Understand the basics with our interactive market course.
A financial market forms part of a global ecosystem and refers in general to any marketplace where financial assets are bought and sold. There are physical stock exchanges in major financial centres, such as London, New York, Chicago, Tokyo, Sydney, Moscow, etc. The trading sessions take place within the local business hours of these cities between Monday and Friday. Trading can be a physical purchase of assets or through derivatives, both exchange and OTC traded, allowing traders from all over the world to buy and sell a variety of currencies and commodities via online platforms.
A day on the financial market is divided into global trading sessions: the opening hours of the largest stock exchanges in the world. They open during daytime hours in the respective time zone of each exchange.
A Trading day begins with the Pacific session, then the Asian one overlaps it; the London session takes over and finally the American one.
In the hours when sessions overlap, the quotes change particularly rapidly, due to increased volatility (i.e. more market participants).
FX is priced and available to trade 24/5, covering all exchange opening hours. The price of national currencies on the Forex market (for example, the US Dollar) reflects how the market perceives the current and future position of the national economy. If positive news is published, currency quotes will generally start to rise, whereas news that is perceived to be negative, will generally cause prices to fall. If you manage to open a ‘‘buy’’ trade via your online platform and wait until the price increases, you can make a profit, which will be added to your balance once the trade is closed. In cases where the forecast is not right and the chart goes down, your trade will be closed in the red.
The prices of financial market assets are constantly changing. As soon as a new quote arrives at the trading platform, it forms the chart of which there are three main types: - Line chart - Bar chart - Japanese candlesticks It is important to note, that on all FxPro trading platforms, charts are built from ‘’bid’’ prices only. The ‘’ask’’ price can be viewed as a horizontal line on the chart.
A ‘pip’ (point in percentage) is the smallest standard increment in which a currency pair can move. For almost all pairs, a pip is the fourth digit after the decimal point. A popular exception is the Japanese yen, where a pip is a change in the second digit after the decimal point. This is an example of how pair quotes are displayed, and the pip for each pair is highlighted: EUR/USD = 1.13422GBP/CAD = 1.71791USD/JPY = 110.771
Leverage multiplies traders’ buying power, allowing investors to control a larger investment than their capital, potentially increasing their returns while only investing a percentage of the overall value of the asset in question. However, if you don’t use leverage wisely, it is possible to lose the entire Equity in a very short space of time– and you may not even notice it! Therefore, leverage is a double-edged sword, and you need to consider how much risk you are willing to take.The leverage available to you may vary depending on your Jurisdiction, please refer the FxPro ‘’Leverage Information’’ for details.
‘Margin’ (or used margin) represents the amount of funds required to secure positions. When you place a trade, the ‘margin’ is locked in until the trade is closed. The exact required margin amount depends on the instrument, the size of the position and the leverage.To calculate it you can use the formula: Trade size in units / Leverage = Margin in base currency Trade size in units / Leverage X Exchange rate = Margin in quote currency Note that the ‘Margin’ figure displayed in your account details represents the total used margin for all open trades
"CFD" stands for "contract for difference" and consists of an agreement (contract) to exchange the difference in the value of a currency, commodity, share or index between the time at which a contract is opened and the time at which it is closed. If the asset rises or falls in price, the buyer receives or earns cash from the seller. CFD pricing is based on the movements of the underlying asset.As a very simple example: if you buy a ‘contract for difference’ at $14 and sell at $16 then you will receive the $2 difference. If you buy a CFD at $10 and sell at $8 then you pay the $2 difference. Basically, a CFD contract means that you are not physically exchanging currencies, nor purchasing any assets, but you are simply making profit or loss based on your speculation of the price movement.
