Each sphere of business has its own “language”, clearly 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.
To clearly understand the market and to overcome the difficulty which may raise by language every beginners should learn the terms with extra care.
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. For example, if we take a currency pair EUR / USD, here 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. For example, in the next couple of euro / US dollar, the Quote currency is the US dollar.
Bid price - sale price.
Ask – purchase price.
Spread - the difference between the sale price and the purchase price. That is difference between the bid and ask price.
Pip - the minimum amount of change in 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. Is triggered to close the position as it moves toward the loss.
Flat (Square) — when your positions are closed and your are in neutral state.
Order — order for a broker to buy or sell the currency with a certain rate.
Margin – a cash deposit that a market participant must have to ensure the trading operations.
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