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Forex trading terminology or jargons are the terms used basically in the forex market. To trade efficiently in the forex market, you must understand the forex terms, and have a good knowledge of how they apply to the forex market. There are quite a lot of them but here are 10 of the most common forex terminologies

  • CURRENCY PAIR:

Currency pair is made of two different currencies that make up the exchange rate. The value of a particular currency is determined when it is compared to another currency. This value is also known as the exchange rate.

  • PIP:

A pip is the unit of measurement used in expressing the change in value between two different currencies as quoted in a currency pair. It is the smallest unit of price for any foreign currency.  It is calculated to the fourth decimal point.

  • BID:

Bid is the best possible price at which a trader can buy any security displayed in the forex market for sale. This price varies with time and other things.

  • ASK:

The ask price of a security is the best possible price a security can be sold for in the forex market. It is the lowest possible price a security can be sold for.

  • SPREAD:

Spread is the difference between the bid and the ask prices of a security in the forex market.

  • LEVERAGE:

Leverage is the ratio of percentage increase a forex trader enjoys in relation to the trade deposit available in the trader’s account. With leverage, a trader can make trades far greater than his trade deposit can allow. Terms and condition applies in the use of leverage.

  • MARGIN:

Margin is the amount of money a trader must have in her account before she is liable to trade with leverage. It is also the amount of money that must be maintained in the account of a trader who trades with leverage.

  • LONG POSITION:

Long position is an investment position that appreciates in value if the market appreciates. If a person buys into a trade with the expectation that the value of the bought security would rise, it is known as a trade with long position.

  • SHORT POSITION:

Short position is an investment position that would benefit from depreciation in the market price of a security. It is the opposite of long position.

  • BROKER/BROKERAGE:

A broker (an individual) or brokerage (a firm) is the mediator between the forex market and the forex traders. They render a number of services for a fee.

Forex trading terminology jargon

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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