If you are going to trade in the forex market, then you must have all the knowledge that you need before trading. Now, there are lots of terms that you must understand if you don’t know them that you will need every day in your trading, then you must read the below article carefully.
Important Terms for Forex Traders
These are the terms and notes of forex trading that all traders must know:
Spot Forex
Spot forex refers buying or selling of real currencies. Let me give you an example; suppose you have bought Japanese yen and exchanged it for Euros. Now, when the value of the Japanese yen increases, you can again exchange it with Euros. And, this way, you will be able to get more than what you have spent.
CFDs
CFDs stands for “Contract for Difference,” which refers to the movements of prices of financial instruments. Now, CFDs are a very useful tool that is because it helps traders to take advantage of price movements. So, traders now can get benefited from the price movements without buying or selling a large number of currencies. Besides, CFDs are also available in indices, bonds, stocks, and cryptocurrencies.
Pip
Pip is the base unit of price in the currency pair. Now, pip actually is the difference of the price that the currency pair has at the quoted price. However, let me give you an example; suppose you are trading in EUR/USD, and the quoted price is 1.14988/1.14998. So, here’s the difference between one pip.
Spread
The spread refers to the difference between the buying and selling price of the currency pair. Now, the spread is very low for the most popular currency pair. At the same time, the spread is sometimes lower than the pip price itself. But, those currencies that aren’t traded very often have a much higher spread.
Margin
It refers to the amount in your trading account that is going to be retained when you will open a trade. Margin is a very crucial thing that a trader must consider before trading.
Leverage
Leverage is the capital that the forex broker provides for all the trades so that the volume of each trade can increase. Now, suppose you are trading in EUR/USD with 1:10 leverage, and you have 1,000 Euros. So, the total volume for your trading and position size would be $10,000.
Bear Market
It is a term for the stock market when it’s moving downwards.
Bull Market
When the stock marketing is moving upwards, and the prices of stocking are rising is called a bull market.
Beta
It is a metric that shows the relationship between the stock price with the whole market’s movement. Now. If the beta is 1.6, it simply means that if the market moves 1 point, the stock price moves 1.6 points.
Broker
A broker is a person or could be a company that provides the trader with all the necessary instruments in their platform so that they can trade.
Conclusion
These are the important terms that you must know before starting to trade in the forex market.
