New to the markets? Start here. Learn what forex is, how a trade actually works, and the core concepts every beginner needs - in plain English.
Forex - short for foreign exchange - is the global marketplace where currencies are bought and sold. It's the largest and most liquid financial market in the world, open 24 hours a day, five days a week.
Currencies are always traded in pairs, like EUR/USD or GBP/JPY. When you trade a pair, you're buying one currency while selling the other - betting on how their value will move relative to each other.
Get comfortable with these six ideas and you'll understand most of what happens on a trading screen.
Every trade involves two currencies - the base (first) and the quote (second). The price shows how much quote currency one unit of base is worth.
A pip is the smallest standard price move, usually the 4th decimal place. It's how traders measure gains and losses on a pair.
The gap between the bid (sell) and ask (buy) price. A tighter spread means a lower cost to enter a trade.
Trade size is measured in lots. One standard lot is 100,000 units; mini (0.1) and micro (0.01) lots let you trade smaller.
Leverage lets you control a larger position with a small deposit (margin). It magnifies profits - and losses - so use it carefully.
Go long (buy) if you expect the price to rise, or short (sell) if you expect it to fall. You can profit either way.
Let's walk through a simple example. You think the euro will strengthen against the dollar, so you go long on EUR/USD with one standard lot.
Open 1 lot at the ask price
The euro strengthens as you expected
1.0896 - 1.0846 = 50 pips
50 pips x $10 per pip
Illustrative example. Had the price fallen instead, you would have made a loss in the same way.
A pip is the 4th decimal place on most pairs (0.0001). On JPY pairs like USD/JPY it's the 2nd decimal (0.01). The tiny 5th decimal you sometimes see is a pipette - a tenth of a pip.
How much each pip is worth in money depends on your lot size. The bigger your position, the more each pip is worth - in both directions.
| Lot size | Units | Value per pip* |
|---|---|---|
| 1.00 (standard) | 100,000 | $10.00 |
| 0.10 (mini) | 10,000 | $1.00 |
| 0.01 (micro) | 1,000 | $0.10 |
*Approximate, for a USD-quoted pair such as EUR/USD.
Leverage lets you control a large position with a small deposit called margin. With leverage of 1:500, you only put up 1/500th of the position's value.
Leverage magnifies your profit and your loss by the same amount - so a small price move can have a big effect on your account. Always size your trades with this in mind.
Position size at 1.0846
ABDFX forex majors
$108,460 / 500
$217 controls $108,460 of exposure - that's the power, and the risk, of leverage.
Funds still available to open new trades - your equity minus the margin already in use.
Equity / used margin, shown as a %. The higher it is, the healthier your account.
A warning at 100% margin level that your equity is getting close to the margin needed.
If the level keeps falling, positions are auto-closed (ABDFX: Standard 20%, Pro 30%, ECN 50%).
Every trade should have a plan. A stop loss automatically closes your trade at a set level to cap your loss. A take profit closes it once your target gain is reached.
Risk 30 pips to aim for 50 - a 1: 1.6 risk-to-reward on this trade.
The market runs around the clock through the Sydney, Tokyo, London and New York sessions.
Trillions change hands daily, so major pairs are easy to enter and exit at tight spreads.
Go long or short - there's an opportunity whether the market is rising or falling.
Leverage lets you access larger positions with a smaller deposit, though it raises risk too.
Open your account in minutes - or start on a free demo to practise risk-free.
Add funds with a convenient payment method when you're ready to trade live.
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