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Discover how the world’s largest and most liquid financial market operates. We explain how international currencies are traded and give you the key facts you need to know before you enter this popular market.
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As a private investor, you can become a retail foreign exchange trader using an online retail forex platform, via a broker or bank.
Brokers generally offer their services in the following ways:
As an agent
The broker will hunt down the best prices in the market on your behalf and place the deal for you, in exchange for a charge.
As a dealer or market maker
The broker acts as principal in the transaction and simply quote the price at which they are prepared to deal.
With FX trading, you’ll benefit from leverage, and you’ll be able to trade on either falling or rising markets. Most online forex brokers don’t charge commission, instead making their money through the dealing spread.
By trading forex as a Contract for Difference (CFD) with IG, you can gain exposure to the markets at a fraction of the cost of owning the underlying currencies.
The idea is that you agree to exchange the difference in value of a particular currency pair between the time you open your position and the time you close it.
You can take both short- or long-term positions on a huge range of currency pairs, from the highly popular majors to exotic pairs appealing to the specialist trader.
Just as in conventional forex trading, with a forex CFD the principle is that you buy one currency while simultaneously selling another. So you might decide to buy sterling (GBP) while selling the US dollar (USD) as a CFD. This would be an example of opening a long position on the forex pair GBP/USD.
All forex CFDs are commission free. The only charge you’ll pay is the dealing spread, plus funding adjustments to reflect the effects of interest, if you hold your position for more than one day. The funding adjustment is based around the tom-next spread for the currency pair concerned, including a daily admin charge.
To find out more, please visit our introduction to CFDs section.
CFDs are a leveraged product and can result in losses that exceed your initial deposit.
Digital 100s are a form of option. They pose a question and you pick whether the outcome will be yes or no.
A digital 100 may ask you, for example, if the pound against the dollar will touch a certain level today. This allows you to speculate on the performance of that currency pair within a specific time period, achieving either a pre-determined profit or nothing at all.