Before You Trade The Essentials

Introduction

How to Use This Guide#

This guide is for people who haven't traded yet, or who have traded without fully understanding what is happening in their account. Every term is explained with numbers, because trading is ultimately arithmetic: how much you gain or lose with each move, how much of your money is held, and when your trades are closed.

Read it in order: Chapters 1 to 3 explain what you are actually trading; 4 to 7 cover instruments, their sizes and the value of their moves; 8 to 12 cover your account, its costs and its limits; and 13 to 15 cover the practical side: times, the platform and prices. Chapter 16 is a glossary to come back to whenever you need it.

Chapter 1

What CFD Trading Is#

A contract for difference (CFD) is an agreement between you and the broker to pay the difference in the price of an asset between the moment a trade is opened and the moment it is closed. You do not buy the asset itself.

What this means in practice#

• You don't own the asset: when you "buy gold", there is no gold in your name in any vault, and you cannot take delivery of it. You own a contract whose profit and loss change with the price of gold.
• You can profit from rises and falls: a buy (long) gains if the price rises; a sell (short) gains if it falls. You don't need to own anything in order to "sell" it.
• With leverage: you put up a small part of the trade's value (the margin), but your profit and loss are calculated on the full value (Chapter 10).
• The counterparty is the broker: the contract is between you and the broker, not between you and an exchange. That is why it matters so much who the broker is (see the "How to Choose Your Broker" guide).
• Usually open-ended: most CFDs have no expiry date, and a swap is charged for every night they are held (Chapter 9).

Example#

You bought one contract (1 lot) of gold at $4,000. One contract equals 100 ounces. The price rose to $4,010 and you closed:

Profit = (4010 − 4000) × 100 oz × 1 lot = $1,000

Had it fallen to $3,990, the loss would have been $1,000 by the same calculation. That is all there is to it: price difference × size.

Chapter 2

CFDs and the Regulated Exchange#

A "regulated market" here means an exchange: a central venue where buyers and sellers meet, such as stock exchanges and futures exchanges. The difference between an exchange and CFDs is fundamental.

So why do individuals trade CFDs?#

• Very small sizes that suit small accounts.
• Access to many markets (currencies, gold, oil, indices) from one account and one platform.
• Selling is as easy as buying.

The price: you depend on the broker for prices, execution and safekeeping of your money. That is why choosing the broker is the most important decision before your first trade.

Chapter 3

Spot and Futures#

You will often see two symbols for the same asset on your platform, such as "XAUUSD" and "GOLD", at slightly different prices. The reason is the difference between spot and futures.

Spot#

The price of the asset for immediate delivery — in practice within two business days. This is the "gold price" you hear in the news, and the "EUR/USD rate". Most currency and gold contracts at brokers are based on spot; they are open-ended and charged a swap every night.

Futures#

A standardised exchange contract to buy or sell the asset on a specific future date, at a price agreed today — for example the gold contract on COMEX or the oil contract on NYMEX. Each contract has an expiry month, and as expiry approaches, traders roll to the next contract.

Why their prices differ#

Because anyone who buys gold today and holds it until the delivery date bears a cost: the interest they would have earned on their money, storage and insurance. So the gold futures price is normally higher than spot, and the gap widens the further away the expiry. This gap is called the "cost of carry".

Chapter 4

The Main Financial Instruments#

A broker offers dozens or hundreds of symbols. They fall into families, and each family has different behaviour, costs and trading hours.

1. Currencies (forex)#

They are traded in pairs: the base currency first and the quote currency second. "EURUSD = 1.1000" means one euro equals 1.10 dollars. Buying the pair = buying the first currency and selling the second.

2. Metals#

Usually priced in dollars per ounce: XAUUSD for gold and XAGUSD for silver, and sometimes platinum and palladium. Gold is one of the most traded instruments in our region, and it moves strongly with the dollar, US interest rates and the news.

3. Energy#

US crude oil (West Texas Intermediate — WTI, shown under names such as USOIL or XTIUSD), Brent crude (UKOIL or XBRUSD), and natural gas. Usually futures-based, with rollover dates.

4. Indices#

An index is a number that summarises the prices of a group of shares. You trade its movement, not the shares themselves.

5. Other instruments#

Contracts on individual shares, cryptocurrencies and agricultural commodities. Each has different specifications and leverage caps, and usually higher costs.

Chapter 5

Lots, Their Fractions, and Contract Sizes#

A lot is the unit of trade size. "1 lot" means one full contract, and the size of a full contract differs from one instrument to another.

