Common Terminologies Used In Forex

Common Terminologies Used In Forex

Submitted by adil on Thu, 03/21/2013 - 06:03

Forex trading has got its own specific set of terminologies. Thus, before you make plan to enter the Forex trading market, you must understand the basic terminologies that are used in Forex trading. You have to admit that one can be successful in Forex field only if he understands the basic terms that are used.

Offer/Ask

This is the real price which any dealer or broker is willing to sell.

Bid Price

This is basically the price on which the broker or the dealer is very keen to buy the currency at..

Bid/Ask Spread

This is the distance that occurs between the bid as well as the ask price. Normally, this distance is expressed in pips.

Leverage

This is a speculative amount which is traded so as to surpass the margin which is required in a trade. Usually, this figure is expressed as a multiple and is also referred to as lot size or contract value.

Pip

It is the lowest price increase in a particular given currency. Majority of the traders refer to it as points and ticks.

Liquidity

This is the cost efficiency and effectiveness which is related to the trade in a financial market. A more liquid foreign exchange markets offers more frequent price quotes but at the cost of lowered bid/ask spread. The finance market is considered as amongst the most liquid market in the plane. This is largely dye to its instant trading abilities, use of currencies as well as high volume.

Margin

It is basically the quantity of cash which is required in the account of the client to enable him to maintain a position or at least to open it. Margin can be either free or used in Forex exchange. A free margin is basically the amount that is available for opening of the new positions whereas the used margin is a specified amount that is required to hold already “open positions”.