MetaTrader 5
What is forex trading
The foreign exchange market (forex) is the world's most liquid and most traded market, where trades worth trillions are completed each day.
Forex trading involves buying one currency and selling another currency at the same time. This is why you always see them quoted in pairs. For example: EUR/USD and GBP/USD.
Which currencies can I trade
Forex trading involves buying or selling these "currency pairs". When you buy a currency pair such as EUR/USD, it means that you are buying the EURO and selling the USD at the same time.
Currency pairs are categorised as follows:
- Major pairs – Consist of the world's most widely traded currency pairs
- Minor pairs – Consist of less liquid currency pairs
- Exotic pairs – Consist of one non-USD major currency that's paired with the currency of an emerging economy, for example: GBP/HKD
The spread – why it matters
When you see currency pairs offered by a broker or trading service, there are usually two prices available: the ask price and the bid price. These are also known as the buy price and the sell price respectively.
The spread is the difference between the ask and bid price.
Based on the table below, can you tell what is the spread for the EUR/USD currency pair?
| Symbol | Bid | Ask |
|---|---|---|
| EUR/USD | 1.05652 | 1.05653 |
| GBP/USD | 1.24509 | 1.24515 |
| USD/CHF | 1.01010 | 1.01015 |
| USD/JPY | 113.248 | 113.251 |
| USD/CAD | 1.31441 | 1.31444 |
| AUD/USD | 0.76876 | 0.76879 |
| AUD/NZD | 1.06683 | 1.06691 |
| AUD/CAD | 1.01043 | 1.01050 |
| AUD/CHF | 0.77652 | 0.77658 |
Let's calculate the spread for EUR/USD:
Ask price – Bid price = Spread
1.05653 – 1.05652 = 0.00001
What time is the market open for me to trade
The forex is an over-the-counter market where trading takes place between two parties, and not with a centralised exchange or marketplace.
Depending on your broker or trading platform, you can start trading from the time the Sydney market opens on Monday morning to the time the New York market closes on Friday evening – up to 24 hours a day, five days a week.
Binary.com clients can trade forex from Sunday 21:00 GMT to Friday 21:00 GMT.
How to trade forex
A forex trader always has one objective in mind when trading: to exchange one currency for another in order to make a profit.
This is why we've come up with the following three-step tutorial to help you bridge that gap and make your first trade:
Step 1: Learn to read currency pairs
One of the first things most forex traders learn is how to read a currency pair. There are two parts to a currency pair
EUR / USD
Tips
- The base currency is always equal to one unit.
- The ask price of the currency pair indicates how much of the quote currency is required to buy one unit of base currency. This is more commonly known as the exchange rate.
For example, if you see that the EUR/USD has an ask price of 1.05382, you'll sell 1.05382 USD (quote currency) for every 1 EUR (base currency) you buy.
If the bid price is 1.05229, you'll buy 1.05229 USD for every 1 EUR you sell.
Step 2: Understand when to buy and when to sell
Think that a certain currency will go up or down? Learn when you should buy (or "go long") and when to sell (or "go short").
Traders choose to buy a certain currency pair if they think the value of the base currency will rise. The opposite is also true: they sell a certain currency pair if they think the value of the base currency will fall.
Let's compare the differences between buying and selling, using the EUR/USD as an example:
Buy
- You're buying the EUR and selling the USD.
- You expect the EUR to rise in value so you can sell it back for a profit.
- Buy = go long
Sell
- You're selling the EUR and buying the USD.
- You expect the EUR to fall in value so you can buy it back at a lower price (and make a profit).
- Sell = go short
Step 3: How to purchase your first currency pair
After you've decided which position you want to take, your next step is to purchase that currency pair on MetaTrader 5.
Here's an example of the EUR/USD currency pair and its bid-ask price:
To go long, you'll want to click on 'Buy' to purchase 1 EUR for 1.17726 USD
To go short, you'll click on 'Sell' to sell 1 EUR and receive 1.17725 USD in return.
Forex margin policy
Margin allows you to trade on leverage – meaning your existing capital can give you a much higher level of market exposure.
For example, if you wanted to purchase 100 units of a particular asset that's trading at 50 USD per unit through a traditional broker, it would typically cost you 5,000 USD for this transaction.
