A spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) quoted in pips. If the quote between EUR/USD at a given moment is 1.2220/2, then the spread is 2 pips. If the quote is 1.22235/50, then the spread is 1.5 pips. The spread arguably compensates the market maker for taking on risk from the time it executes a client trade to when the broker's net exposure is hedged (possibly at a different price).

Spreads can affect the return on your trading strategy in a big way. Wider spreads can make it more difficult to realise a profit. The trader's sole interest when going 'long' is to buy low and sell high or when 'shorting', selling high and buying back low. Wider spreads means buying higher and having to sell lower for a long position and for the 'short' position, selling higher and buying back lower to get the same return as small spread. In summary, the wider the spread, the less return compared to a narrow spread for the same percentage move.

Stop-loss order:  The most common and important tool in currency trading is the stop-loss order. A stop-loss order ensures that a particular position is automatically liquidated at a predetermined price in order to limit potential losses, should the market move against a trader's position. This allows the trader to live to trade again.

TRUMarkets always provides stop loss levels in our Forex Trade suggestions. For whatever reason, if the market starts going in the wrong direction traders tend to panic and say to themselves, it will turn around. Then comes the anxiety of when to exit. Not only could the trader lose more money than intended, but also the trader often loses morale, as it's now much harder to make up the losses. This is the reason TRUMarkets always suggests a stop-loss level in our Forex trade suggestions. Even if the market starts going in the right direction 5 minutes later, you have not eliminated the risk of it turning around. Trading rules are there to follow, not to try to go around them. History shows that over the long term, not following a stop-loss strategy will only hurt the trader.

The destroyer any trading strategy: One of the more common and often fatal mistakes a trader may commit in a loosing trade is when they begin to think of excuses not to close the position - he or she thinks that perhaps the market will suddenly turn around and move in a favourable direction. The trader keeps thinking of this, and doesn't have the discipline to close the falling position. Don’t let this happen and set exit points when you establish the trade - you can always change them once the trade goes in your favour.

In foreign currency trading, it is important to set the exit points. When making foreign currency trades, you need to set two trading orders that will be used as exit points, one for selling your currency when you reach a certain profit, and the other to sell in order to cut your losses down.

•  If you are buying foreign currency, it means you are investing in a long position. In this case, you will set a sell limit above the current currency price, so if the currency rises, you will collect the profit you've accumulated. You will also select sell stops in the long position; so if the currency drops you will cut your losses short.
• In short position, when you are selling currency, you will set buy limit trading orders below the currency price, so you can take profits if the currency keeps dropping. Buy stop trading orders will prevent you from taking more losses, also for the short position. 

The TRUMarkets Trading desk will take the emotion out of your trading by providing strategic entry and exit points via email and SMS text message.