The world of Forex trading can sometimes be a little stunning, with a number of phrases often used in the trading game that don’t usually pop up in everyday speech. For new traders who want to increase your chances of success, language proficiency is key. Let’s break down some of these tricky terms into easy-to-understand explanations in our alphabetical dictionary.
Gratitude: Not applause or patting on the back, but gratitude on Forex – is to increase the value of the exchange rate
Request price: Market price when trying to buy a foreign exchange asset
Bid price: Market price when trying to sell a currency asset
Base currency: Each Forex pair consists of two currencies, the first of which is the base currency, for example, in EURUSD, the EUR is the base currency. When trading, the EUR is the currency you sell and the USD is the currency you buy. USDEUR on the contrary.
Currency pair: One currency is bought and another is sold in every Forex trade. The two currencies form a currency pair that looks like USDEUR (US Dollars and Euros)
Depreciation / Devaluation: The opposite of strengthening is when the value of the exchange rate decreases
Exchange rate: The exchange rate of one currency to another
Leverage: Leverage trading allows investors to increase their trading power by occupying larger market positions. Some brokers offer leverage up to 100: 1!
Long position: If you acquire an asset with the intention of holding it long enough to see a significant price increase
Loss: Negative trading income when closing a position
Lot: Forex trading takes place in three lots of different sizes. Standard lot: 100,000 units of base currency. Mini Lot: 10,000 base currency units. Microlot: 1000 units of base currency
Margin: The amount needed to open a leverage position, for example, with a leverage of 50 and a position of $ 100,000 you will need to deposit $ 2,000
Pips: Pip means ‘Percentage In Point’. This is the minimum possible price movement that an exchange rate can make. Pips is the fourth point after the decimal in price (excluding JPY) and is a traditional measure of profits and losses on Forex.
Profit: Positive profits from trading when the position is closed
Currency quotes: The first currency in the pair is the base currency, and the second is the quote currency. In GBPEUR, EUR is the quote currency
Risk management: Use a variety of trading strategies to manage and mitigate trading risks, minimizing losses, providing profits, in particular
Short position: A short position arises when an asset is sold because a Forex trader believes that the market price is about to fall in the short term
Distribution: There is a difference between the bid price and the ask price, and this small amount is equivalent to the type of commission for a broker or exchange
Stop loss: One of the best risk management tools is stop loss, which allows traders to determine the low price at which a position will automatically close. This means that if the market falls and the exchange rate falls to that stop-loss price, the position will close and the investor will not continue to lose money on the currency. In some cases, if the market falls too fast, there is a slip and the position does not close
Take profit: Reverse stop loss is a mechanism that allows you to make a profit. This means that if the price reaches a certain high point, the position will close and a profit will be provided in the event of a reversal and the price suddenly falls.