Glossary

Following are some of the most commonly or generally used terms in forex trade.

 

  1. Ask Price: –It is also referred to as offer price and it is the price at which investors or traders can buy currency pairs. They are usually quoted on the right side.
  2. Bar Chart: – For the purposes of technical analyses, a bar chart is used. The top represents the high price, the bottom the low price.
  3. Base Currency: – In a currency pair, the first of the pair is called the base pair.
  4. Bid Price: -Used in contrast to the offer or ask price. It is the price at which a trader can sell a currency pair.
  5. The spread of bid to ask price: – It is the difference between the ask price and the bid price. All brokers earn their brokerage fees through this difference. It is inbuilt into all forex trading platforms.
  6. Broker: – The forex broker acts as a go between or liaison between the trader and the seller. Most forex brokers act as representatives of large banks or institutional brokers.
  7. Candlestick charts: – It is a kind of chart used for technical analysis.
  8. Cross Currency: – All currency pairs that do not have the USD as one of the pairs are cross currencies like EURCAD.
  9. Economic Indicators: – These are statistical reports released by governments giving indications about the economic conditions prevailing in a country that have a bearing on the exchange value of the currency. This is one of the most vital forex trading tips that you should ask your broker because you must be aware of the economic situation prevailing in the country whose currency pairs you trade.
  10. Fundamental Analysis: – It is an in-depth study and appraisal of the economic, political and social environment prevailing in the countries whose currency pairs you frequently deal with. Most forex trading systems that are worth their salt provide full information to their customers regarding fundamental analysis via text messages and video clips.
  11. everage vis-à-vis Margin: – If the maximum leverage to margin ratio of 200:1, it means with an investment or deposit of $100 you have control or leverage on an amount of $20,000. Different brokers offer different ratios. What you should bear in mind is the fact on one hand a high leverage to margin ratio gives you the spread to make a good profit but on the other, a wrong speculation can lead to heavy losses.
  12. Limit Order: – When you order the broker to buy or sell as the currency pair attains a specified level, it is called a limit order. This term is also used heavily in commodity trading.
  13. Lots: – Lots are the trading sizes or volumes. A customary or standard lot usually amounts to $1, 00,000.
  14. Major Currencies: – The currencies that are traded more heavily like the greenback, pound, Swiss franc, Japanese yen, euro, and the Deutsche are known as the major currencies.

 

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