This means that, unlike any other financial market, traders can respond to currency fluctuations caused by economic, social and political events at the time they occur, without having to wait until the relevant Exchange opens.

Spread Co enables you to trade foreign exchange using FX CFDs (Contracts For Difference) which simulate the price performance of an exchange rate without the need to physically own the relevant currencies. FX trades in a very similar way to other CFDs, except for some minor differences, as described below.

Currency pairs

During an FX trade, you buy one currency while simultaneously selling another in order to pay for the first currency.

The two currencies which are the subject of a single FX trade are referred to as a currency pair. For example, USDJPY is a commonly traded currency pair. USD stands for United States Dollar and JPY stands for Japanese Yen. The most common traded (and therefore most liquid) currencies are known as the “Majors” and this includes the US Dollar, Japanese Yen, Euro, British Pound, Swiss Franc, Canadian Dollar and Australian Dollar. Each currency is referred to for the purposes of FX trading by a three-letter code.

The first currency in a currency pair is called the 'base currency'. The second currency in a currency pair is called the 'quote' or' term currency'. The exchange rate quoted for the purposes of FX trading is how much of the quote currency you need to sell in order to buy one unit of the base currency.

Quotation principles

Exchange rates are almost always quoted with five significant figures. This means that most currencies are quoted to the ten thousandth of a currency unit. For example, 1.8525 would be a valid quote for GBPUSD.

The smallest possible exchange rate movement is called a pip. For example, GBPUSD can increase by 0.0001 from 1.8500 to 1.8501, therefore one pip is equal to 0.0001 for GBPUSD. USDJPY can increase by 0.01 from 115.00 to 115.01 therefore one pip is equal to 0.01 for USDJPY. If USDJPY goes up by 0.15, you would say, "USDJPY went up 15 pips".

The spread

The spread, also known as “the dealing spread” or “the bid / offer spread”, is the difference between the prices at which you can buy and sell.

The spread is how market makers such as Spread Co are compensated for creating a market for you to trade FX. A wide or large spread is more expensive to you. A narrow or small spread is cheaper to you.

The size of the spread represents how much the market must move in your favour before you begin to make a trading profit. Your trades will always begin at a loss calculated by multiplying the trade quantity by the size of the dealing spread. For example, if you buy 100,000 USDJPY at a JPY 0.03 spread, your trade will begin at a JPY 3000 loss.