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What is spread in Forex?

Forex spread - what is it?

Spread means the difference between the buying and selling prices of a given currency pair at Forex.

For example:

Looking at the boards in the counter you can see the buying and selling prices. They differ from each other by a certain amount of pennies, which are the profit of the owner of the counter. These pennies are just the spread between the purchase price and the selling price.

Similarly to Forex, only on a much smaller scale, this margin, calculated in pips, is present on every brokerage platform. The lower the margin, the cheaper the platform.

Every broker earns profits from the spread.

Forex trading: leverage, flights and positions

Lever on Forex

Leverage is a tool by which a small sum of money can control a position of much greater value. This is the relationship between the fixed-interest rate borrowed by the brokerage company (credit) and the value of the invested capital (deposit).

Without leverage you would need a very large capital to be able to earn anything on Forex. It is because of this that so many people choose to venture into this capital market. In the end everyone can risk $ 100, while only the selected ones can risk the sum of $ 10,000.

Flights on Forex

This is a unit specifying the minimum amount of currency that can be purchased on a given platform and account type. This is usually for mini accounts 10,000 and for standard accounts 100,000.

With the above leverage (200: 1) for one flight ($ 10,000), your mini deposit will be $ 50 in your account and $ 100 in the standard deposit (100: 1), where 1 lot = 100,000.

Positions on Forex

Positions are nothing but purchased or sold flights. Whenever you decide to buy or sell a given currency pair, you open new positions as often as you can.

If you have purchased or sold a certain number of flights and are now subject to change, then you have an open position. It will be open until you open the same position in the other direction (if you bought it you sell and if you sold it you buy). The opposing positions stand each other (except for hedging)

A closed position is an item that has been lifted by another (opposite) position or closed with a button on the platform (so called "square" or "close").

We distinguish two types of items: short and long positions. Short position is the position you opened when selling a given currency pair. Accordingly, the position of buying a pair of flights is a long position.


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