Glossary: Key Forex & CFD Trading Terms

Understanding fundamental terms is crucial for managing risk and making informed decisions in Forex and CFD trading. Here’s a concise guide to the most important concepts.

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Leverage

Leverage allows you to open larger positions by depositing a smaller amount of capital. For example, with 1:400 leverage, €25 controls a €10,000 position. While this can accelerate profits, it also increases the risk of significant losses. At Gold Stait Brokerage, our CFDs feature fixed leverage based on the asset class.

Margin

Margin is the minimum capital required to open and maintain a position. With us, the required margin is the investment amount you select before opening a trade. Maintaining this margin is essential to avoid automatic position closure.

Margin Call

A margin call occurs when your account balance falls below the maintenance margin. Although we do not issue traditional margin calls, your position will automatically close when your stop loss is triggered.

Is Leveraged Trading Risky?

Yes — leverage magnifies both gains and losses. While your initial margin is small, profits and losses are calculated on the full position size (Invested Amount × Leverage), making risk management critical.

Profit & Loss (P&L) Calculation

Pip Value Formulas:

• Forex (non-JPY): (Invested Amount × Leverage) / Open Price / 10,000
• Forex (JPY quoted): (Invested Amount × Leverage) / Open Price / 10,000
• Equities & Commodities: (Invested Amount × Leverage) / Open Price / 100

📌 The pip value is shown in your account's base currency.

P&L Formula:
(Pip Movement × Pip Value) – Swap Charges

Pending Orders

Use pending orders to automate trade entries:

• Buy Limit: Buy at a lower price than current market value.
• Sell Limit: Sell at a higher price than current market value.

⚠️ There may be minimum distance requirements from the current market price.

Take Profit

This is an automatic exit point at a profitable level. You can set or adjust it before or during the trade.
📌 Always check platform restrictions on the distance between the open price and take profit.

Example:
SELL EUR/USD at 1.1208 with €100 investment → Pip Value = €3.5688
Take Profit at 1.1180 = ~€100 profit
Take Profit at 1.1100 = ~€385.40 profit

Stop Loss

A stop loss automatically closes a losing trade at a pre-set level. Changing the stop loss affects your margin requirement, but not your pip value.

Example:
SELL EUR/USD at 1.1208 with €100 investment → Pip Value = €3.5688
Stop Loss at 1.1236 = ~€100 loss
Stop Loss at 1.1250 = ~€150 loss → Margin increases to €150

Manual Close

You can manually close any open position at any time by clicking the “Close” button next to your open trade in the platform dashboard.

Trading Costs

• Spread: The difference between bid and ask price. This is your entry cost.
  Cost = Spread × Pip Value
• Swap: Overnight interest charged on open positions held past market close.
  Swap Formula: Invested Amount × Leverage × Swap Rate / 365