Basic Forex Terminology

As with any new skill learned, it is also necessary to learn its terminology. There are certain terms that you must know before you start trading in Forex. Here are the most important. Main and secondary currencies The 8 most used currencies (USD, EUR, JPY, GBP, CHF, CAD, NZD and AUD) are known as “main currencies”. All other currencies are called “secondary currencies.” You don’t have to worry about smaller coins, since you probably won’t negotiate with them first. The USD, EUR, JPY, GBP and CHF currencies are the most popular and liquid in the market. • Main currency The base currency is the first currency in a currency pair. Shows how much the base currency is worth to the second currency. For example, if the USD / CHF is at 1.6350 then it means that $ 1 is worth $ 1.6350. In the currency market, the US dollar is often the base currency for quotes. The quotes are expressed in units of 1 USD against the other currency of the pair.

In some other pairs, the base currency is the pound sterling, the euro, the Australian dollar or the New Zealand dollar. • Currency listed The currency quoted is the second currency of the currency pair. This is often referred to as a “pip currency,” and unrealized gains or losses are expressed in that currency. • Pip A pip is the smallest unit of the price of a coin. Almost all currencies have 5 significant digits and most pairs have the decimal point immediately after the first digit. For example, EUR / USD = 1.2538, in which case a pip is a smaller change in the fourth decimal space, that is, 0.0001. A notable exception is the USD / JPY pair, where the pip equals $ 0.01. • Purchase price (offer) The purchase price (offer) is the price at which the market is willing to buy a particular currency in the currency market. At this price you can sell the base currency. The purchase price is shown on the left side. For example, the selling price in GBP / USD = 1.88112 / 15 is 1.8812. This means you can sell a GPB for $ 1,888. • Sale price The sale price is the price at which the

Market is willing to sell a particular currency pair in the currency market. At this price, you can buy the base currency. The sale price is shown on the right side. For example, the selling price in EUR / USD = 1.2812 / 15 here is 1.2815. That means you can buy a euro for $ 1,285. The sale price is also known as the sale price. • The courses distributed in Forex include two courses, Offer (offer) and Question (demand). The offer is the price at which the agent is ready to buy the base currency in exchange for the quoted currency. This means that the offer is the price at which you can sell. The question is the price at which the broker is willing to Base currency against the quoted currency for sale. That is, asking is the price you will buy. The difference between money and money is popularly known as propagation and is the consideration that the online agent receives for his services. • Transaction costs Transaction costs that can be said to be identical to the extension are calculated as follows: Transaction costs = Ask – Offer. This is the number of pips paid when opening a position. The final amount also depends on the size of the transaction. It is important to keep in mind that, depending on the broker and volatility, the difference between the offer and the offer may increase, which makes the opening of an agreement more expensive. This usually occurs with high volatility and low liquidity, as is the case with the disclosure of some relevant economic data. • Cross currency A cross currency is a pair in which one of the currencies is the US dollar (USD). These pairs show unpredictable price behavior when the operator opens two operations in US dollars. For example, if you open a long purchase transaction in EUR / GPB, you must buy EUR / USD and sell GPB / USD. Currency pairs generally cause higher transaction costs.

Margin When you open a new account margin with a forex broker, you must deposit a minimum amount to your broker. This minimum varies by broker and can be as low as $ 100 / $ for higher amounts. Each time a new operation is performed, a percentage of your account balance is the initial margin required for a new operation, based on the underlying currency pair, the current price and the number of units (or lots) of the operation. Suppose you open a mini-account with a leverage of 1: 200 or a margin of 0.5%. Mini books work with minilots. For example, suppose a minilot is $ 10,000. If you are about to open a small lot, you will need only $ 50 ($ 10,000 x $ 50 = $ 50) instead of $ 10,000. • Leverage Leverage is the proportion of capital used in a transaction for the required deposit. It is the ability to control large amounts of dollars with relatively little capital. The leverage varies drastically according to the broker and can vary from 1: 2 to 1: 2000. The most frequent leverage in Forex is currently 1: 200. With a margin, you can increase your purchasing power. This means that you can buy $ 500,000 in currencies with an account balance of $ 5,000 that allows a leverage of 1: 100 because you only need to invest a percentage of the purchase price. Another way of saying this is that it has a buying power of $ 500,000. With more purchasing power, you can significantly increase potential profits without paying in cash. But be careful when using a high   The profit margin increases both your profits and your losses if the operation is not in your favor.

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