Basics of Forex can be understood by understanding these terms mentioned below. You can easily learn forex when you know and understand the basic terms of forex :
Forex or foreign exchange : Exchange of foreign currency in the forex market is called Foreign exchange/Forex.
Foreign exchange market : The financial market that never sleeps. It runs 24X7. Most of the transactions in forex market is carried on phone or on the internet.
Spot market : Where currency is bought and sold at the on going market rate.
Exchange rate : The term used when mentioning the difference between two currencies. For example if USD/CAD is 1.077 then that means 1 American dollar is equal to 1.077 Canadian dollars.
Base Currency : The very first currency of the two currencies is called the base currency.
Counter Currency : The second currency of the two currencies in the pair is known as counter currency.
Spread : It is the difference between bid price and ask price. Lower spread is beneficial for the trader party because it can make bigger profits for him.
PIPs : Pip is short for Percentage in point. It is the most common increment of a currency – “The smallest of price value change in a currency”. For example if the USD/CAD moves from 1.0077 to 1.0078, then that equals to 1 PIP. How ? Because A pip is actually the difference in final decimal place in the quotation.
Swing trading : This means Forex trading where you gain quickly from short term swings in trend.
Auto trading : Where no human is involved whatsoever. With use of sophesticated forex software the trading is done automatically.
Scalping : Strategy for trading where you wanna gain quick buck with a small price change in a matter of minutes. Forex traders who use this technique are called scalpers.
More Forex How to , Faqs and terms continued next week…