The two currencies in a pair are known as the base and the quote. A forex pair tells you how much of the quote currency you'll need to exchange for a single unit of the base. Forex traders look to take advantage of changes in the relative value of the base and quote currency in a pair.

How do currency markets work?

If the euro strengthens against the US dollar, then your euros will be worth more dollars — so can sell euros for dollars and keep the difference as profit. In this case, you would make a loss. For more information on pairs, take a look at our What is forex trading? Pips measure how much a forex pair has moved. A single pip is equivalent to a one-digit move in the fourth number after the decimal point.

One key exception to this rule is when the Japanese yen is the quote currency. In this case, a pip is calculated as a one-digit move in the second number after the decimal point. As you may have noticed, even a pip move won't earn you much if you trade or units of currency.

A standard lot is equivalent to trading , units of currency. To avoid having to tie up all their capital when opening one position, most forex traders use leverage.

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With leverage, you only have to put up a fraction of your position's full value to open a trade. The amount you are required to put up is known as your margin. Find out more about forex leverage and margin. The first step to opening a forex trade is to decide which currency pair you wish to trade. There are over 80 to choose from. There are three main categories of forex pair: majors , minors or major crosses and exotics. There are two main ways to trade forex: derivatives such as Spread Betting and CFDs, or spot forex trading. They all enable you to go long and short on currency pairs, but they work in slightly different ways.

Spot FX is when you buy and sell currencies — for instance by buying US dollars and selling euros. You open your trade by deciding how much of the base currency you want to buy or sell. Forex derivatives are markets that enable you to speculate on the price movements of forex pairs without buying or selling any currencies. When spread betting, you bet pounds per point of movement in the underlying currency. When trading CFDs, you choose how many contracts you want to buy or sell. In addition to choosing how to trade forex, you can pick a different market for each currency pair.

The two main types of forex market are spot and futures. All forex is quoted in terms of one currency versus another. The base currency is the currency on the left of the currency pair and the quote currency is on the right.

Forex Trading: A Beginner's Guide

View article. Learn about some of the key events that can affect prices and the tools available to take advantage of these movements. Learn about how support and resistance levels are common technical analysis technique used to help identify trade opportunities. Learning from your own mistakes is important, but in this short video we will highlight some of the most common mistakes to try and avoid. See all.

Trade CFDs on over currency trading pairs, including all the major FX pairs and a huge range of minor and exotic currencies. What is a spread when trading Forex and CFDs? Enhance your trading knowledge and learn how to use our platforms with our useful CFD trading guides.

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An FX option is a financial derivative that gives the right but not the obligation to buy or sell a currency pair at a set price on a specified date.? What is ethereum? What are the risks? Cryptocurrency trading examples What are cryptocurrencies?

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