Page 21 - WHAT IS FOREX (2)_Neat

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The spread is the difference between the buying (Ask) price and

the selling (Bid) price of a currency pair. It’s how brokers earn
money-like their built-in fee.

Example: If EUR/USD is quoted as 1.1000 / 1.1002,the spread is
2 pips.

The smaller (tighter) the spread, the better for traders.
High spreads usually appear during low liquidity hours or before

big news events.

3. Leverage

Leverage allows traders to control a large position with a small
amount of capital.It’s like borrowing money from your broker to

multiply your trading power.

Example: If your account has $1000 and you use 1:100 leverage,

you can control a trade worth $100,000.

This increases both potential profit and potential loss.

Warning:
Leverage is a double-edged sword.While it can boost gains, it can

also wipe out an account quickly if the trade goes against you.

4. Buy / Sell Positions