Lot fractions#

Full contract size for common instruments#

Chapter 6

Indices: Standard, Mini and Micro Contracts#

Indices in particular cause confusion, because "size" is defined by the value of each index point, and that differs between the exchange and brokers.

On the exchange: US futures#

The Chicago Mercantile Exchange (CME) lists each major US index in more than one size, and the difference is the "multiplier": how many dollars one index point is worth.

So a 100-point move in the S&P 500 means $5,000 on the E-mini and $500 on the Micro. The Micro is always one tenth of the E-mini. In a similar pattern, gold has a full contract (100 ounces), a micro contract (10 ounces) and a one-ounce contract, and oil has a full contract (1,000 barrels) and a micro (100 barrels).

At CFD brokers#

Each broker sets the value per point per lot on its own symbols. Commonly 1 lot = $1 (or 1 unit of the index currency) per point, but some make it $10, and some offer two symbols for the same index: standard and mini. An example at $1 per point:

Note two more things: non-US indices are calculated in their own currency (the DAX in euros, the Nikkei in yen), so profits are converted into your account currency; and many brokers apply lower leverage to indices than to currencies.

Chapter 7

Pips, Points and the Value of a Move#

"Pip" and "point" are the two terms used with the most different meanings. This chapter pins them down.

In currencies#

Careful: a "point" in MetaTrader is the smallest possible price change, i.e. one tenth of a pip in currencies. So if someone says "a 200-point stop" on a platform, they may mean 20 pips.

Pip value#

Pip value = Pip size × Contract size × Lots

The rule: when the dollar is second in the pair, the pip value per lot is a fixed $10. When it is first or absent, the value is converted from the quote currency into dollars at the exchange rate, so it changes slightly with the price.

In gold and other instruments#

In gold there is no standard naming. A "point" in MetaTrader is usually $0.01; some traders call $0.10 a "pip", and others mean a whole dollar by "point". In Consultya content: a point on gold = one dollar of price (from 4,000 to 4,001).

Chapter 8

The Two Prices and the Spread#

Every instrument has two prices at every moment, not one.

The spread is the difference between them, and it is a cost you pay the moment you open: every trade starts with a loss equal to the spread.

What affects the spread#

• Liquidity: major pairs are tighter than exotics.
• Time: it widens at the close of the trading day, at the weekly open, and in quiet market hours.
• News: it widens the moment major news is released.
• Account type: standard with a wider spread and no commission, or raw with a tighter spread plus commission.

Chapter 9

Commissions, Swaps and Other Costs#

Commission#

On some accounts the broker charges a fixed amount per lot in exchange for a tighter spread. Read it carefully:

• Per side or round turn? "$3.50 per side" = $7 for the whole trade (open and close).
• Per lot or per million? Some brokers charge per million dollars of traded value.

The rule: compare accounts on full cost = spread + commission, in dollars, for your usual trade size.

Swap#

An amount added or deducted for every night your trade stays open past the close of the trading day (around midnight Jordan time in summer). It comes from the interest-rate difference between the two currencies (or the cost of financing the position), plus the broker's markup. It is charged three times over one night a week, usually Wednesday night.

Swap ($) = Swap points × Point size × Contract size × Lots

On gold, for example: if the long swap is −45 points, a full contract pays $45 on a normal night and $135 on the triple night. (More detail in the "Inside the Broker" guide.)

Other costs#

Chapter 10

Balance, Equity and Margin#

At the bottom of the MetaTrader platform is a line of figures for your account. You must understand these six numbers before your first trade.

An example following an account moment by moment#

An account with $1,000, leverage 1:100. You bought 0.50 lot of EURUSD at 1.1000. Position value = €50,000 × 1.10 = $55,000, and margin = 55,000 ÷ 100 = $550.

Simplified: ignores the spread and assumes constant margin (margin changes slightly with the exchange rate because the account is in dollars and the contract in euros).

Leverage#

Leverage of 1:100 means every $1 of margin opens a position worth $100. Leverage does not change what you lose per pip — that is set by the trade size — it changes how much of your money is held, and therefore how many trades you can open. Its cap differs between regulators and between instruments.

Chapter 11

Margin Call and Stop Out#

As floating losses build up, the margin level falls. At two thresholds the broker steps in.

When does it happen in our example?#

The same account: $1,000, margin $550, and stop out at 50%. It happens when equity becomes 50% of 550 = $275, i.e. a loss of $725. At $5 per pip (0.50 lot), that means 145 pips against you.

