A-BEGINNERS-GUIDE-TO-FOREIGN-EXCHANGE-TRADING
Guide to Foreign Exchanges: What is forex trading and how does it work? Learn how to get started in currency trading. The Forex exchanges allow for 24/7 trading in currency pairs, making it the world's largest and most liquid asset market.
Guide to Foreign Exchanges: What is forex trading and how does it work? Learn how to get started in currency trading. The Forex exchanges allow for 24/7 trading in currency pairs, making it the world's largest and most liquid asset market.
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Spread
The difference between the Bid/Ask is called the
‘spread’ – another common term you’ll hear often,
which basically represents brokerage service costs.
The GBP/USD forex pair above shows the spread or
‘cost’ to purchase 1 unit of GBP using IC Markets is half
a pip, or five pipettes (1.28742 [the Ask] – 1.28737 [the
Bid]). The broader the spread the more expensive it is
to trade. Liquid and frequently traded major currency
pairs routinely offer small bid/ask spreads, while the
more erratic, less traded pairs, typically boast larger
bid/ask spreads (the exotics and some minor currency
pairs).
Leverage
Leverage is the ability to control large sums of capital
using very little of your own funds. Leverage, however,
is a double-edged sword and can be considered high
risk if not controlled.
Risk of excessive leverage has the potential to enlarge
your profits or losses by the same magnitude.
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