual funds on MT4 or MT5.
Find the pair in Market Watch and open its chart.
Open a new order and set the volume, such as 0.01 lot.
Review the stop-loss setting and understand that execution at the selected price is not guaranteed.
On the demo account, confirm direction and size before placing the practice order. Review the position and its changing result.
Close the practice position and review the history, including costs and what you learned.
Decide how much you are prepared to lose before you open a trade,
not after.
Know the risks
CFDs are high-risk, leveraged instruments. Leverage magnifies gains and losses alike, leverage may change without prior notice, and losses may exceed deposited funds. In fast markets a price can move past your stop loss before it is filled.
