Forex & CFD Basics

Forex (foreign exchange) is the largest financial market in the world, where currencies are traded against each other. Instead of buying assets like stocks, traders exchange one currency for another and profit from price movements.

• Forex is open 24 hours a day, five days a week
• It’s a decentralized market, meaning there’s no single exchange like the stock market
• It’s the most liquid market, with over $7 trillion traded daily

Example:

• Let’s say you buy EUR/USD at 1.1000 and later sell it at 1.1050. The difference of 50 pips is your profit (or loss, if the price moves against you).

Understanding Currency Pairs

• Forex is always traded in pairs – one currency against another. Each pair has a base currency (first) and a quote currency (second).

Types of Currency Pairs:

• Major Pairs – Most traded, always include USD (EUR/USD, GBP/USD, USD/JPY).

• Minor Pairs – Strong currencies but without USD (EUR/GBP, AUD/JPY).

• Exotic Pairs – One major currency paired with an emerging market currency (USD/TRY, EUR/ZAR).

Example:

• If EUR/USD is at 1.1000, it means 1 euro = 1.10 US dollars. If the price moves to 1.1050, the euro has strengthened against the dollar.

• You can go long (buy) or short (sell) in any market.
• CFDs allow leveraged trading, meaning you can control a larger position with less money.
• You can trade forex, stocks, indices, and commodities – all from one platform.

Example:

• You believe gold prices will rise. Instead of buying physical gold, you open a long CFD position on gold.
• If the price goes up, you make a profit. If it drops, you take a loss.
• The difference between your entry and exit price determines your profit or loss.

These are the fundamentals of trade execution – understanding them is essential for managing your trades.

• Pip: The smallest price movement in forex (usually 0.0001 for most pairs).

• Lot Size: The volume of a trade (1 lot = 100,000 units, but mini and micro lots exist).

• Leverage: A tool that lets you control a larger position with less capital.

Example:

• You trade EUR/USD with 1 standard lot (100,000 units).
• If the price moves 10 pips in your favor, you make $100.
• If it moves against you, you lose $100.
• With leverage, you don’t need $100,000 to trade 1 lot – your broker covers most of it.

• Forex is the largest market in the world, open 24/5.
• Currency pairs are traded in majors, minors, and exotics.
• CFDs let you trade without owning the actual asset.
• Pips, lots, and leverage determine your trade size and profit potential.