One aspect of trading the
Forex, or even talking to Forex traders, that can be really intimidating is
that the Forex market has an awful lot of jargon. For those of us who have been
trading for years, the jargon comes as second nature. If you’re just getting
started, then it’s easy to see how intimidating that can be.
This
article will set out to help you get started. There is a lot of Forex lingo,
but at least now you’ll be able to jump into the game a little bit more after
knowing these common Forex terms:
The major currencies There are eight major currencies, which
are: the U.S. Dollar, Canadian Dollar, Australian Dollar, New Zealand Dollar,
the Euro, Japanese Yen, the British Pound, and the Swiss Franc.
Minor
currencies This is
any currency that does not belong to the major eight. So even currencies of
large economies like Brazil, Mexico, Russia, China, and India are all still
considered minor currencies.
Base
currency This is
the first currency listed in a currency quote, and is always measured in a unit
of 1.
Cross
currency The
second currency listed in a currency quote.
The
Aussie A slang
term for the Australian Dollar.
The
Kiwi A slang
term for the New Zealand Dollar.
The Bid Refers to the bid price, which is the price
the market will currently purchase a specific currency pair for. The bid price
will always be higher than the ask price.
The Ask Refers to the ask price, which is what you
will sell a currency for. The ask price is the one used when selling.
The
Spread The
difference in value between the ask price and the bid price. This
miniscule difference is how some brokers make their money off Forex traders
instead of charging a commission.
Bull
Market A
market distinguished by an overall rise in price.
Bear
Market A
market distinguished by an overall fall in price.
Lots This is more than lingo, and not a word
referring to a lot of something. Lots are the bulk amounts of currency required
for trading in the Forex market, generally $100,000.
Margin This is the minimum amount of money needed
to put up to place a trade with a broker. As long as you have this minimum
amount in your account you can trade. When your account falls below that
amount, all your positions are closed out.
Margin
Call A
margin call is made when, due to losses, your account falls below the allowed
minimum for a broker account, then the broker makes a margin call, which will
close out all your positions.
Limit
Order This is
an order to execute a trade only if it hits a specific price or better.
Carry
Trade Depending
on what Forex traders you hang around with, you could hear this one a lot. A
carry trade is a trade where you choose a currency pair in which you go
interest positive, meaning that you are earning daily interest on your trade
because of the difference in interest rates between the two nations.
Counter-Trend Many people think this means trending
downward, but that is NOT correct. A counter trend market is a market that is
not trending either way, meaning all movements are basically staying within the
same channeled area.
GTC
Order Good
Till Cancelled Order. This is an order placed for a currency pair that will
remain in play until the trader shuts that position down.
OCO
Order One
Cancel Other. A type of trade using two orders that are set up by trigger
values. When a currency pair hits a trigger, that trade goes into effect while
the other is automatically cancelled.
Once
you understand this principal your trading will get an
instant boost - enjoy!
Source: http://www.ino.com/
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