Forex trading, also known as foreign exchange trading or currency trading, involves buying and selling different currencies with the aim of making a profit. Here are some of the most commonly used Forex trading terminologies:
1. Base Currency:
This is the first currency in a currency pair. It is the currency you are buying or selling in exchange for the quote currency.
2. Quote Currency:
This is the second currency in a currency pair. It represents the value of the base currency in terms of the quote currency.
3. Bid Price:
This is the price at which the market is willing to buy the base currency. It is always lower than the ask price.
4. Ask Price:
This is the price at which the market is willing to sell the base currency. It is always higher than the bid price.
This is the difference between the bid and ask price. It represents the cost of trading and is usually measured in pips.
A pip is the smallest unit of measurement in Forex trading. It represents the fourth decimal place in most currency pairs.
This is the standard unit of measurement for trading. One lot represents 100,000 units of the base currency.
READ MORE: Requirements to Become a Pro in Forex Trading.
This is the amount of money you need to deposit with your broker to open a trade. It is a percentage of the total trade size and varies from broker to broker.
This is the amount of money your broker is willing to lend you to trade. It allows you to control a larger trade size with a smaller amount of capital. Leverage is usually expressed as a ratio, such as 1:50 or 1:100.
This is an order you place with your broker to automatically close a trade when the price reaches a certain level. It is used to limit your losses.
11. Take Profit:
This is an order you place with your broker to automatically close a trade when the price reaches a certain level. It is used to lock in your profits.
12. Margin Call:
This is a notification from your broker that your account has insufficient funds to maintain your open positions. You will need to deposit more funds or close some of your positions to avoid a margin call.
This is an instruction to your broker to execute a trade on your behalf. There are several types of orders, including market orders, limit orders, and stop orders.
14. Long Position:
This is a trade where you buy the base currency and sell the quote currency. You profit if the value of the base currency increases.
READ MORE: How to Get Started in Forex Trading.
15. Short Position:
This is a trade where you sell the base currency and buy the quote currency. You profit if the value of the base currency decreases.
These are just some of the most common Forex trading terminologies. As you become more experienced in Forex trading, you will encounter many more terms and concepts. It is important to have a good understanding of these terminologies to be able to trade Forex successfully.