In the past few years, trading in the forex market has become very popular, with more and more people getting into it as time goes on. However before one goes into forex, it is imperative that he learns the language of forex before he starts trading. How otherwise is he going to find out what anything means?
In this article we will tell you the most important terms used in forex trading.
- Ask/Bid Spread is the margin between the price of the bid and the ask price in a currency quotation. This is basically, the price that is paid to the broker. As it is not dependent on the condition of the market, it is something that varies from broker to broker.
- Base currency is the currency you have decided to trade in. All other currencies are show in respect to the base currency you have selected. For instance, USD/INR 60.00 means that the base currency used here is US Dollars and 1 USD is worth 60 Indian Rupees.
- Broker is the person between the buyer and the seller. The broker acts as a sort of bridge between the buyer and the seller and is usually a financial institution. Some fees are dependent wholly on the prices the broker has decided to levy and thus it is a good idea to check out all the brokers the market has to offer before deciding on one that is suited to your needs.
- Bid price is the price at which a trader can sell currencies. The bid price is the number that is found at the left end of a quote. This bid price can make or break your earnings and it is suggested you make a bid price that is neither too low nor too high.
- A bar chart is a graphical representation of data in which two data sets are plotted against each other in a two dimensional frame. The data points are represented by bars and by studying the relative heights of the bars, one can determine the relative values of the data that has been represented through it.
- A pie chart is another graphical representation of data that represents each constituent of a data set as a part of the whole. The whole is represented as one complete pie and the individual parts are represented as slices of the pie, as you can see from the latest tweets of @academyofft.
- A cross-currency is a pair without USD. A currency pair is any two arbitrary pair of currencies used in forex.
- A fundamental analysis is an indicator of socioeconomic conditions that can affect the values of currencies in a country. This is similar to an economic indicator.
There are also two sets of currencies, the major currencies and the minor currencies. These are determined by the confidence of the people in these given currencies. You are most likely to trade in a major currency and sometimes in the minor ones. The major currencies are the US Dollars, the Japanese Yen and Swiss Franc. The minor ones are the Australian Dollar and New Zealand Dollar.