A Forex deal is a contract agreed upon between the trader and the market-maker (i.e. the Trading Platform). The contract is comprised of the following components:
• The currency pairs (which currency to buy; which currency to sell)
• The principal amount (or "face", or "nominal": the amount of currency involved in the deal)
• The rate (the agreed exchange rate between the two currencies).
Time frame is also a factor in some deals, but this chapter focuses on Day-Trading (similar to “Spot” or “Current Time” trading), in which deals have a lifespan of no more than a single full day. Thus, time frame does not play into the equation. Note, however, that deals can be renewed (“rolled-over”) to the next day for a limited period of time.
The Forex deal, in this context, is therefore an obligation to buy and sell a specified amount of a particular pair of currencies at a pre-determined exchange rate.
Forex trading is always done in currency pairs. For example, imagine that the exchange rate of EUR/USD (euros to US dollars) on a certain day is 1.1999 (this number is also referred to as a “spot rate”, or just “rate”, for short). If
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