How trading works, in plain words.
Real mechanics, worked through with real numbers, and the mistakes that end most accounts. Single terms live in the Glossary. This is how they fit together.
How a leveraged trade works
One trade, start to finish, with the numbers a real position would use.
Say you buy one standard lot of EUR/USD (100,000 units) at 1.0850, with 30:1 leverage. The broker doesn't take the full value from your account. It sets aside only the margin needed to hold the position:
- Position value
- 100,000 × 1.0850 = $108,500
- Margin required (÷30 leverage)
- $108,500 ÷ 30 ≈ $3,617
- Value of 1 pip on this position
- $10
- If price moves 50 pips in your favour
- +$500 profit
- If price moves 50 pips against you
- −$500 loss
Look at the pip value: leverage didn't touch it. Going from 30:1 to 100:1 changes how much margin the position ties up. A 50-pip move is worth the same $500 either way.
Your platform tracks your margin level: equity divided by margin in use, as a percentage. Above 100% you're fine. As losses push it toward 100%, most brokers send a margin call, which is a warning. If it keeps falling to around 50%, the broker starts closing your positions for you (a stop-out), usually the biggest loser first, so your balance can't go negative.
Order types
Five order types, and the mix-up that catches almost every beginner.
Market order
Fills straight away at the best price available. You're sure to get in. You're not sure of the exact price.
Limit order
Fills only at your price or better. A buy limit sits below the current price, a sell limit above it. You're sure of the price. You're not sure it fills.
Stop order (an entry)
Opens a trade at market once price reaches your level. A buy stop sits above the current price, a sell stop below it. Traders use it to join a move that's already breaking out.
Stop-loss order (an exit)
Here's the mix-up. A stop-loss uses the same trigger as the stop order above, but it's attached to a position you already hold, and it closes that position once price moves against you by a set amount. Same mechanism, opposite job: one gets you in, the other limits the damage.
Take-profit order
A limit order attached to an open position. It closes the trade automatically when price reaches your target. The mirror image of a stop-loss.
Position sizing
The one habit that matters more than picking winning trades.
Most professional risk management comes back to one rule: risk no more than 1–2% of your account on any single trade. Confidence has nothing to do with it. The rule exists so that one wrong call, or a run of them, can't end your account, however good your strategy is.
The position size that achieves this comes from your stop-loss distance, not a round number of lots:
- Account balance
- $10,000
- Risk per trade (1%)
- $100
- Stop-loss distance
- 50 pips
- Position size that risks exactly $100
- 0.2 standard lots
Widen the stop and the position shrinks to match. Tighten it and the position grows. You fix the dollar amount at risk first, and the lot size follows.
Why most retail accounts lose money
The number every EU and UK broker is legally required to publish.
Since 2018, EU and UK regulators have required every CFD provider to publish, in a standard format, what percentage of its own retail clients lost money over the trailing 12 months. Individual broker figures vary — across the 9 brokers we currently hold a verified figure for, the range runs from 53% to 80%. That isn't marketing caution; it's each broker's own disclosed, audited number.
That number is why the two lessons above matter. Small risk per trade and a clear exit plan are what most directly separate the accounts on the right side of it from the rest.
Using a demo account properly
A demo account teaches you nothing if you use it like a video game.
No number of weeks makes you ready. Consistency does: can you follow your own plan, position sizing and stop-loss included, across 30 to 50 trades in a row, and not only when a few happen to work out?
Match your demo balance to your real deposit
Most demo accounts start with far more virtual money than a beginner will actually fund live with. Trading confidently with a $50,000 demo balance tells you very little about how you'll behave once real money — and a much smaller number — is on the line. Reset it to match what you actually intend to deposit.
Use the risk rules you'll use live
On a demo it's tempting to skip stop-losses and oversize positions, because the losses aren't real. That trains exactly the habits you don't want when they are. Trade the demo under the rules from the lesson above.
Keep a log
Without a record of what you did and why, there's nothing to review. The test was never virtual profit. It's whether you can follow your own plan under pressure.
Mistakes that end accounts
Overleveraging
High leverage shrinks how far price can move against you before a stop-out. On a heavily leveraged position, a 1% move can take all the margin behind it.
Trading without a stop-loss
The most common way an account blows up. A position with no defined exit leaves the downside open to the move nobody saw coming.
Revenge trading
Doubling your size, or dropping your plan, to win a loss back fast. It stacks worse decisions on top of the original loss.
Overtrading
Trading because you feel you should be in the market, with no real setup in front of you. Every extra trade adds cost and fresh risk, and no edge.
Ignoring overnight financing
Swap looks tiny per night. Hold a position for a few weeks and it adds up, and it can quietly eat a trade that looked profitable on price alone.
Trading money you need
This one isn't technical, but it turns every other mistake on this list from a lesson into a real problem. Only trade money you can afford to lose completely.
Choosing a broker, in order
Five checks, in the order that protects you.
1. Check the licence yourself
Skip the badge on their homepage. Take the licence number and check it against the broker's own regulation page or the regulator's public register. See Regulators for what each regulator requires and covers.
2. Confirm segregated funds and negative balance protection
Client money should be held separately from the broker's own operating funds, and your account should never be able to go below zero. Both are checkable facts, not just claims — see each broker's own profile for their specifics.
3. Test the demo properly
Matched balance, real risk rules and a log, as in the lesson above, before any real money moves.
4. Read the real pricing
A "0.0 spread, no commission" claim with no small print is a warning sign. See Glossary for how spread and commission combine into what you pay.
5. Fund small first
Deposit a small amount first and test a withdrawal and the support desk before you send the rest.
Once you know what you're checking for, Brokers by country narrows the field to brokers that actually take clients where you are, and Category guides narrows it further to brokers that genuinely offer what you want to trade.