Chapter 12

How Much Can I Buy with My Money?#

Two different questions: how much does margin allow me to open? And how much should I open? The first is a margin calculation, the second a risk calculation — and the second is the one that protects you.

1. The maximum margin allows#

Margin = Contract size × Lots × Price (in account currency) ÷ Leverage

An account with $1,000 and 1:100 leverage on all instruments (an assumption — many brokers apply lower leverage to indices and oil):

With the whole account in gold, a move of just $40 — which happens on an ordinary day — almost wipes out the account. That is why the maximum is not a size to use but a limit to stay well away from.

2. The right size: from risk, not from margin#

Lots = Risk ($) ÷ (Stop distance × Value per unit move per lot)

The same account ($1,000), with 1% risk = $10 per trade:

Notice the difference: margin allows 0.25 lot of gold, while sensible risk says 0.02 — less than a tenth of the maximum. And the margin used is $80 out of $1,000. This is what a well-managed account looks like: plenty of free margin, a very high margin level, and a loss fixed in advance if the stop is hit. (More detail in the article "How to Calculate Your Position Size".)

Chapter 13

Trading Sessions in Jordan Time#

The currency and gold market runs 24 hours a day, five days a week, but its activity moves between financial centres. Jordan time (UTC+3) is fixed all year, while Europe, the US and Australia change their clocks.

Sydney changes its clocks in the opposite direction (its summer is our winter), so its hours here are approximate. Japan does not change its clocks. The exact trading hours for each symbol are listed in its specification, and they differ on public holidays.

Times you should know#

How instruments behave across the sessions#

• The yen and the Australian dollar: most active in the Asian session.
• The euro and the pound: most active in the London session.
• Gold: moves in every session, with its strongest moves usually in the London–New York overlap and around US data.
• US indices: traded for long hours at brokers, but most of their volume and movement is in the US stock-market session.
• Oil: reacts to the weekly US inventory data and OPEC news.

Chapter 14

Trading Platforms: MetaTrader 5 from the Inside#

A platform is software that displays prices and sends your orders to the broker's server. It is not the broker, and it does not hold your money.

Common platforms#

How MetaTrader 5 works#

You run the "terminal" on your computer or phone, and it connects to the broker's "server". You log in with your account number, password and server name. All prices come from the server, and all orders are executed there. The platform is usually downloaded from your broker's website.

The main windows#

The New Order window#

• Symbol and volume: in lots (0.01 and up).
• Type: immediate execution at market, or a pending order (limit or stop) at a price you set.
• Stop loss and take profit: set them in the order itself, not afterwards.
• Deviation: in instant execution, the maximum price difference you accept.

The most important window beginners never open: the contract specification#

In Market Watch: right-click the symbol → Specification. There you will find:

A demo account first#

Every broker offers a demo account with virtual money. Use it to learn the platform, practise position sizing, and understand when each figure in your account changes. But remember that spread and execution there may differ from a live account.

Chapter 15

Why Prices Differ from Broker to Broker#

Open gold at two brokers at the same moment and you will see a small difference. You may even find a daily candle with a different high. Most of this is normal, and these are the reasons.

This is also why the levels in an analysis you see on another platform may differ slightly from those on your own. Use your broker's chart for execution, and don't put your stop at the exact level you saw in another source.

Chapter 16

Glossary#

Closing

Disclosure and Sources#

Sources#

1. Chicago Mercantile Exchange (CME) — E-mini and Micro E-mini contracts on US equity indices and their multipliers.
   cmegroup.com — micro-e-mini-futures-products-overview
2. CME — specifications for gold (100 oz), micro gold (10 oz) and the one-ounce contract; and for crude oil (1,000 barrels) and micro crude (100 barrels).
   cmegroup.com — gold-futures · e-micro-gold · ampfutures.com/trading-info/contract-specifications
3. Spot, futures and the cost of carry in gold.
   gold.org/goldhub/data/gold-futures-curves · metalcharts.org/guides/gold-futures-vs-spot
4. Order execution in MetaTrader 5, and orders versus deals.
   metatrader5.com/en/terminal/help/trading/performing_deals · mql5.com/en/articles/211
5. FCA — risk-warning wording, the percentage of losing accounts, and the 50% margin close-out rule.
   fca.org.uk/publications/policy-statements/ps19-18
6. Swap calculation and the triple swap.
   pepperstone.com — what-are-swaps · afterprime.com/glossary/triple-swap-wednesday

© 2026 Consultya · info@consultya.co · This guide is educational and is not investment advice.