What a CFD is, and how it differs from the asset
A CFD is a contract that settles the difference between two prices of an asset. Going long EURUSD puts no euros in your account, and a position on gold delivers no bar to your door. What you hold is an agreement that the gap between your opening and closing price will be credited or debited to your balance: added if it runs your way, taken out if it does not.
This is where it parts company with the underlying asset. Someone who buys a share owns part of a company, with a vote and a dividend. A share CFD carries no ownership; the dividend reaches the account as an adjustment, the position is carried on margin, and an overnight financing cost applies. Physical gold raises questions of storage and purity, while a gold CFD involves no delivery at all, only a contract size and a margin requirement. What a symbol represents is written down inside MetaTrader 5: right-click it in Market Watch and open Specification to see contract size, minimum volume and the swap rows.
The cost of that structure is plain. The position is carried on margin, but profit and loss are both calculated on its full size rather than on the sum you set aside. A move against you is not capped at the blocked amount, it runs into the rest of the account. The quickest way to make that concrete is to open the Specification window of two symbols side by side on a demo account and read how many units one lot means in each.
The MT5 window: Market Watch, Navigator and Toolbox
MetaTrader 5 does its work in three panels. Market Watch (Ctrl+M) is where prices arrive: the symbol list, the bid and ask columns, and a tab holding the tick chart. To add a symbol, press Ctrl+U for the Symbols window and pick from folders such as forex, metals or indices. Navigator (Ctrl+N) holds accounts, indicators, expert advisors and scripts, and double-clicking an indicator attaches it to the chart. If you hold more than one account, this is also where you move between demo and live, and the title bar names the one you are on. Toolbox (Ctrl+T) is the account's report card: the Trade tab lists balance, equity, margin, free margin and margin level, the History tab holds closed trades, and the Journal tab records everything the terminal did.
Knowing the panels has a concrete payoff. When an order is rejected you do not settle for the short pop-up, you read the line in the Journal, where the reason is written. The terminal does nothing quietly; every order and every connection attempt lands there as a line. In the same way, you ask the Trade tab how many lots a position carries rather than trusting your memory.
The panels cost little, but not nothing. Every symbol kept in Market Watch means a live feed running for it, and the ones you never look at clutter both the list and your attention. Open the terminal, use Ctrl+U to remove the symbols you do not follow, and dock the Toolbox so the Trade tab stays visible while you work.
Reading a bid and ask quote
Every symbol shows two prices. The bid is the price at which you are bought from, the ask the price at which you are sold to. A long position opens at the ask and closes at the bid; a short opens at the bid and closes at the ask. The gap between them is the spread, and a position sits that far in the red from its first second.
Take an example quote. EURUSD with a bid of 1.08420 and an ask of 1.08434 leaves a gap of 0.00014, which is 1.4 pips. On one lot, meaning 100,000 euro, each pip is worth 10 USD, so the figure showing at the moment of opening is minus 14 USD. Opened at 0.10 lots, the same trade would start at minus 1.4 USD. On a five-digit quote the final digit is a point, not a pip: the last 4 in 1.08434 is a tenth of a pip. Before the position reaches break-even, the price has to travel that gap in your favour.
To watch the gap live, right-click in Market Watch and switch on the Spread row. The spread is not a fixed number: it widens at session closes, around data releases and in thin hours, so the entry cost of the same position depends on the time of day. Add the column, pick one symbol, and note over a few days how the figure differs in the morning, in the afternoon and near midnight.
Pips, ticks and contract size
On most currency pairs a pip is the fourth decimal of the price: EURUSD moving from 1.0850 to 1.0851 has risen one pip. On pairs with the Japanese yen the pip is the second decimal, so USDJPY going from 152.30 to 152.31 is also one pip. A tick is the smallest change the symbol can make, which on a five-digit quote equals one point, a tenth of a pip. Contract size is how many units one lot contains.
Put the three together and the money value of a pip appears. One lot of EURUSD is 100,000 euro and the pip is 0.0001, so one pip is worth 10 USD; at 0.10 lots it is 1 USD, at 0.01 lots ten cents. On USDJPY the pip is 0.01, so one pip on a lot is 1,000 JPY, converted into your account currency at the rate of the moment. Gold and indices use entirely different contract sizes, so rather than memorising them, right-click the symbol and read Specification, where tick size and tick value also sit.
The measure of risk comes out of the same place. The same fifty-pip move is 500 USD on one lot and 5 USD on 0.01 lots; identical price action, a hundredfold difference in the account. Volume is the single setting that decides how much room a move takes up. Open Specification for three symbols, note the contract sizes, then work out for yourself what one pip on 0.01 lots is worth in each.
