Everything involving money has a pretty complicated nomenclature; and Forex is no different. Anyone who has tried Forex trading would know that there are lots of confusing terms out there, and that is one major deterrent for people to get trading. Here are some of the most oft used terms and their definitions.
Forex – Foreign Exchange
Ask – Used instead of ‘offer’ – the price which you are willing to offer for buying
Spread – The margin in which you are willing to buy. This is usually between two amounts – like 1.20 – 1.25
Cost of Carry – The amount charged to hold currency for a particular period of time
Futures – Similar to futures trade in shares, speculation price over futures contract
Leverage – The amount of exposure the trader is willing to give the customer
Limit – The amount at which the buy / sell is set to happen. Usually customers set buy prices at lower than market price, and selling price slightly higher
Pip – The slightest increase in currency amounts – like $ 1.1916 to $ 1.1917. While trading in large quantities, pips are what traders count
Stop – or stop loss. The price which a trader can set in advance at which the Forex is automatically sold – usually set to reduce loss in volatile markets
Market Order – A buy order to be executed at current market price
Trading Terminology – Like stocks have their own codes on the stock market, Forex also has trading terms that are common internationally. Like ‘Cable’ used for a trade between UK Pound and US Dollar
These are but a few of the terms related to Forex. You will pick up the rest of the vocabulary while trading; but remember to start small, learn the ropes, and then go ahead full steam.