Forex Trading Terminology

The terminology of the Forex trading is the main thing, which you need to learn if you are trying to venture on Forex trading. Before doing Forex trading, there are some basic terms and words that you need to be familiar with in order to learn how the buying and selling of currencies are done effectively. Going into the Forex trading venture without having proper knowledge about this is similar to entering into a battle without having any weapon. Therefore, we are introducing some of the basic terminology of the Forex trading for your knowledge and convenience.

Currency Pair

Currencies are traded in the Forex market. You will find six major currency pairs that are mostly traded such as EUR/USD, USD /JPY, USD/CHF, GBP/USD, and USD/CAD. The currencies are generally traded in a pair and you can trade with any kind of currency with another until they are available in the Forex market.

Trading Platform

It is basically software provided by the broker for making trades. No trade can be done without an excellent trading software or platform. Investors use them for the purpose of online operation of trading Forex.

Exchange Rate

Exchange rate refers to the amount of money paid in unit of quote currency to buy one unit base currency. For an instance, the exchange rate of USD/EUR is about 1.5600, it means that 1 USD is equal to 1.56 EURO.

LOT

A LOT indicates a bundle of units in trade. It is also called a trade size. A lot size works effectively with the risk management strategy. There are basically three different types of LOT in Forex trading- standard lot, mini lot and micro lot.

Bid

Bid is basically the cost for buying an exchange.

Ask

It is the price for selling an exchange.

Spread

It is basically a difference between the ask price and the bid price. Some of the Forex brokers charge a fixed spread for the exchange of currency, while some brokers charge a variable. It is suggested to the investors to choose the broker who charges less spread to lower Forex spread.

Margin and leverage

It is a deposit made by a trader in order to hold a good position in trading. What margin you have set to put in trading will determine your leverage. Leverage is that amount of money which you are managing with relation to your margin.


    Trading Warning : Trading accounts offered by the brokers play a vital role in your winning and losing in the Forex trading. So, if you are a newbie in this trading, then you must go for mini or micro accounts and then move to standard accounts. As mini and micro accounts require minimum deposit requirement as compared to the standard trading accounts.

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