Inevitably, you must understand common terms in the world of forex trading well. This is certainly going to make the forex learning process more rapidly, as well as being able to understand properly. Some terms may have you look at the articles on this site. But it never hurts to review again in a more thoroughly.
Major and Minor Currencies
Eight types of the most common currencies traded: USD, EUR, JPY, GBP, CHF, CAD, NZD and AUD often known as Major. While other currencies outside of it, is called a small currency (Minor). You can ignore the minor currencies. Mostly on all kinds of writing (articles, analysis, predictions, etc.) about the forex will only review on your favorite currencies (USD, EUR, JPY, GBP, and CHF), why because the most liquid currencies, sexy, as well as many in the market forex trading.
Base Currency
Base currency = currency basis, is the first currency in the currency pair. In the writing of the base currency is always written to the left of the sign '/'. For example: USD/CHF, USD = base currency.
For example, if the price of USD/CHF current is 1.6300, then this means one CHF worth of 1.6300 us dollars. This shows how much the base currency measured against the second currency.
Quote Currency
Quote = the second currency, is the second currency in the currency pair. For example, USD/CHF, USD = Base Currency, CHF = the Quote Currency.
PIP
PIP is the smallest unit of unit price of any currency. Almost all currency pairs have five-digit numbers. With 1 first digit is a number followed by a 4-digit number principal fractional (behind the comma). For example the EUR/USD is equal to 1.2420 in this case, one pip is equal to the smallest changes on the fourth decimal i.e. 0.0001, so if on a pair where there is a USD, then one pip is always equal to 1/100 cent. There is however one exception only in USD/JPY, here 1 pip is worth $ 0.01
Bid Price
Bid price = bid price, the price at which the market is ready to buy a certain currency pair. Or in other words for us/trader is the price for which we can sell.
For example, the currently displayed price of GBP/USD 1.8800/1.8803, then 1.8800 = bid price and the ask price = 1.8803. If you intend to sell GBP then its value is 1.8800
Ask Price
Ask price = bid, as opposed to the bid price, then this means the price for which the market is ready to sell a specific currency, or for us (trader) is the price for which we can buy.
Like the example above GBP/USD 1.8800/1.8803, then = 1.8803 ask price, if you intend buying the GBP price is then 1.8803
Spread
The spread is the difference between the bid and ask price. The bid price is always and is generally smaller than the ask price. Following the example above GBP/USD 1.8800/1.8803, this means the spread is 3 pips.
Quote
The quote could be said as a general writing format in forex (raw) to inform the price movement of a pair. This format is :
Base currency/Second currency Bid price/Ask price
for example: GBP/USD 1.7750/1.7753 84.90, USD/JPY/84.94
Cross Currency
Currency cross pair/couple is the currency in which the U.S. currency does not exist in it. For example, the EUR/GBP GBP/JPY. Suppose you buy the EUR/GBP EUR/USD = buy and sell GBP/USD. In general the pair Cross often bring higher transaction costs.
Margin
The margin is the Fund balance/mandatory reply available, will be set aside by the broker every time you open/new order. What is the magnitude of the margin? It will depend of the magnitude of the contract, leverage, lot.
For example, let's say you open a mini account with leverage 200:1 or 0.5%. Where one mini lot is equal to $ 10,000. If you open a lot of transactions, then the margin is $ 50 ($ 10,000 x 0.5% = $ 50).
Leverage
Leverage is the ability to control/dealing with a large amount of dollar by using relatively small amounts of capital wrote. With a ratio of ordinary brokers provide is varied from 100:1 to 400:1
Illustration
of leverage is: Suppose you have $ 5,000 in cash margin account with
100:1 leverage, you could buy up to $ 500,000 worth of currency. Can I
be this now you have $ 500,000 purchasing power.
With more buying power, you can increase your profit potential. But the opposite is also proportional to the potential damage/loss yg will you experience.
Margin = Leverage + Possible Combinations Of Potential Lethal
So be careful in choosing the leverage!!
Margin Call
Generally traders will begin to feel anxiousness and fear when a broker tells that the remaining balance/balance you've got smaller falls below the minimum level requirements, as a result of the open position has moved against you.
If position reply against (loss) until a threshold specified in the reply, then the broker will close order (can be a partial/total).
A margin call can be avoided with intensive monitoring your account balance. Or by using the command/stop-loss facilities on every order to limit the risk of loss.
Forex Terms
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Oleh
Renvin Nelwan