However, with leverage you can purchase those 100 units at a fraction of the typical cost – depending on the leverage afforded to you by your broker or trading platform.
How to calculate margin
You can determine the margin for our currency pairs by using the formula below:
For example, if you buy one lot of the USD/JPY pair with a contract size of 100,000 and leverage of 100:1, the margin that you need to purchase one lot of USD/JPY will be calculated as follows:
What's a margin call and how is it applied
Equity is the sum of your balance and floating profit and loss (PnL). Margin level is the ratio of equity to margin. When that ratio reaches a specified percentage (usually 100%), your account will be placed under margin call. This does not affect your ability to open new positions; it serves to alert you that your floating PnL is moving lower. However, it is recommended to add funds to your account in order to keep your positions open. Alternatively, you may close losing positions.
What's a stop out level and how is it applied
If your margin level reaches an even lower level (usually 50%), it will reach the stop out level where it is unable to sustain an open position. This will lead to some, or all your open positions being forcibly closed (also known as "forced liquidation").
When your account hits the forced liquidation level, your orders and positions are forcibly closed in the following sequence:
- We delete an order with the largest margin reserved.
- If your margin level is still under the stop out level, your next order will be deleted. However, orders without margin requirements will not be deleted.
- If your margin level is still under the stop out level, we will close an open position with the largest loss.
- We will continue to close open positions until your margin level becomes higher than the stop out level.
Forex contract specifications
Major pairs
| Symbol | Description | Lot size | Minimum volume | Volume step |
|---|---|---|---|---|
| AUD/CAD | Australian dollar vs Canadian dollar | 100,000 | 0.01 | 0.01 |
| AUD/CHF | Australian dollar vs Swiss franc | 100,000 | 0.01 | 0.01 |
| AUD/JPY | Australian dollar vs Japanese yen | 100,000 | 0.01 | 0.01 |
| AUD/NZD | Australian dollar vs New Zealand dollar | 100,000 | 0.01 | 0.01 |
| AUD/USD | Australian dollar vs US dollar | 100,000 | 0.01 | 0.01 |
| EUR/AUD | Euro vs Australian dollar | 100,000 | 0.01 | 0.01 |
| EUR/CAD | Euro vs Canadian dollar | 100,000 | 0.01 | 0.01 |
| EUR/CHF | Euro vs Swiss franc | 100,000 | 0.01 | 0.01 |
| EUR/GBP | Euro vs British pound | 100,000 | 0.01 | 0.01 |
| EUR/JPY | Euro vs Japanese yen | 100,000 | 0.01 | 0.01 |
| EUR/NZD | Euro vs New Zealand dollar | 100,000 | 0.01 | 0.01 |
| EUR/USD | Euro vs US dollar | 100,000 | 0.01 | 0.01 |
| GBP/CHF | British pound vs Swiss franc | 100,000 | 0.01 | 0.01 |
| GBP/JPY | British pound vs Japanese yen | 100,000 | 0.01 | 0.01 |
| GBP/USD | British pound vs US dollar | 100,000 | 0.01 | 0.01 |
| NZD/USD | New Zealand dollar vs US dollar | 100,000 | 0.01 | 0.01 |
| USD/CAD | US dollar vs Canadian dollar | 100,000 | 0.01 | 0.01 |
| USD/CHF | US dollar vs Swiss franc | 100,000 | 0.01 | 0.01 |
| USD/JPY | US dollar vs Japanese yen | 100,000 | 0.01 | 0.01 |
Minor pairs
| Symbol | Description | Lot size | Minimum volume | Volume step |
|---|---|---|---|---|
| CAD/CHF | Canadian dollar vs Swiss franc | 100,000 | 0.01 | 0.01 |
| CAD/JPY | Canadian dollar vs Japanese yen | 100,000 | 0.01 | 0.01 |
| EUR/NOK | Euro vs Norwegian krone | 100,000 | 0.01 | 0.01 |
| EUR/PLN | Euro vs Polish zloty | 100,000 | 0.01 | 0.01 |
