Terms In Forex

Forexolic  - Just as in learning something new, you often hear the term you've never heard of before, similarly in learning trading. As a novice trader in the forex business, before starting to trade, you should completely understand the following terms, which are often used in the forex world.

Major and Minor Currencies.

There are eight of the most common currencies traded (USD, EUR, JPY, GBP, CHF, CAD, NZD and AUD), which the United Kingdom is known by the term ' major currencies ' or ' the majors '. This currency is a currency that has a very high liquidity. As for the currencies that are included in this group are not known by the term ' minor currencies '.

The Base Currency.

The Base currency (or currencies basis) is the first currency listed in the currency pair. In the writing of currency pairs, we can know how much the value of the base currency is the currency compared with the second. For example: a currency pair USD/CHF showed price 1.6350, meaning that one has a value equivalent to USD 1.6350 CHF.

The Quote Currency.

Terms of the quote currency in the United Kingdom is used to refer to the second currency in a currency pair, or that is often known as the ' pip ' currency.

Pip.

Pip is the smallest price unit in the currency. Almost all currencies in writing using the five numbers, and generally consists of a decimal number after the first numbers, for example EUR/USD exchange rate has 1.2538. In this case, one pip is equal to the smallest changes the value of a decimal number is a decimal number to the last-four, i.e. 0.0001. So, when ' the quote currency (currency) in a currency pair is USD, then the one pip is equal to 1/100 cent.

Pipette.

Pipette is equivalent to a tenth of a pip. Some brokers are quoting exchange rates of currency pairs with the use of fractional pip (fractional pips – language of the United Kingdom). For example, if EUR/UDS 1.32156 to move from 1.32158, is said to be going on a price increase of 2 pipette.

The Bid Price.

The Bid price is the price at which the market is willing to buy a currency pair in forex market. At this price, you can sell the base currency (base currency). This price is printed on the left side of the writing of the exchange rate of the currency pair. Example: in the quote GBP/USD 1.8812/15, bid price is 1.8812. That means you can sell one British pound for $ 1.8812 US dollars.

Ask/Offer Price.

Ask/offer price is the price at which the market is willing to sell a certain currency pairs in the forex market. At this price, you can buy the base currency. This price is printed on the right side of the writing of the exchange rate of the currency pair. Example: in the quote EUR/USD 1.2812/15, ask price is 1.2815. That means you can buy one euro 1.2815 u.s. dollars worth.

Bid/Ask Spread.

 Bid/ask spread is the difference between the sale price and the purchase price. Forex brokers often do not include some of the leading figures in quote currency pairs. For example, the USD/JPY exchange rate has indeed 96/118.34, but quoted verbally without leading three digits, so it's only mentioned "30/34″. In this case, the USD/JPY has a spread of 4 pips increments.

The Way Of Writing The Exchange Rate.

The exchange rates of currencies in the forex market in general are listed using the format as follows: Base currency/Quote currency = Bid/Ask.

Transaction Cost.

Transaction cost (or transaction costs) is often manifested in the buy/sell price difference (bid/ask spread) in one round of deals. One round of the transaction contains the notion of buying (or selling) closed with a sale (or purchase) for the same number of units of a currency pair. For example, the EUR/USD exchange rate has for $ 1.2812/15, this means the cost of this transaction is 3 pips.

Dictionary For You

Spread  = Ask Price – Bid Price

Cross Currency.

Cross currency is a currency pair that does not contain the US dollar. This currency pair is often showed a pattern of erratic movements, because traders basically do two transactions involving u.s. dollars. For example, when we make deals to buy (long) EUR/GBP, essentially the same as buy sell EUR/USD and GBP/USD. Often a transaction involving cross currency has a higher transaction costs.

Margin.

When you open a margin account (or margin account) in one of the forex broker, you must deposit a certain minimal amounts of money. Minimum amount varies from one broker to another broker. Every time you make a transaction, a few percent of the total value of your account will on isolateis used as the initial margin required for new transactions based on currency pair being traded, the price at the time, and the number of units (or a lot) in the transaction. Number of lots always refers to the base currency.

Leverage.

Leverage is a comparison of the amount of capital that is used in a single transaction against the margin (security deposit is required). Leverage allows traders to control large amounts of money just by using relatively much less. This leverage factor varies between one broker with other brokers, ranging from 2: 1 to 1: 500.