Learn all the trading fundamentals before you start placing trading orders. Practice these key elements on your demo account using virtual money, and get ready to trade CFD and forex live in real-time with your account balance.
The Exchange Rate is the price for which foreign currencies are traded. Currency pairs are always listed in the same order. For example, the most commonly-traded currency pair consists of the Euro and the U. When published with an exchange rate, the currency pair indicates how much of the quote currency is required to purchase one unit of the base currency. The bid price is always less than the ask price because brokers pay less than they receive for the same currency pair.
This difference — known as the spread — is how your broker generates much of its revenue. In this example, the spread is 1. For currency pairs displayed to four decimal places, one pip is equal to 0. Yen-based currency pairs are an exception and are displayed to only two decimal places 0. For example in the rate panel shown, the bid price is 1. You could sell one Euro for 1. The ASK price is the rate at which your broker is willing to sell and represents the rate you must pay to buy the base currency.
In the example 1 Euro will cost you 1. Active trades are referred to as open positions and are subject to fluctuations in the exchange rate. Open positions are closed by entering into a trade that takes the opposite position to the original trade, bringing the total amount for the currency pair derivative back to zero. Only when you close a position do you realize the actual gains or losses for the trade, thereby affecting the actual cash balance of your account. It is important to understand that gains or losses for open positions are still unrealized.
To close a long position, you must sell an equal amount of the same currency pair derivative to reduce your long position to zero. If you receive more when you sell than you paid to buy the order, you earn a profit.
If you receive less, you realize a loss. A short position is the opposite of a long position. In order to close a short position, you would need to buy enough of the currency pair derivative to bring your position back to zero. If you can buy this back for less than you earned when you sold it originally, the difference is retained as profit. It is possible to partially close an open position by only selling or buying enough to partly offset the open position. The forex market is the largest and most liquid financial market.
Volatility boosts opportunity due to exchange rate fluctuations. Forex trading operates 24 hours a day, 5 days a week. The greatest liquidity occurs when operational hours in multiple time zones overlap. Spreads in the forex market tend to be tighter less , than the spreads applied to other securities such as stocks.
This makes OTC forex trading one of the most cost-effective means of investment trading. A pip is the smallest price move in a given exchange rate. Understanding the change in value helps traders to enter, or edit orders according to the objective of the strategy plan. Develop your trading strategy and learn to use trading tools for market analysis.
Learn the skills necessary to open, modify and close trades, and the basic features of our trading platform. Price Chart And Patterns. A trading strategy can offer benefits such as consistency of positive outcomes, and error minimization. Technical analysts track historical prices, and traded volumes in an attempt to identify market trends. They rely on graphs and charts to plot this information and identify repeating patterns as a means to signal future buy and sell opportunities.
Introduction to Trading Analysis. Leveraged trading involves high risk since losses can exceed the original investment. A capital management plan is vital to the success and survival of traders with all levels of experience. Learn risk management concepts to preserve your capital and minimize your risk exposure. Seek to understand how leveraged trading can generate larger profits or larger losses and how multiple open trades can increase your risk of an automatic margin closeout.
Introduction to Capital Management. For more information refer to our regulatory and financial compliance section. This is for general information purposes only - Examples shown are for illustrative purposes and may not reflect current prices from OANDA. It is not investment advice or an inducement to trade. Past history is not an indication of future performance.
A hedge is the practice of buying a physical commodity to protect against a possible currency devaluation. Market-Maker — A dealer or broker that provides a two-way quote i. Offering both sides of a trade literally "makes" a market for those wishing to engage in currency trading. In recent years, new developments in web-related technologies have made it possible for independent brokers to develop internet-based trading platforms. These brokers serve as market-makers and provide a two-way quote for each currency pair they support.
OANDA is an example of a forex market-maker. Refers to the number of buyers and sellers in the market willing to trade at any given time. Generally speaking, the greater the liquidity within a market, the greater the number of trades completed, which translates into higher volumes.
An attempt to profit on the fluctuation in prices for currencies and other investment securities. A commitment to fix the value of a currency to a specific quantity of gold. Under this system, the holder of the country's currency can convert funds to an equal amount of gold. To help these economies recover — and to avoid mistakes made in the wake of the First World War — the Bretton Woods Accord was convened in July Several resolutions arose from Bretton Woods, but it was the "pegging" of foreign currencies to the U.
A contract to buy or sell a specified amount of a currency pair at a given exchange rate. Learn the basics here. Losses can exceed investment.More...