When trading Forex, you need only a small amount of capital to open and maintain a position. This capital is known as margin.
For example, if you want to buy $100,000 worth of EUR/USD, you don’t need the full amount, but only a small portion, like $2,000. This margin amount depends on your forex broker or CFD provider.
In simple terms, the margin is the good faith deposit or the assurance you give to the broker that you can afford to hold the trade until it is closed.
Leverage is the ratio of the amount of capital used in a transaction to the margin (security or good faith deposit).
What is a Bid/Ask Spread?
Every currency pair has two prices quoted for it: the bid and ask price.
The “bid” is the price at which you can Sell the base currency.
The “ask” is the price at which you can Buy the base currency.
The difference between these Buy and Sell price is known as the spread. Also known as the “bid/ask spread”.
For example, if you receive a quote for a EUR/USD currency pair of $1.2770/72, the first figure is the “Bid” price of $1.2770, the second figure is the “Ask” price, and the difference between the two is $0.0002, which is the bid/ask spread and is equivalent to 2 pips.
How can you trade Forex with us?
You can trade contracts for difference (CFDs) in Forex with only a small amount of capital.
A CFD is a contract between a CFD provider/broker and a trader, where one party agrees to pay the other the difference in the value of a security, between the opening and closing of the trade.
In Forex, CFD is an agreement (“contract”) to exchange the difference in the price of a currency pair from when you open your position versus when you close it.Trading forex CFDs allows you to trade a currency pair in both directions. You can take long as well as short positions.
Long – for example, if you think the euro will rise against the dollar, you can take a long position on the EUR/USD.
Short – if you believe the euro will depreciate against the dollar you can take a short position on the currency pair.
With STARTRADER, trade CFDs on more than 30 currency pairs. To explore them, click here.