Long and short positions
A long position is opened so a rise in price credits the difference to you; it opens at the ask and closes at the bid. A short is the mirror image: it opens at the bid, closes at the ask, and credits you when the price falls. Going short on a CFD requires no borrowing and no separate arrangement; the two directions are buttons side by side in the same order window, and the only difference is which one you press.
In currencies every position already has two sides. Being long EURUSD means being long the euro and short the dollar, buying and selling at the same moment. A worked case: one lot of EURUSD sold short at a bid of 1.0840 and bought back at an ask of 1.0810. The thirty pips between them, at 10 USD a pip, come to 300 USD, and the spread was already paid inside those two prices.
The two directions do not cost the same. Both pay the spread, but overnight financing is worked out separately per direction: of the two swap rows in Specification, one for long and one for short, one may charge you while the other credits you, and one day a week it applies at triple weight. Reading those rows takes seconds and shows what holding a position overnight costs. The arithmetic of risk is not symmetrical either: a long can fall no further than zero, while a short has no mathematical ceiling, so the upper bound of the loss is set by your exit, not by price.
Order types: market, limit, stop
A market order fills at the price available at that moment; it does not guarantee the price you saw, and in fast conditions it can slip. A limit order fills at your stated price or better, but it waits for the price to come to it, and if the price never arrives the order never opens. A stop order turns into a market order once your level trades, so the trigger is certain while the fill price is not.
Placement changes with direction: a buy limit sits below the current price and a sell limit above it, a buy stop above and a sell stop below. With EURUSD at an ask of 1.0850, a buy limit at 1.0800 waits for a fifty-pip fall, while a buy stop at 1.0900 triggers on a fifty-pip rise. In MetaTrader 5 it all lives in one window: double-click the symbol or press F9, set Type to Pending Order, enter the price, and choose an expiration setting.
The risk side runs like this. A pending order protects nothing until it triggers; the moment it does, it becomes an ordinary position and takes up margin from then on. A stop loss is itself a stop order, so it guarantees that the exit happens but not the price of it, and a gapped opening can fill it beyond your level. An order that reaches its expiry is cancelled and leaves no position behind. On a demo account, place a pending order well away from price, confirm it appears in the Toolbox Trade tab, then delete it.
Lots, margin and free margin
A lot is the unit of trade volume. In currencies one standard lot means 100,000 units, so 0.10 lots is 10,000 and 0.01 lots is 1,000. The smallest volume a symbol allows and the step between volumes are written in its Specification window, and they are not the same for every symbol. Margin is the amount blocked in your account to carry the position, and it follows from the size of that position and the leverage.
See where the margin comes from. A one-lot EURUSD position opened at, say, 1:100 leverage is 100,000 euro, so the margin is 100,000 / 100 = 1,000 euro. If your account is held in dollars that figure is converted at the current rate, which at 1.0850 comes to 1,085 USD. Free margin is equity minus the margin blocked: with 5,000 USD of equity and that position open, free margin is 3,915 USD, and that is the part available for opening anything else.
The point to watch is that free margin does not hold still. Equity is your balance plus the floating profit and loss of open positions, so if the position drifts 200 USD into the red, equity and free margin both fall by 200 USD while you do nothing at all. When the position closes, the blocked amount is released back into free margin. Open a single position on demo and watch the balance, equity, margin, free margin and margin level rows in the Toolbox Trade tab for a few minutes as price moves.
How leverage magnifies both ways
Leverage does not set how much you make; it sets how much margin is blocked for a position of a given size. One lot of EURUSD is a 100,000 euro position either way, and leverage only changes the sum locked in your account to carry it. At 1:100 that is 1,000 euro, at 1:500 it is 200 euro.
Both sides of the same move show up clearly here. Suppose EURUSD rises from 1.0850 to 1.0959, roughly one per cent: 109 pips, which on one lot is 1,090 USD. Converted at 1.0850, the margin locked at 1:100 is 1,085 USD and the margin locked at 1:500 is 217 USD. So the same move is worth all of the money you set aside in the first case and about five times it in the second. Profit and loss are identical either way because the price move is identical; the only thing that changed is how little you put aside to hold the position.
The shrinking side is the same mechanism. High leverage lets the same capital carry far larger positions, which brings the account to margin call and stop out levels much faster; low leverage blocks more money for the same volume and leaves less free margin. The leverage set on your account and any per-instrument limits depend on the account type, so confirm them on the account types page and in your client area. Before sending an order, work the required margin out on paper, then open the position on demo and compare it with the Trade tab's margin row.
