Trading Terms

Essential Trading Terms 

It is vital that you understand the basic terms of Forex & CFD trading. This will enhance your trading experience when investing on our leading trading platforms. Make sure to read the basic trading terms below before you begin trading with us.

Buy/Sell Spread

When an investor buys or sells units in a fund, the investment manager trades the underlying assets of that fund to either invest the money or provide cash for the withdrawal. This trading generates transaction costs, such as brokerage, which are paid for by the fund.

The buy-sell spread is the difference between a fund's entry price and exit price and is a cost incurred by investors each time they invest or withdraw funds. The buy-sell spread is retained by the fund (it is not a fee paid to us) and contributes towards the transaction costs associated with the fund buying or selling assets.

The spread ensures that those investors joining or leaving the fund contribute towards these transaction costs and other investors who are not joining or leaving at that particular time are not disadvantaged.

A buy-sell spread is expressed as a percentage of the net value of the Fund's assets. The buy-sell spreads for our funds are reviewed annually and can change from time to time. Any changes are updated on this website.

Currency Quotes

To put the term simply, a quote is known as the current price which is asked or offered for an asset. A quote will always be in the form of two figures. The first will be the Sell (Bid) price and the second figure will be the Buy (Ask) price. For example, as is the case with the following EUR/USD pair: 1.3550/1.3553. When trading on the Forex market, currency pairs are quoted according to the rate at which the online broker wishes to either buy or sell the currency pair in question.

Forex Rollover

Rollover is when the settlement date of a trade is rolled forward to the next value date. The process of rollover includes the positions being charged swap or credited based on the difference in interest rates between the two traded currencies.

FX Pips

Pip is one ten-thousandth of a point (1/10,000) or the typical unit to measure price changes for a currency pair. There are also mini pips that are present on the GoForex platform, enabling traders to get tighter spreads. The majority of currency pairs are quoted in decimal places. For example, this is the case with the EUR/USD where a movement from 1.3000 to 1.3001 is 1 pip (0.0001). The USD/JPY pair is quoted with 3 decimal places. For example 85.00, so 1 pip equals 0.01 JPY. Please note that the GoForex platform quotes in 3 decimal places.

Lot Measurements

Many Forex brokers trade their assets in lot measurements. Lots are traded in various units, such as 100,000 (100K) units. A lot is a representation of the trade size of a position in an underlying asset. GoForex uses lots, but it is important to note that not all brokers use lots. The measurement helps you understand how to optimize your trading. Opening up many lot positions increases your exposure to sudden market changes.

Margin Requirements

The margin represents the equity which is required to open or maintain a trade, as percentage of the current rate. You need to only deposit a small percent of the current value of the asset when trading on margin. For example, if you trade an index which requires a margin of 1%, you can use a leverage of 100 times your deposit. Therefore, a deposit of $1,000 can uphold a trade worth $100,000.

Trading Leverage

Leverage is commonly used in Forex & CFD trading nowadays. It involves investing in a position that is larger than your equity. While using leverage, you are depositing a small percentage of the market value of the asset. For example, if the stock you intend to trade requires a margin of 1%, this allows you to leverage your investment 100 times the required deposit. To put it simply, if you deposit $1,000, you can control an investment of $100,000.

Trading Spread

The spread is the difference between the Ask price which a position is bought and the Bid price at which a trading instrument is sold. In the case that the EUR/USD pair is trading at 1.30001/30003, the spread is 0.2 pips.

You will be able to know the spread by simply reading the quote of a currency pair or other instrument. The spread is wider if there is a lack of buyers and sellers in the market. On the other hand, the spread will be tighter if there are many market participants trading the currency pair in question.