What do we trade in this market?

What is Spread

It is the commission between supply and demand. All currencies include two prices, the bid price and the ask price, and the bid price is always lower than the ask price.

Example: If I want to buy for $100, I will buy British pounds, for example, I will get 60 British pounds for $100, but if I want to sell the 60 pounds again, I will get only $95. This $5 between the selling price and the buying price is the spread.

Margin and leverage

If I do not have enough money to buy 10,000 euros, can I trade then or not? In another way, how can I make money in this market with small amounts (margin trading)?

There is what is known as margin. Suppose you deposited a thousand dollars in the account and you will trade with a value of 10% of the account, i.e. $100. This means that there are $100 that you bought with and the others, which are 900, are still saved in your account, and since the hundred dollars cannot be They make a good profit in case of movement. For example: We will assume that the sterling-dollar pair is worth 1.5000 and you made a purchase, meaning that you sold 100 dollars and bought the equivalent in sterling. If the prices move up to 1.5050, this means that you earned 0.0050, so if we multiply it by the 100 that we paid in… First, we will find that we only got half a dollar from that movement (0.0050 * 100 = 0.5 dollars).

But what do you think if we doubled the income and made $10,000 instead of $100? We will find that you will earn a hundred times what you earned before, meaning you have earned $50.

You may be wondering how a small investor like you can trade all this amount of money. Think about the brokerage company that you work with, such as a bank. It will lend you $100,000 to buy other currencies, and all it needs from you is a good faith deposit of $1,000, and after you close the matter, it will return this deposit to you after liquidation. The deal is whether it is a profit or a loss.

There are two important terms. If we assume that you deposited $10,000 and wanted to buy $1,000 from them, then this $1,000 is known as the used money (USED FUND) or (USED Margin) (the first term), and the remaining 9,000 is the money (FREE FUND). The heat.

The transaction takes place as follows: You will enter with $1,000 from your account and use a multiplier of 1:100. Thus, you will enter with $100,000, which can be divided into two parts: $1,000 paid by you and $99,000 paid to you by the brokerage company as a debt you owe, which you will recover when you close the deal.

The available margin is the maximum amount that can be lost in the deal. In the event that the winning deal is closed, the broker will recover the value of the deal (which he paid for you 99,000) and add the full profit to your balance.

In the event that the losing deal is closed, the broker will recover the value of the deal (which is less than what he paid you because the deal is losing) and collect the difference from your account. Meaning, the company returns (USED FUND), which is also called (USED MARGINE), to your account, which is $1,000, and takes the loss from the (FREE FUND), which is also called (FREE MARGINE), which is $9,000.

Pip and Lot

The increase or decrease in the value of the currency is calculated in pips, and the pip means a point.

If the EUR/USD moves from 1.2250 to 1.2551, this difference that occurred in the price is ONE pip. The pip is the last decimal digit in the price. Some companies show 4 decimal units, some show 5 decimal units, but there are companies that show 5 decimal units. The decimal unit number five refers to a fraction of a point, not a full point. In any company, the full point is calculated on the fourth decimal unit, for example 0.0001. Forex trading is always calculated in lots and has three forms:

100,000 units, which is known as the Standard Lot

10,000 units, which is known as a mini lot

1000 units, which is known as Micro Lot

Order Types

Trading times