The vocabulary,
acronyms, and words used in the forex market are usually strange and might
leave us perplexed. It could already be challenging enough to adjust to trading
on new platforms. </p><p class=“MsoNormal“>Using foreign
terminology and not understanding such trading lingo can seriously hinder a
trader’s progress and profitability. Even if you’re just starting to <a target=“_blank“ href=“https://www.oanda.com/bvi-my/cfds/“ target=“_blank“>trade forex</a> today, keep reading for a primer on some of the key
terms that every forex trader needs to be aware of to improve their
comprehension of the forex market. </p><p>1. Currency Pair</p><p class=“MsoNormal“>There are 180
recognised currencies in use throughout 195 countries. By doing various studies
and research, we traders can anticipate how a specific currency will behave on
the market. </p><p class=“MsoNormal“>How we trade these
currencies or conduct forex trading is <a target=“_blank“ href=“https://www.investopedia.com/terms/c/currencypair.asp#:~:text=our%20editorial%20policies-,What%20Is%20a%20Currency%20Pair%3F,is%20called%20the%20quote%20currency.“ target=“_blank“>based on how one currency
performs in comparison to another</a>. When deciding which
currencies to trade, you’ll see they come in pairs. Let’s use EUR/USD as a case
study. If you were to „buy“ EUR against USD, you would bet that the
euro would do better than the US dollar. </p><p class=“MsoNormal“>To categorise pairs,
there are three basic divisions used: </p><p class=“MsoNormal“>Major Pairings: The
eight widely traded pairings that each contain one of the following currencies:
EUR, CAD, GBP, CHF, JPY, AUD, or NZD, and the US dollar (USD) as the base or
counter currency. </p><p class=“MsoNormal“>Cross Pairs: Any pair
of two prominent currencies that do not use the US dollar as either their base
currency or counter currency is referred to as a cross pair. These are believed
to be less predictable than major pairs. GBP/AUD, EUR/CAD, and NZD/CAD are a
few examples, but there are more as well. </p><p class=“MsoNormal“>Exotics – These are, to
put it simply, less well-known currencies with significant levels of market
volatility. These include the South African rand, the Hungarian forint, and the
Polish zloty. </p><p>2. Leverage</p><p class=“MsoNormal“>Leverage is essentially
borrowing money from a trading account. A trader can open a position with a big
contract size for less money by using leveraged trading. Using high leverage to
trade your chosen forex pairs, cryptocurrencies, and other markets without
needing to make substantial financial commitments is a profitable strategy. </p><p class=“MsoNormal“>Let’s use the
well-known forex pair GBP/USD as an example. Based on a contract size of
100,000 per lot, a trader without leverage would need roughly $130,000.00. A
trader may open a position with only $260, employing leverage of 1:500 (130,000
/ 500). The trader presently has $130,000 in his possession after only
investing $260. </p><p>3. Price ASK and BID</p><p class=“MsoNormal“>The bid price is the
price a trader is willing to sell a currency pair for. At the asking price, a
trader will purchase a currency pair. The difference between the asking price
and the bid price is known as the spread. </p><p>4. PIP</p><p class=“MsoNormal“>PIP is an acronym for
percentage in point. The smallest fluctuation in the exchange rate between two
currencies is known as a PIP. The PIP is the fourth decimal point on a price
quotation for a currency pair. It is a tool for measuring value. </p><p class=“MsoNormal“>For instance, the price
quotation for the AUD/USD pair is 0.6876, meaning that you can acquire around
0.6876 US dollars for every Australian dollar. If the PIP increased by 0.0001
to 0.6877, it would mean that you could buy slightly more US dollars for every
Australian dollar. </p><p>5. Lot Size</p><p class=“MsoNormal“>The term
„lot“ in forex trading refers to the size of the transaction or
position you will open. One lot, or 100,000 units of the base currency of a
currency pair, is the standard unit of trading in the forex market. In the case
of EUR/USD, a trade amount of $100,000 is needed to initiate a transaction. EUR
is the base currency. Since one standard PIP is worth $10 in a buy transaction,
a shift of 10 PIPs would result in a gain of $100. </p><p>6. From Long to Short</p><p class=“MsoNormal“>When a trader buys the
first currency in a currency pair and sells the second, they are said to be
going long on the pair. Going long or short on a currency shows that you
believe its value will rise. </p><p class=“MsoNormal“>Like AUD/USD,
purchasing AUD in the hope that it will gain value against the USD. A trader
who goes short does so by selling one currency and buying another. Going short,
or „selling,“ one-half of a currency pair, is a wager that the price
will decline. </p><p>6. Margin</p><p class=“MsoNormal“>The initial quantity of
money a trader must deposit to open a position is called margin. <a target=“_blank“ href=“https://www.thebalance.com/trading-on-margin-1344888″>Margin also enables a
trader to open larger positions</a>. When trading on
margin, the trader just has to contribute a percentage of the entire position value
to begin a transaction. Margin enables leveraged trading, but exercise caution
because it increases both gains and losses. </p><p>7. Bearish / Bullish</p><p class=“MsoNormal“>A market’s or the stock
market’s overall performance may be deduced from market sentiment. A bullish market
outlook means that prices are increasing. When the market is in a pessimistic
mindset, prices are falling. </p><p class=“MsoNormal“>Bulls can readily be
distinguished from other animals thanks to their horns and propensity to toss
stuff into the air when enraged. Rising costs Bears have a destructive nature
when upset; they will rise erect on their hind legs. Costs are decreasing.

</p><p>Summary</p><p class=“MsoNormal“>As you can see, the
forex trading sector uses several acronyms and specialised terms. To develop
into more well-rounded and successful traders, we should continually read,
learn new knowledge, and build on what we currently know. </p><p class=“MsoNormal“>The most absurd
question of all is the one that is never posed. Ask around, conduct some
studies, and find out the next time you visit a trading community and encounter
words or phrases you’re not acquainted with. We can all become better traders
with the right tools and instruction, even though forex trading may be a tricky
beast to tame.</p>

This article was written by ForexLive at forexlive.com.