All transactions made on the Forex market involve the simultaneous purchasing and selling of two currencies. These are called currency pairs and include a base currency and a quote currency.
Foreign currency exchange (also known as forex or FX) refers to the global, over-the-counter market (OTC) where traders, investors, institutions, and banks exchange, speculate on, buy and sell world currencies.
Trading is conducted over the ‘interbank market’, an online channel through which currencies are traded 24 hours a day, five days a week. Forex is one of the largest financial markets, with an estimated global daily turnover of more than $6.6trillion.
Forex prices are often quoted to four decimal places because their spread differences are typically very small. However, there is no definitive rule when it comes to the number of decimal places used for Forex quotes.
On the Forex market, trades in currencies are often worth millions, so small bid-ask price differences (i.e., several pips) can soon add up to a significant profit. Of course, such large trading volumes mean a low spread can also equate to significant losses.
Always trade carefully and consider the risks involved.
The only technical difference is that when you are trading with a provider of a Forex CFD, you will not be buying the actual currency. You will be trading on the provider's prices. A problem with CFDs is that they almost never have exactly the same identical prices or the same spreads in their underlying currency pairs. Your CFD provider acts as the counter-party and sole market maker in all your trades, so in the absence of in-house hedging mechanisms, you can end in a situation where when you win, the provider will lose, while when the provider wins, you will lose. When trading in Forex CDFs, a significant advantage is that the price at which a Forex CFD is bought becomes the base price. The trader isn't concerned with the least or the maximum value of the currency pair. Instead, he is only affected by whether the price of a currency is above or below the contract price.
When the contract is closed, SNP-500 promises to pay a certain amount for every pip the bought currency has moved in your favor, if it moved against you it's you who pays the broker. The term comes from the fact that upon closing the position, you take the difference between the closing price and the opening price and that money is transferred/deducted to/from your account. It is important to note that at no point you physically or virtually possess the bought currency, nor must you deliver the sold currency.