Basic Trading Terms
What is a contract for differences (CFD)
The term 'CFD' stands for Contract for Difference. It is effectively a “contract” between a buyer and seller (i.e., the trader and the broker), agreeing to pay the “difference” between the value of an asset at the time the trade was entered into and the value when the trade ends.
CFDs are commonly used as a way of trading assets like share CFDs, gold, oil, or other commodities without having to physically purchase that asset. Instead, you simply trade on that asset’s real-time price movements.
For example, if you were trading gold as a CFD you would not be buying any real bars of gold. Instead, you would just be trading on the price movements of the gold market. And because you are only trading on the price movements, CFD trading allows you to profit on upward or downward price movements, depending on which way you speculate.
For more details on these products, please refer to our Markets to Trade page.
You can find our full list of products in our Product Schedule.
IMPORTANT: Before opening trades, you should know what Base Currency is. The base currency (also known as the transaction currency), is the first currency to appear in a currency pair quotation. For example, if you were looking at the EUR/USD currency pair, the euro would be the base currency and the U.S. dollar would be the quote currency. The available base currencies are AUD, PLN, CAD, CHF, EUR, GBP, HKD, JPY, NZD, SGD, and USD.
STP (Straight Through Processing) vs ECN (Electronic Communication Network)
Straight Through Processing (STP) usually refers to the method of processing Forex trades which routes them “straight through” a broker's servers and onto liquidity providers without having to be re-entered and without any dealing desk intervention. In effect, orders are sent to the liquidity provider without any intervention by the broker, meaning the broker has no conflict of interest – with clients or the liquidity provider – and the only profit is generated on spreads and/or commission markup (if any).
Standard Axi accounts operate under the STP model.
Electronic Communication Network (ECN) brokers are like STPs in that neither has a conflict of interest with clients. The main difference is that the ECN consolidates price quotations from several market participants, with the advantage being that the broker can usually offer a better (lower) spread price to clients.
Axi does not offer a dedicated ECN account, but we do offer a Pro account which has the same characteristics as an ECN account.
Over the Counter (OTC)
Over the counter (OTC) trading refers to a decentralized method of trading financial instruments directly between two parties without the involvement of a centralized exchange. Unlike exchange-traded markets, OTC trading happens directly between buyers and sellers in the open market. At Axi, you do this using the electronic trading platform (MT4).