Before starting and getting to know the most profitable Forex trading strategies every newbie needs to learn the so-called Forex glossary: basics and terms required for adequate beginning of live Forex trading. In a case you have heard about Forex but have never tried to become a FX trader we will tell you the most common terms and definitions you will have to learn as ABC in order to earn but not lose money while trading in the FX Market.
The first term we want to explain is Forex itself. It stands for the short for foreign exchange market where traders and brokers trade currency pairs in order to earn profits. Sometimes you can meet such short abbreviations as FX and similar to it but Forex is the most widespread one. Now when you know what this term means let's consider the most common basic terms you will require from the very beginning of your live trading in the FX market.
1) Ask Price. Every Forex glossary starts with this term denoting the price using of which trader can purchase the base currency. For example if you suppose that USD value will increase in foresight then you can select to buy this currency for any other currency like EUR according to the price that displayed in the so-called ask quote.
2) In order to explain what base currency is we should say that it denotes the first currency which is listed in any currency pair used for trading in the FX market. For instance, if the currency pair's rate of EUR/USD is 1.3223 then the EUR becomes the base currency and its value is 1.3223 USD.
3) The bear term according to the FX glossary denotes a market with pessimistic diagnoses and declining prices.
4) While the bull according to the same Forex glossary stands for a market with rising prices and more optimistic trends.
5) There is such common term as bid price many Forex newbies can't define. The bid price (displayed usually as the left quote) stands for the price traders may use in order to sell any base currency.
6) Another term in our Forex glossary is the counter currency. The counter currency is simply the second currency in a pair. And usually value of it is predetermined by the opposite base currency's value. It is easy to explain - in the pair EURUSD the second which means USD is the counter currency.
7) As for the cross rate it is a price quote composed of any currency which is quoted against any other currency which can't be related to USD. This quote is the combination of the individual rates for exchange 2 currencies against USD.
8) There are many ways to trade in the FX but all of them are based on certain strategies and the most popular type of Forex day trading strategies which means a trader uses the method based on opening and closing his trading positions during one trading day and to the end of this day a trader has no any position open.
9) Another important term in the FX glossary is Fed meaning the short for Federal Reserve which in its turn denotes the central banking system effecting significantly on the trends of the Forex market.
10) Every Forex glossary contains the term leverage because it is the basic term in Forex vocabulary. It means the loan a trader takes for the FX broker which allows trading only having a small capital. In such way one can increase his profits but the risks get higher as well.
11) Margin is another term every trader should understand and it denotes the minimal amount of cash deposit a trader can put up for a certain transaction. Losses increased but the profits as well so one should think twice before trading FX on margin.
12) What is a pip? Pip is the smallest price which can be found in the last number of the currency pair rate. Commonly it is the 4th digit located after the decimal point.
13) As for the price trend it means a stable movement of the currency prices with a certain direction. Spotting trends can capitalize the potential.
14) Forex spreads stand for the differences between the ask and the bid prices.
15) The last term in out FX glossary is stop loss which stands for the trade order which closes an open trading position in automatic way for preventing losses if the FX market fluctuates against this chosen position.
