Your Simple Guide to All Forex Trading Terms
We can define the Forex trading market as a global market where one currency is traded with another currency in order for the individual to earn money online. Many may know that these decentralized markets do not mean that there is no central exchange for them; Thus, we can buy and sell coins from anywhere in the world. It is the largest exchange market in operation today.
In it, your profit or loss is determined by a large difference between the prices of selling one currency and buying another currency. Where the currency price fluctuates according to the conditions of the world economy at the time.
It happens while making Forex trading deals, that the forecast of the market and the movement of this major currency are made in every trader’s consideration.
Forex Trading Terms: Key Participant and Forex Trading System
The Forex market uses many different terms which are mentioned below:
In Forex trading, the US dollar currency, the Australian dollar currency, the Canadian dollar currency, the Swiss franc currency, the British pound currency and the euro currency are among the most liquid Forex currencies, so they are called major Forex currencies.
A participant in the Forex market is someone who buys currencies and sells currencies. Where the Forex market includes more than one different participant such as the individual investor, the bank, the insurance company, the company and the financial institution with a large entity.
Forex system displays the currency at its current price. Forex software also provides useful Forex tools and analysis for the individual to make a wise and rational investment decision. Where the Forex trading system used allows use in the Forex trading room and in the Forex brokerage companies.
Forex Broker Role
It is by its nature that the Forex market can make huge profits and losses overnight. Therefore, if an individual is a novice Forex trader, he should start with a small amount of money to reduce the risk of Forex trading. In that, he should make use of the service of an experienced Forex broker in order to take a good position in order to make money in Forex.
The role of a Forex broker is important because of the following:
- Forex trading room in a Forex broker company is the best place for a novice Forex trader who wants to learn the trick of Forex trading and gain important and effective information in order to understand its settings.
- Provides guidance, important technical support and technical analysis of the Forex market so that the client can trade in the Forex market like a professional.
- In it, our Forex brokers can manage Forex accounts and make many foreign currency trades on our behalf.
Basic Forex Trading Terms
Currency pair trading: one currency is bought and the other is sold. The two currencies together are the exchange rate.
Exchange rate: It is the price of a currency with which an individual can exchange the currency of a particular country for the currency of another country
Base currency: It is the currency that comes first in the currency pair
Quote currency: is the currency in second place in a currency pair
Long position: A position that refers to the process of buying an asset and then expecting an increase in its market price.
Short Sell Position: A position that refers to the process of selling a currency, then expecting a drop in the market price and is very prepared for a decline
Bid price: It is the original selling price
Ask price: is the Forex market price when buying an asset
Spread: It is a price difference that occurs between the bid and ask for Forex currencies, and it also constitutes the selling price and the buying price of the currency.
Appreciation: It is the increase in the value of the exchange rate of currencies in Forex
Currency devaluation: is the occurrence of a decrease in the exchange rate of a Forex currency pair
Gap: The opening price of a significantly higher or lower position at the close of a previous trading day with no change in trading activity between those positions.
Peps: It means the definition of the percentage in one point, which is the smallest price movement that an exchange rate can make. It measures the amount of change in a particular exchange rate of a currency pair in the Forex trading market.
Lot: A standard lot is defined as 100,000 units of an individual’s base currency. That’s 100,000 of your currency if you’re trading any currency. Where a small lot contains 10,000 and there is also a micro lot, which is equivalent to 1,000 units.
Financial Leverage: Forex leverage is that means that the investor uses to increase the strength of his trade and manage larger and more positions in the Forex market through a cash investment of a symbolic amount. Where an online Forex broker offers Forex trading with a leverage of up to 30 times the value of the trader’s investment.
Margin: It is a minimum deposit of cash required in order for an individual to maintain an open position trading position.
Forex risk management: It includes a special use of Forex trading strategies in order to help the trader in controlling Forex financial risks or reducing their number.
Stop Loss: It is a specific Forex trading risk management tool that allows an individual to close a position as soon as he reaches a specific trading price.
Take Profit: Another tool for managing the risks that occurs when trading Forex as it allows the trader to automatically close a position as soon as he reaches his profit target that he previously set.
Profit/Loss: It is the proceeds of Forex trading, which always comes from an established position.