Margin call and stop out levels
Margin level is your equity divided by the blocked margin, written as a percentage: equity over margin times one hundred. A margin call is the level at which the account is warned that this ratio has dropped below a set threshold. Stop out is the lower level at which positions begin closing automatically, usually starting with the largest loser and continuing until the ratio climbs back above the threshold.
Look at it with numbers. With 1,000 USD of margin blocked and 2,000 USD of equity, the margin level is 200 per cent. In an example where the stop out threshold is 50 per cent, equity falling to 500 USD triggers the closures, which leaves a cushion of 1,500 USD. Since each pip on one lot of EURUSD is 10 USD, that cushion is 150 pips. The ratio rises in only two ways: equity grows, or the blocked margin shrinks, and the second happens when part of an open position is closed. The margin call and stop out percentages that apply to you depend on your account type, so confirm them on the account types page and in your client area.
Stop out looks like a safety net but it is not a price guarantee. At a weekend opening or on sharp data, price can jump straight past the level and positions can close at prices worse than the ones you calculated. Read the percentage on the margin level row in the Toolbox Trade tab and work out how many pips your position sits from the stop out threshold.
The cost of spread, commission and swap
A position carries three costs, and they land at different moments. The spread is paid on entry: you start as far in the red as the gap between the bid and the ask. Commission, where your account type charges one, is taken per lot and applies on the way in and on the way out, so a round turn is double. Swap is the overnight financing cost, applied at the daily rollover, and it accumulates for as long as you hold.
Add the items up one by one. With a spread of 1.2 pips, opening one lot of EURUSD costs 12 USD at entry. Add a commission of 3.5 USD per lot and the round turn adds 7 USD more, so the position starts 19 USD behind before the price has moved. Those figures are an illustration; the commission structure for your account is set out on the account types page and in your client area, while the symbol's swap rows sit in Specification.
Swap is the item most often ignored because it looks small. It is written separately for each direction, one side may charge while the other credits, and one day a week it is applied at triple weight, with that day also named in Specification. A small daily negative swap on a position held for several weeks comfortably exceeds the spread paid to enter. Open the History tab in the Toolbox and read the commission, swap and profit columns of a closed trade side by side; the effect of each on the net result shows up there.
Trading sessions and market hours
The currency market opens on Monday morning in Sydney and runs without a break until the New York close on Friday, but those twenty-four hours are not uniform. The day is made of financial centres taking over from one another: Sydney, Tokyo, London, New York. During the few hours when London and New York are open together, volume reaches its daily peak; in the stretch after New York closes and before the Asian session is properly under way, it is at its thinnest.
The practical consequence is cost. When the market thins the spread widens, so a position opened near midnight can cost more to enter than the same position in the afternoon. The daily rollover falls in those hours too: swap is applied at that moment and quotes can widen briefly. Shares, indices and metals work differently again, each with its own opening hours and holiday calendar. A position left open over the Friday close is exposed to any gap at the Monday opening.
MetaTrader 5 shows times in server time, not the time on your own computer, and the daily candles on a chart close at the server's midnight rather than yours. That difference can be several hours and it shifts any reading of the sessions. Compare the timestamp of the latest candle with your own clock and note the offset, then press Ctrl+U for the Symbols window and convert the hours on the trading sessions tab of a symbol you follow into your own time.
Placing a first order on a demo account
A demo account runs on the live price feed and the same terminal, with money that is not real. You can open one from the File menu in MetaTrader 5 with Open an Account, or from your client area; once the login details arrive you will see prices moving in Market Watch.
The order window opens with F9 or by double-clicking the symbol. Leave Type on market execution, put the smallest volume the symbol allows in the Volume field, which on most currency pairs is 0.01, and press Buy or Sell. The position is then listed in the Toolbox Trade tab with its open price, current price and floating profit or loss. Knowing the arithmetic in advance helps: one pip on 0.01 lots of EURUSD is ten cents, so a twenty-pip move is 2 USD. To add a stop loss, right-click the position and choose Modify; to close it, right-click and choose Close. Once closed, the trade drops into the History tab, where the commission and swap rows are visible.
Two things a demo cannot teach are real slippage in busy conditions and the decisions you make when the money is yours. Learning the mechanics here is still cheap, because typing the wrong volume costs nothing. Today, open a single 0.01 lot order, add a stop loss, close it after a few minutes, then read the record in History and see whether the gap between the open and close prices produced the amount you calculated.