I am happy that you are back as today we are going to discuss the basics of the Forex language practically. So, take your pen, take a seat and let’s get started.
Each business sphere has its own “language”. Speaking each area has its own terminology, and Forex is not an exception. Despite the specificity of many of the terms of forex trading, they are a necessity, without which it won’t be possible to explore the forex market.
Therefore, every trader seeking to succeed in the market should master the Forex terminology perfectly, of course, if you do not want to be fooled.
Now let’s check out some basic forex trading terms:
Rate– the price of one currency expressed in units of another currency.
Base currency – The first currency in the currency pair. Its value is determined as opposed to the other currency pair. So, for example, if we take a currency pair EUR / USD, EUR will be the base currency.
Quote currency – The second currency in a currency pair. Its value is defined in opposition to the cost of the basic currency. So, for example, in the next couple of Euro / US dollars, the Quote currency is the US dollar.
Bid price- sale price.
Askprice– the purchase price.
Spread- the difference between the sale price and the purchase price. That is the difference between the bid and ask price.
Pip- the minimum amount of change in the value of the currency.
Transaction– operation of opening/closing positions.
Open position- buy or sell a currency, thereby committing the transaction.
Close position – close the sale transaction.
Stop-loss – stop order used to limit losses. It is triggered to close the position as it moves toward the loss.
Flat (Square)— when your positions are closed and you are in a neutral state.
Order— Order for a broker to buy or sell the currency at a specific rate.
Margin – a cash deposit that a market participant must have to ensure the trading operations
I think this entry will prove helpful for all Forex beginners, and I strongly recommend that you read them all!