In this guide, forex trading means trading currency pairs, such as EURUSD, through a broker. It explains the words a beginner meets first: currency pair, pip, lot, spread, leverage, margin, margin call and stop-out. Each one links to a page that covers it in detail.
The definitions follow the Exness Help Centre and material from the futures regulator CFTC (checked 2026-10-13). Other brokers can define terms differently, and Exness can change its rules without notice. Leverage makes losses larger as well as gains. Nothing here is a recommendation to trade.
What does forex trading actually mean?
The CFTC describes it as buying or selling currency in pairs, such as the euro and the dollar. Profits or losses build up as the exchange rate between the two currencies moves, and individual traders usually never see the foreign currency.
What forex trading involves
The CFTC describes off-exchange foreign currency trading as the buying or selling of currency in pairs, such as the euro and the dollar (EUR/USD). It says profits or losses accumulate as the exchange rate fluctuates between the two currencies. It also says individual traders usually do not see the foreign currency at all: they typically close out their commitments and calculate gains or losses based on price changes in that currency relative to another currency, over time.
The CFTC describes off-exchange (over-the-counter) forex as trading in which the broker is the other party to your trade. It says the broker earns money from frequent trading, client losses, fees, spreads and commissions. So the cost of each trade and the broker's own rules are part of what you need to understand.
The CFTC also says a broker asks you to hold a minimum amount of margin to open and keep a position, and that the amount normally depends on how much the currency pair moves.
Sources: CFTC forex advisory and CFTC, Four Things That Can Help Reduce Your Risk of Forex Fraud (checked 2026-10-13).
Currency pairs
What do the two currencies in EURUSD do?
In Exness's EURUSD examples, EUR is the base currency and USD the quote currency. Volume is counted in the base currency (3 lots is 300,000 EUR); profit or loss is worked out in the quote currency, then converted to your account currency.
A pair is written as one code, such as EURUSD, USDJPY or USDCAD. In Exness's EURUSD examples, EUR is the base currency and USD is the quote currency. At Exness the two kinds of currency are used like this:
- The trading volume is counted in the base currency. Exness's example: 3 lots of EURUSD is a volume of 300,000 EUR.
- The quote currency is the one profit and loss are calculated in. The result is then converted to your account currency, and if your account currency is not part of the pair, the relevant rate at closing is used.
A pair has two prices, a bid and an ask. The gap between them is the spread, which is explained below.
Source: Exness Help Centre, Common trading terms and trading volume article (checked 2026-10-13).
Pip, lot and spread at a glance
| Term | What it means at Exness | Read more |
|---|---|---|
| Pip | For most forex instruments, a price change in the fourth decimal place (pip size 0.0001; pairs with the yen use 0.01). A move from 1.11115 to 1.11135 is 2 pips. | What is a pip? |
| Lot | The unit that counts the size of an order. For forex, 1 standard lot is 100,000 units of the base currency, and the minimum trading volume is 0.01 lot. Standard Cent accounts count in cent lots instead: 1 cent lot is 1,000 USD, which is 0.01 of a standard lot. The minimum differs by instrument. | What is a lot? |
| Spread | The gap between the bid and the ask, and a cost of trading. In pips it is (ask - bid) / pip size: USDCAD with a bid of 1.26586 and an ask of 1.26600 is 1.4 pips. | What is spread? |
The value of a pip depends on the size of your trade. Exness gives this formula: pip value = lots x contract size x pip size. For 1 standard lot of EURUSD that is 100,000 x 0.0001 = 10 in the quote currency (USD); this is a calculation from Exness's formula, not a figure Exness states. To try your own numbers, use the pip value calculator.
Sources: Exness Help Centre, Common trading terms, forex specifications and spreads article (checked 2026-10-13).
Leverage and margin
Leverage lets you open a position larger than the money in your account. Margin is the amount you must hold to open and keep that position.
- At Exness, leverage is the ratio between your equity and the capital Exness provides. It is written like 1:200, 1:2000 or 1:Unlimited, and it affects the margin an open position needs.
- For variable margin, Exness gives this formula: required margin = lots x contract size / leverage. Exness's example: 2 lots of EURUSD at 1:2000 is 2 x 100,000 / 2000 = 100 EUR.
- The CFTC gives this example: with a 2% margin requirement, a position of 100,000 dollars can be opened with 2,000 dollars. It warns that such high leverage makes profits and losses larger.
Exness explains that higher leverage allows a large position with little margin, but a small price move can then lead to a stop-out. Details are in leverage and margin explained and how Exness leverage works. To estimate the margin for a position, use the margin calculator.
Sources: CFTC forex advisory, Exness Help Centre, Leverage, Margin and stop-out article (checked 2026-10-13).
Margin call and stop-out
Exness defines the margin level as (equity / required margin) x 100. Equity is your balance plus or minus the floating profit or loss, plus the swap. Exness's example: equity of 50 USD and required margin of 10 USD give a margin level of 500%.
- Margin call. At Exness, a warning sent to the trading platform when the margin level falls to a set level. It tells you that you may need to deposit funds or close some orders.
- Stop-out. At Exness, orders are closed automatically when the margin level falls to the stop-out level, starting with the order that has the least profit.
The levels differ by account type and can change. Futures and securities firms use the term margin call in a different way, so check which meaning a source uses. See margin call and stop-out.
Sources: Exness Help Centre, Common trading terms and margin level article (checked 2026-10-13).
The risks, stated plainly
If a stop-out closes my orders, is my loss limited to what I deposited?
Not necessarily. Exness closes orders automatically in a stop-out, but the CFTC warns that clients trading OTC forex may be responsible for losses beyond their first deposit.
- Leverage makes losses larger as well as gains. You may have to add funds or close the position if the market moves against you, and you may be responsible for losses beyond your first deposit (CFTC).
- At Exness, high leverage allows a large position with little margin, but a small price move can then cause a stop-out. A smaller position lowers the exposure to a given price move.
- At Exness, the spread changes with volatility, news releases, unexpected economic events and market opens and closes, and some account types also charge a commission.
- A calculator does not remove the risk. It gives an estimate, not a limit on your loss. The lot size calculator leaves out spread, fees and slippage.
- Rules and levels can change without notice. Check them on your own account screen.
A demo account at Exness trades with virtual funds, so no real money is used. See how a demo account works.
Sources: CFTC forex advisory, Exness Help Centre, stop-out article, spreads article and Real and demo accounts (checked 2026-10-13).
Where to go next
- The terms: what is a pip, what is a lot, what is spread, leverage and margin and margin call and stop-out.
- The calculators: lot size calculator, pip value calculator and margin calculator.
- Exness: how Exness leverage works and how a demo account works.
