The Foreign Exchange market has its own terminology which is normally used by all Forex brokers, investors and traders. Here is a brief list of the frequently used Forex terms and their meanings. Also besides terms, we provide you beneficial Hints For Forex Trading as well.
Ask Price/ Offer Price
The ask and offer price is the price at which the market is ready to trade a specific currency. This is the price where, an investor can purchase the base currency. When seeing a quote, it is located on the right side.
For example, in the quote EUR/USD 1.4547/52, the ask price is 1.4552.
The currency listed first in a Currency Pair is known as the Base currency.
A Bid is the price at which the investor is willing to purchase a currency.
Simply stating, Bid/Ask spread is the variation between the bid and offer price. It can also be defined as the degree of difference in pips, amid the buying price and the selling price of a currency pair.
A person or an organization acting as an agent, putting together buyers and sellers for a commission or fee, can be defined as a Broker. They are the ones who work on behalf of their investors.
The currency listed second in a Currency Pair is known as the Counter currency.
EUR - Euro
AUD - Australian Dollar
CAD - Canadian Dollar
CHF - Swiss Franc
JPY - Japanese Yen
GBP - British Pound
Day trading refers to the buying and selling of positions within a single day’s trade.
Also known as Forex or FX, it is the process of buying of one currency in exchange of other currency in an over-the-counter market.
Leverage is the ratio of the deposited amount to the amount that can be traded. Find out Importance of Forex Leverage
Limit orders let the Forex investors stop further trading and leave the market at preset profit objectives. It is an order which restricts the greatest price to be paid or the lowest price to be received.
Liquidity can be defined as the capacity of a market to allow fat transaction with negligible impact on the price stability.
Margin is the minimum amount required to be deposited before an investor starts trading. This can also be known as the initial amount with which the Forex trading account can be opened.
Pip / Point
When dealing in terms of quotes, prices are expressed in terms of Pips. Pips can be defined as “percentage in points” and are mostly the fourth decimal point i.e. 1/100th of 1%. A pip can also be defined as the smallest value at which an exchange of currency can take place.
Stop Loss Order
Stop/loss commands allow the investors to set an exit point for a loss. By limiting your losses to a pre set position, Stop/loss orders help investors control their risk conditions. 'Stop-loss' can lower an investor's exposure to risk by a large proportion.
Yes, the basics of forex are really important for a newbie to get the basics of what is forex and familiarise themselves with the terminology. This will also help you learn to understand the language of forex trading so you are able to follow through the learning guides.
Also it will give hints for those who wants to trade because I see that traders usually don't understand it thoroughly if they just read it. Its more understandable if they have already seen or experienced it in trading particularly that they will usually encounter those terms when they are trading already.
The idea of Forex trading interests me. I do some researches about it, but I have difficulty understanding some terms. With your post, it helps me a lot. The terms are well explained for a newbie to understand it fully.
Thank you for sharing and hope to learn more about Forex.
Well, there were lots of websites that actually defines or have simple explanation of the terms likely layman's term. I think investopedia will have the best for you since they both have word and video explanation which satisfies members about the terms that used in forex trading.
Knowing this terminilogy will also help you to participate in forex forums like this because you can converse and understand discussions that are taking place. Ultimately, this is the foundation that will help you as you explore your way around the world of forex and with your communication with the rest of the community.
Yes, you can use those terms and of course you will able to understand what the discussion is all about. Its your advantage if you have more knowledge about forex trading and when you are gaining some trading bonus or credits in the different forex brokers.
Yes, and you can even benefit if you have opened a demo account to understand your way around and how to place your initial trades in here.This is part of the foundation that a newbies would need in order to ensure that they are able to follow along while learning and trading in a demo account.
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