The Forex market comes with its very own set of terms and jargon. This phrase is also sometimes used to refer to currency quotes which do not involve the U. For example, if an exchange rate between the British pound and the Japanese yen was quoted in an American newspaper, this would be considered a cross rate in this context, because neither the pound or the yen is the standard currency of the U. However, beginners the exchange rate between the pound and the U. Exchange Rate The value of one currency expressed in terms of another. Also called point or points. To calculate the leverage used, divide the total value of your open positions by the total margin balance in your account. For margin is that amount which is being used to maintain an open position, whereas free margin is the amount available to open new positions. Most brokers will automatically close a trade when the margin balance falls below the amount required to keep it open. Spread The difference between the sell forex and the buy quote or the bid and offer price. In order to break even on a trade, a position must move in the direction of the trade by an amount equal to the spread. You will need to understand how to properly read a currency pair quote before you start trading them. The reason for this is because in any foreign exchange forex you are simultaneously buying one currency and selling another. If you were to buy the EURUSD and the euro strengthened against the dollar, you would then be in a profitable trade. In other words, in the example above, you have to pay U. In other words, in the example above, you will receive U. An easy way to think about it is like this: the BASE currency is the BASIS for the trade. So, whether you buy or sell a currency pair, it is always based upon the first currency in the pair; the base currency. The basic point of Forex trading is to buy a currency pair if you think its base currency will appreciate increase in value relative to the quote terms. If you think the base currency will depreciate lose value relative to the quote currency you would sell the pair. Bid Price The bid is the price at which the market or your broker will buy a specific currency pair from you. Thus, at the bid price, a trader can sell the base currency to their broker. Ask Price The ask price is the price at which the market or your broker will sell a specific currency pair to you. Thus, at the ask price you can buy the base currency from your broker. Jump To Next Chapter Part 3: Long or Short? Part 2: Forex Trading Terminology Part forex Long or Short? Part 5: What is Fundamental Analysis? Part 6: What is Price Action Trading Analysis? Part 7: Introduction to Forex Charting Part 8: What Is A Forex Trading Strategy? Disclaimer : Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. Futures, options, and spot currency terms have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology is not necessarily indicative for future results. High Risk Warning: Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable beginners all investors. Please do not trade with borrowed money or money you cannot afford terms lose. Any beginners, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Thus, at the bid price, for trader can sell the base currency to their broker Ask Price The ask price is the price at which the market or your broker will sell a specific currency pair to you. Part 9: Common Forex trading mistakes and traps Part What is Technical Analysis? Part How to Make a Forex Trading Plan Part The Psychology of Forex Trading Part Professional Price Action Forex Trading Strategies Follow nialfuller!
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