Forex Trading Terms To Live By

Forex trading education is vital when you plan to invest in this business. As we all know, this market runs 24 hours a day and 7 days in a week. This is a cash market where in the currencies of all nations around the globe are purchased and sold through a broker. For instance, buying Euro using US Dollar or selling British pounds using Japanese Yen. There are a lot of terms associated with this trade and it is vital that a trader is familiar with these terms so you will not get out of track.

Base Currency is the currency that you will see on the left side of the slash or the first one in the Forex quote. Be reminded that the value of the base currency is always one. The figure on the right side of the slash refers to the Counter Currency. Thus, if a Forex quote such as EUR/USD which is equivalent to 1.3489, the EUR is your base currency and the USD is your counter currency. Forex quotes always comes in pairs or two currencies from different nations.

The Ask Price is the term used to define the price that you can buy for a certain currency. The Bid or Ask Spread is the distance between the ask prices and the bid. This is commonly expressed in pips. Forex deal is basically the sale or the purchase of a certain currency. The fundamental analysis make use of the political and economic factors such as the unemployment rate, housing starts and inflation as the means for predicting the movements of the currencies. It is basically concerned on the reasons why there is movement on the currency.

The long position is the market position responsible for appreciating the values when there is an increase in the market price. Margin refers to the collateral that is needed in order to smoothly facilitate a foreign exhange deal. This is usually a very small portion, however, it has a double-edged sword. When there is no proper use of the risk management tools, there is a big possibility that you will be experiencing a big loss. Technical analysis utilizes historical data to predict the currency movement. It believes that history always repeats itself. It is not concerned on the reasons why there is movement but it depends on the history of the movement of currencies in the past.

These are just few among the many terms used in Forex trading. So for you to be successful in this business, you must be knowledgeable enough about the language that traders and brokers use for you to really the business flawlessly.