Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You could sustain a loss of some or all of your initial investment and should not invest money that you cannot afford to lose. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

Basis point definition

A basis point (also referred to as bp – pronounced bip or beep) is a unit used in trading to describe movements in interest rates or other percentages. It is equal to one hundredth of one percent, or 0.01%.

The basis point is used because changes in percentage rates involved in trading are often less than 1%. Central bank base rates, for instance, can have a major impact when changed by just a few basis points. The same is true for changes in the yield available from certain investments. If £10,000 is invested in an instrument with a yield, then each basis point move would be equal to £1 of profit returned.

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