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Best venue for spot — Euronext FX. Best exchange for FX — Eurex. If you want to open a long position, you trade at the buy price, which is slightly above the market price. If you want to open a short position, you trade at the sell price — slightly below the market price. Currencies are traded in lots — batches of currency used to standardise forex trades. As forex tends to move in small amounts, lots tend to be very large: a standard lot is , units of the base currency. Leverage is the means of gaining exposure to large amounts of currency without having to pay the full value of your trade upfront.
Instead, you put down a small deposit, known as margin. When you close a leveraged position, your profit or loss is based on the full size of the trade.
While that does magnify your profits, it also brings the risk of amplified losses — including losses that can exceed your margin. Leveraged trading therefore makes it extremely important to learn how to manage your risk.
Margin is a key part of leveraged trading. It is the term used to describe the initial deposit you put up to open and maintain a leveraged position. When you are trading forex with margin, remember that your margin requirement will change depending on your broker, and how large your trade size is.
Margin is usually expressed as a percentage of the full position. Pips are the units used to measure movement in a forex pair. A forex pip is usually equivalent to a one-digit movement in the fourth decimal place of a currency pair.
The decimal places shown after the pip are called fractional pips, or sometimes pipettes. The exception to this rule is when the quote currency is listed in much smaller denominations, with the most notable example being the Japanese yen.
Here, a movement in the second decimal place constitutes a single pip. Instead, there are several national trading bodies around the world who supervise domestic forex trading, as well as other markets, to ensure that all forex providers adhere to certain standards.
Gaps do occur in the forex market, but they are significantly less common than in other markets because it is traded 24 hours a day, five days a week. However, gapping can occur when economic data is released that comes as a surprise to markets, or when trading resumes after the weekend or a holiday.
Although the forex market is closed to speculative trading over the weekend, the market is still open to central banks and related organisations. So, it is possible that the opening price on a Sunday evening will be different from the closing price on the previous Friday night — resulting in a gap. Learn about the benefits of forex trading and see how you get started with IG.
Be aware of the risks associated with forex trading and understand how IG supports you in managing them. Compare features.
The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
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