| EUR/SEK | Euro vs Swedish krona | 100,000 | 0.01 | 0.01 |
| GBP/AUD | British pound vs Australian dollar | 100,000 | 0.01 | 0.01 |
| GBP/CAD | British pound vs Canadian dollar | 100,000 | 0.01 | 0.01 |
| GBP/NOK | British pound vs Norwegian krone | 100,000 | 0.01 | 0.01 |
| GBP/NZD | British pound vs New Zealand dollar | 100,000 | 0.01 | 0.01 |
| GBP/SEK | British pound vs Swedish krona | 100,000 | 0.01 | 0.01 |
| NZD/CAD | New Zealand dollar vs Canadian dollar | 100,000 | 0.01 | 0.01 |
| NZD/JPY | New Zealand dollar vs Japanese yen | 100,000 | 0.01 | 0.01 |
| USD/CNH | US dollar vs Chinese renminbi | 100,000 | 0.01 | 0.01 |
| USD/MXN | US dollar vs Mexican peso | 100,000 | 0.01 | 0.01 |
| USD/NOK | US dollar vs Norwegian krone | 100,000 | 0.01 | 0.01 |
| USD/PLN | US dollar vs Polish zloty | 100,000 | 0.01 | 0.01 |
| USD/SEK | US dollar vs Swedish krona | 100,000 | 0.01 | 0.01 |
| USD/ZAR | US dollar vs South African rand | 100,000 | 0.01 | 0.01 |
Exotic pairs
| Symbol | Description | Lot size | Minimum volume | Volume step |
|---|---|---|---|---|
| AUD/SGD | Australian dollar vs Singapore dollar | 100,000 | 0.01 | 0.01 |
| CHF/JPY | Swiss franc vs Japanese yen | 100,000 | 0.01 | 0.01 |
| EUR/HKD | Euro vs Hong Kong dollar | 100,000 | 0.01 | 0.01 |
| EUR/ILS | Euro vs Israeli new shekel | 100,000 | 0.01 | 0.01 |
| EUR/MXN | Euro vs Mexican peso | 100,000 | 0.01 | 0.01 |
| EUR/SGD | Euro vs Singapore dollar | 100,000 | 0.01 | 0.01 |
| EUR/TRY | Euro vs Turkish lira | 100,000 | 0.01 | 0.01 |
| EUR/ZAR | Euro vs South African rand | 100,000 | 0.01 | 0.01 |
| GBP/SGD | British pound vs Singapore dollar | 100,000 | 0.01 | 0.01 |
| GBP/TRY | British pound vs Turkish lira | 100,000 | 0.01 | 0.01 |
| HKD/JPY | Hong Kong dollar vs Japanese yen | 100,000 | 0.01 | 0.01 |
| NZD/CHF | New Zealand dollar vs Swiss franc | 100,000 | 0.01 | 0.01 |
| NZD/SGD | New Zealand dollar vs Singapore dollar | 100,000 | 0.01 | 0.01 |
| SGD/JPY | Singapore dollar vs Japanese yen | 100,000 | 0.01 | 0.01 |
| USD/HKD | US dollar vs Hong Kong dollar | 100,000 | 0.01 | 0.01 |
| USD/ILS | US dollar vs Israeli new shekel | 100,000 | 0.01 | 0.01 |
| USD/RUB | US dollar vs Russian ruble | 100,000 | 0.01 | 0.01 |
| USD/SGD | US dollar vs Singapore dollar | 100,000 | 0.01 | 0.01 |
| USD/THB | US dollar vs Thai baht | 100,000 | 0.01 | 0.01 |
| USD/TRY | US dollar vs Turkish lira | 100,000 | 0.01 | 0.01 |
How to read the contract specifications table
The forex is typically traded in lots. One standard lot is equivalent to 100,000 units. Each time you open a position on a currency symbol, you can start with a minimum transaction of 0.01 lots.
For information about forex leverage, refer to our Margin Policy.
Important notes on our swap rates (overnight funding)
If you keep any positions open overnight, an interest adjustment will be made to your trading account as indication of the cost required to keep your position open.
This interest adjustment (or swap rate) is based on interbank lending rates, on top of a 2% fee.
The interest adjustment is calculated in 'points' – meaning we will convert the relevant interbank lending rates to 'points' in the base currency.
Please take note that our swap rate also depends on the time and days you hold your positions open:
- You will be subjected to swap rates if you keep a position open past 23:59:59 GMT.
- Positions that are still open on Wednesday at 23:59:59 GMT will be charged three times the swap rate to account for weekends – a standard practice for all forex brokers.
- Our swap rate may also be adjusted to take holidays into account.
