What is Forex Trading?

Everything concerning money has a pretty complex nomenclature; and Forex is no exception. Anyone who has tried Forex trading would know that there are lots of puzzling terms out there, and that is one major deterrent for normal people to get into forex trading. But don’t worry about all those complicated terms. In fact if you know the definition and meanings of forex terms it is pretty easy. Let’s see some of the most often used terms in forex trading and their definitions.

  • Forex – Foreign Exchange
  • Ask – Used instead of ‘offer’ – the price which you are willing to offer for buying
  • Pip – The slightest increase in currency amounts – like $ 1.1916 to $ 1.1917. While trading in large quantities, pips are what traders count
  • Spread – The margin in which you are willing to buy. This is usually between two amounts – example 1.30 – 1.35
  • Cost of Carry – The amount charged to hold currency for a specific period of time
  • Futures – Similar to futures trade in stock market, speculation price over futures contract
  • Leverage – The amount of exposure the trader is willing to give the customer
  • Limit – The amount at which the buy / sell is set to happen. Normally customers set buy prices at lower than market price, and selling price slightly higher
  • Stop – or stop loss. The price which a trader can set in advance at which the Forex is automatically
  • Sold – usually set to reduce loss in volatile markets
  • Market Order – A buy order to be executed at current market price
  • Trading Terminology – Like stocks have their own codes on the stock market, Forex also has trading terms that are common internationally. Like ‘Cable’ used for a trade between UK Pound and US Dollar

These are some of the common terms related to Forex. You will pick up the rest of the forex vocabulary while trading. However always remember to start small, learn the ropes, develop a strategy and then go ahead full steam.