As a beginner, it is very necessary for you to know about some basic terminologies in forex trading business.
Here are 40 important terminologies for your consumption:
1. Spread:- This is the different between the price(Bid price) that you can sell a currency and the price(Ask price) that you can buy.
2. Pips:- A pip is the smallest unit by which a cross price quote changes. When trading the major currencies, you will often hear that there is a 3-pip spread.
On a contract or position, the value of a pip can easily be calculated. You know that the EUR/USD is quoted with four decimals, so all you have to do is cancel out the four zeros on the amount you trade and you will have value of the pip.
Thus, on a EUR/USD 100,000 contract, 1 pip is USD 10. On a USD/JPY 100,000 contract, 1 pip is equal to 1000 Yen, because USD/JPY is quoted with only two decimals.
3. Ask:- Is the price requested by the trader.
4. Bid:- Is the price offered by the trader. This ususlly indicates the highest price a purchaser will pay.
5. Base currency:- The currency that the investor buys or sells. In EUR/USD, EUR is the base currency.
6. Bear:- A bear market is one in which there has been a sustained fall in price and which does not look like it will recover quickly. Bear is someone who believes prices are heading down.
7. Bull:- Is someone who is optimistic about the market. A bull market is characterised by enthusiastic and sustained buying opportunities.
8. Bid/Ask:- The Bid is the rate you can sell while the Ask is the rate you can buy.
9. Cross:- In EUR/USD, the two currencies form the cross. When trading, the investor buys one currency with another.
10. Cross rate:- An exchange rate that is calculated from two other exchange rates.
11. EUR/USD:- This means that you trade EUR against USD. If you buy euro you pay in dollars and if you sell euro you receive dollars.
12. Interbank:- Short-term (often overnight) borrowing and lending between banks.
13. Long:- This means to buy.
14. Short:- Means to sell.
15. Leverage:- Leverage enables you to hold a position worth up to 100 times more than your margin deposit. For example, a USD 10,000 deposit can command positions of up to USD 1,000,000 through leverage.
16. Long position:- A position that increases its value as market prices increases.
17. Liquidity:- Is the ability of a market to accept large transactions.
18. Margin:- This is the deposit required when entering a position as well as to hold the open position.
19. NYSE:- Means, New York Stock Exchange.
20. Over the Counter:- When trading takes place directly between two parties rather than on an exchange.
21. Position:- Traders talk of "taking a position", which simply means buying or selling currency cross. "Position" can also refer to a trader's cash/securities/currencies balance.
22. Counter, secondary or variable currency:- In EUR/USD, USD is the counter currency.
23. Short position:- A position that benefits an investor when there is a decline in market prices.
24. Speculative:- Buying and selling in the hope of making a profit, rather than doing so for some fundamental business-related need.
25. Spot:- A spot rate is the current market price of an asset.
26. Asset Allocation:- Dividing instrument funds among markets to achieve diversification or maximum return.
27. Bearish:- This is a market view that anticipates lower prices.
28. Bullish:- Refers to a market view that anticipates higher prices.
29. Chartist:- Is an individual who studies graphs and charts of historic data to find trends and predict trend reversals.
30. Counterparty:- The other organization or party with whom trading is being transacted.
31. Day trader:- Speculator who takes position on instruments which are liquidated prior to the close of the same trading day.
32. Economic Indicator:- Is a statistics which indicates economic growth rates and trends. Such as retail sales and interest rate.
33. Exotic:- Is refer to a less broadly traded market instrument.
34. Fast market:- Rapid movement in a forex market caused by strong interest by buyers or sellers.
35. FED:- Refers to the USA, Federal Reserve.
36. GDP:- Total value of a Country's output, income or expenditure, produced within the Country's physical borders.
37. Resistant level:- A price level which is likely to result in a rebound but if broken, may result in a significant price movement.
38. Support level:- Is a price level where analyst suggests that price will rebound after a depreciation in market price.
39. Thin market:- Is a market in which trading volume, and liquidity is low and consequently, spread is wide.
40. Volatility:- A measure of the amount by which an asset price is expected to fluctuate over a given period.
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www.agea.com/?gid=53541 and
www.instaforex.com/en/index.php?x=LGYM
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