Trading Mechanics

A trade begins when you submit an order through a trading platform. The order is processed according to its type, the instrument's trading rules, available liquidity, and your provider's execution arrangements.

Your account may show an open position, its entry price, current market price, and unrealized profit or loss. The displayed result can change as the market moves. Closing the position realizes the result, subject to applicable costs and execution conditions.

The bid is the price at which a market participant is willing to buy an instrument, while the ask is the price at which a participant is willing to sell it. In a typical trading quote, the ask is higher than the bid.

The spread is the difference between these prices. It is one of the transaction costs traders should consider. Spreads may widen during low liquidity, major news, market openings, or volatile conditions.

A market order requests execution at the best available prices under the platform's execution rules. The final price can differ from the displayed quote, particularly in fast-moving markets.

A limit order specifies a price limit. A buy limit is generally placed below the current market price, while a sell limit is generally placed above it. A stop order becomes active when its trigger condition is reached. The precise behavior depends on the platform and product.

A pending order is not a guarantee of execution. Price gaps, liquidity, trading hours, and broker rules can affect whether and how an order is filled.

Position size determines how much exposure a trade creates. Forex commonly uses lots, but the contract size represented by one lot depends on the instrument and provider.

For example, one standard lot in many major forex pairs represents 100,000 units of the base currency. This convention does not apply universally to gold, indices, crypto, or every broker's product. Always check the contract specifications.

Leverage allows a trader to control a larger notional exposure relative to the funds required as margin. It can make capital usage more efficient, but it also magnifies the impact of price movements on the trader's equity.

Margin is the collateral required to maintain a position. Required margin depends on the product, position size, leverage, price, and provider rules. If equity falls too far relative to margin requirements, the platform may restrict trading or close positions under its policies.

A position's profit or loss depends on the difference between its entry and exit prices, the position size, and the instrument's contract specifications. Long positions generally benefit from rising prices; short positions generally benefit from falling prices.

The final result may also be affected by spreads, commissions, financing or swap charges, currency conversion, slippage, and other applicable fees. Some products have different settlement conventions, so always read their specifications.