Forex or foreign exchange trading can seem like a daunting task to take up but with the right knowledge and understanding of terms such as ‘forex’, it becomes much more accessible. Understanding these basics will help you develop your own strategy and improve profitability.
The best way for beginners who want to start investing in this market is by familiarizing themselves not only with what they mean when hearing these words, but also understanding how knowing the terms will help them while trading.
Without wasting time let’s start to get acquainted with the forex trading glossary we prepared for you.
Forex market trading terms
Forex broker – Forex brokers provide traders with access to a platform for buying and selling foreign currencies. It is a financial service that acts as an agent between two different countries’ exchanges so that clients can buy or sell currency pairs with safety. Have a look at the legit forex brokers in Nigeria to learn more about regulated brokers.
Forex volatility – Volatility is a measure of how much fluctuation there can be in the price movement for any given currency pair. This generally indicates whether or not trading this instrument might result in losses if done without consideration and understanding of what one is doing with their money.
Forex market liquidity – The definition of forex liquidity is a currency’s ability to be bought and sold without a major impact on its exchange rate. A high level means there will always be plenty of trading activity for this pair, so you can trade with confidence. Note, that the Forex market is the most liquid of all financial markets.
Bear market – The bear market is a type of financial term that indicates traders expect prices to fall. This means there will be more short-selling in the markets, which can lead an asset’s value to drop even further.
Bull market – Unlike the bear market, prices are on the rise in the bull market and there is an increased interest from traders to trade long.
Forex basic terms
Bid – In the foreign exchange market, the bid is a price at which traders or brokers are willing to buy currencies.
Ask – The ask is a price at which traders or brokers are willing to sell currencies.
Leverage – When you invest money to expand your deals, you can use borrowed money to make more money. This is called leverage. It is a way to make more money from your investment and it can be risky. Leverage is given from a broker you work with.
Pip – The lowest increment in which a currency pair is priced and used to measure movement on either side of an exchange rate.
Margin – The margin is the minimum deposit that you must make in order to trade a currency pair. This is usually done through a leverage ratio.
Contract for Difference (CFD) – It is a short-term contract between a trader and a broker. CFD allows traders to own not the physical assets, but give the rights of owning a certain asset (a currency in case of forex).
The world of forex is complex and can be difficult to understand if you are new to it. That is why we have put together this glossary of the most popular forex terms, as well as a few basic trading terms.
To wrap it up, we will say that knowledge is power in any market, so take your time to learn about forex trading before jumping in head first! To familiarize yourself consider reading https://brokertested.com/no-deposit-bonus-forex/ to make the first step easy.
George is the Chief Market and Broker Analyst at brokertested.com. Prior to being recruited by brokertested.com, I served SVS Securities as Chief Market Analyst for two years. Earlier, he joined Morgan Stanley in Nov 2013 as Research Analyst.
George is a well-rounded financial services professional experienced in fundamental and technical analysis, global macroeconomic research, foreign exchange and commodity markets and an independent trader.