The Forex market is the world‘s largest and most liquid financial market, where currency exchange trading takes place constantly around the globe. With an average daily turnover averaging $5 trillion, this market operates 24 hours a day, five days a week, ensuring continuous opportunities for online Forex trading.
With Forex CFDs, you can speculate on currency pair movements using leverage, capitalising on this market‘s dynamic nature without needing to purchase the underlying currencies.
In the Forex market, currency exchange trading consists of the purchase or sale between two different currencies. These combinations of currencies are referred to as currency pairs. Exchange rates are the relative price of currency pairs when compared to each other. There are seven major currency pairs, all of which include the US dollar. A Forex CFD is a financial derivative that allows you to speculate on the price movements of these currency pairs without owning the currencies.
- Trade long and short
- Trade 24 hours 5 days per week
- Mitigate currency risk
- Carry trades
A pip stands for ‘percentage in points’ or ‘price in points’. This term was traditionally the smallest price increment of a currency pair; also, it measures the amount of change in the exchange rate for a currency pair, calculated using the last decimal point. For FX majors and minors excluding JPY, a pip is the 4th decimal point (0.0001). Meanwhile, on JPY pairs, a pip is the 2nd decimal point (0.01).
The spread is the difference between the best bid and the best ask quotes of a currency pair, is measured in pips, and affects the cost of entering a trade. (Spread = Best Ask Price – Best Bid Price)
- The bid price is the price you can sell the base currency
- The ask price is the price to buy the base currency
- The base currency is shown on the left of the currency pair. Also, the variable, quote or counter currency, on the right.
EUR/USD is the most widely traded pair so it tends to have the tightest spread. But depending on the region and news flow, USD/JPY is also very popular with day traders, along with EUR/JPY and AUD/JPY.
The tick volume indicator looks very similar to a traditional volume indicator, only tick volume counts the number of bid/ask quotes per bar. Whereas a volume indicator from an exchange represents how many shares or contracts have been traded per bar.
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Leverage in online Forex trading is a powerful tool provided by your Forex broker that allows you to control a large currency position with a relatively small amount of capital. Trading with Forex CFDs allows you to amplify your potential market exposure, meaning a small price movement can result in a larger profit or loss.
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