Features of forex CFD trading

Why trade forex CFDs?

Many traders are drawn to forex for the market’s volatility and extended trading hours compared to other markets like stocks or indices. Trading forex CFDs enables you to:

1. Trade on forex volatility
2. Trade around the clock
3. Go long or short
4. Access high liquidity when available
5. Access leveraged trading products
6. Choose from a wide range of currency pairs
7. Hedge with forex CFDs
8. Access tools to help you trade

With CFDs, you can lose more than you deposit, you do not have ownership in the unerlying asset, and you may be subejct to margin close-outs if you do not maintain sufficient margin.

Trade on forex volatility

The high volume of currency trades each day translates into billions of dollars every minute, which makes the price movements of some currencies extremely volatile. You can potentially reap large profits by taking a position on price movements in either direction. But, volatility is a double-edged sword – the market can quickly turn against you, so it’s important to limit your exposure with risk-management tools.

Go long or short

With us, you’ll trade forex with CFDs. CFDs are financial derivatives, meaning you can go long or short.

Going long means that you expect the price of a forex pair to rise, while going short means that you expect the price to fall. You’d go long if you think the base currency will strengthen against the quote currency, meaning you expect the pair’s price to rise. Alternatively, you’d go short if you think that the base will weaken against the quote, meaning that you expect the pair’s price will fall.

For reference, the base currency is always on the left of a currency pair and the quote currency is always on the right. The price for a forex pair states how many of the quote currency you would have to sell in order to buy a single unit of the base.

It’s important to note that CFDs are leveraged, which we’ll cover further below.

Access leveraged trading products

With us, you can trade forex via CFDs. CFD products are leveraged. Leverage in forex enables you to open a position on the currency market by paying just a small proportion of the full value of the position up front.

For example, opening a trade on EUR/GBP might require a deposit worth just 3.33% of the total value of the position. This initial deposit is referred to as margin.

The profit or loss you make will reflect the full value of the position at the point it is closed, so trading on margin offers an opportunity to make large profits from a relatively small investment. But, it can also amplify any losses, which could exceed your initial deposit. So, it’s important to consider the total value of your leveraged forex trades before you open a position.

We have a range of risk-management tools to help you control your exposure to risk, including stop losses, trailing stops, guaranteed stops and price alerts.

Choose from a wide range of CFD currency pairs

Forex CFD trading gives you the opportunity to trade a wide variety of currency pairs, taking a position on global events and the relative strength of major and minor economies.

Our CFD offering lets you trade over 80 currency pairs including:

• Major currency pairs like GBP/USD, EUR/USD, and USD/JPY
• Minor pairs like USD/ZAR, SGB/JPY, CAD/CHF
• Emerging currency pairs like USD/CNH, EUR/RUB and AUD/CNH
• Exotic pairs like EUR/CZK, TRY/JPY, USD/MXN

These CFD pairs are all available to trade on our award-winning trading platform and app¹ when you create an account with us.

Hedge with forex CFDs

Hedging is a technique that can be used to reduce the risk of unwanted moves in the forex market by opening multiple strategic positions. Although volatility is part of what makes forex so exciting, hedging can be a good way of mitigating or limiting your loss to a known amount.

There are a variety of strategies you can use to hedge forex, but one of the most common is hedging with correlated currencies. By opening opposing positions on forex pairs that are positively correlated – like GBP/USD and EUR/USD – you can limit your downside risk. For example, a loss on a short EUR/USD position could be mitigated by a long position on GBP/USD.

Alternatively, you could use forex CFD trading to hedge against loss in other markets, such as commodities. As an example, USD/CAD generally has an inverse relationship with crude oil. So, a long USD/CAD position can be used as a hedge against falling oil prices.

Why trade forex CFDs instead of share CFDs?

Shares are a popular market in their own right, and many traders will choose the perceived stability of the stock market over the heightened volatility in forex. That said, there are a number of reasons why some people choose forex CFD trading over share CFDs:

• Market opening hours: the stock market is limited to an exchange’s opening hours, whereas the forex market is open 24-hours a day. But, it is worth noting that certain stock index CFDs are available for weekend trading
• Higher liquidity: the forex market sees an average daily turnover of $6 trillion, whereas the stock market sees comparatively fewer traders per day
• Greater volatility: the stock market tends to have more stable prices that change over a longer period of time. Although this is great for long-term trading styles, the volatility of the forex market can create an exciting range of opportunities for short-term traders