Course 1 of 5 · Beginner · 23 min
How does trading work?
Who is on the other side of your trade, what a CFD actually is, and why a falling price is a position rather than a problem.
Course overview
Description
This course covers the mechanics underneath every trade you will ever place. We start with who is in the market and what they are doing there, because retail speculation is a small share of it and the rest of the flow explains a lot of the movement.
We then look at what you are actually holding. Retail forex and index positions are contracts for difference: you never own the instrument, you settle the difference in cash, and that single fact explains why selling is as ordinary as buying.
By the end you can say what a position is, what it costs to open, and what happens on each side when the price moves.
Example lesson: why every forex trade has two sides
Every forex quote names two currencies, and you cannot hold one without giving up the other. Buying EUR/USD is not “buying euros” in isolation — it is buying euros and selling dollars in the same action.
That is why there is no cash position inside a pair. You are long one currency and short the other at all times, and the price is simply how many units of the second currency it takes to buy one unit of the first.
There is no neutral position inside a currency pair. You are always long one side and short the other.
| EUR/USD at 1.0850 | |
|---|---|
| You buy 0.10 lots | 10,000 euros of exposure |
| What you are long | Euros |
| What you are short | US dollars |
| One pip is worth | about $1 |
Check your understanding
3 questions. Nothing is recorded and nothing is sent anywhere — the answers are checked in your browser.
You buy EUR/USD. What are you short?
Buying a pair means buying the base currency and selling the quote currency in the same action.
When you hold a CFD on gold, what do you own?
A CFD settles the difference between the opening and closing price in cash. Nothing is delivered or stored.
Why is opening a short as simple as opening a long?
You never hold the instrument, so a sell order needs no borrowing and is placed exactly like a buy.
Practise it before it costs anything
A demo account runs the same platform on the same live prices, with nothing at stake.
