The foreign exchange trading market promotes the international trade of currencies. As exchange rates for currencies change constantly, some countries money is worth more while some currencies drop in value. If you’re thinking of getting into forex trading, you’ll need to learn the jargon, just like with any other business or field. Here are some basic terms you’ll need to know when trading forex.
Exchange rate is the rate at which one country’s currency can be traded for another. This is what the foreign exchange trading market is all about. There are economic calendars offered by some trading websites that will help you predict which currencies will be worth more or less throughout the trading time periods.
The pips are one of the most important components of forex trading. Watching the pips or points will determine whether or not you make a profit. Pips usually go up to the fourth decimal, or 0.0001, of the given currency. Trading multiple currencies that have such minor changes in value is what makes the profits larger.
A demo is a forex trading program that allows you to get a feel for what it’s like to trade on the forex market without investing any money. Many people encourage new traders to use these services, because they will teach you the basics you need to know and increase your chances of making a profit. Suggested training times with demo programs vary, but most say that you should train on demo programs for quite awhile before putting your money into trading. There are also online live trading feeds where you can learn from experienced traders.
Margin refers to the amount of money a trader needs to invest to hold a spot in the Forex trading market. A margin account is a short-term loan from a broker to allow the trader to begin working with the Forex market. These monetary values vary from broker to broker. The more money you are willing to pay to a broker or borrow from them, the more advice and help you’ll likely get while trading. Another term for margin is leverage.
An ask price or offer is the amount at which a dealer is willing to sell their currency. You’ll need to know how to read the offer numbers and what they mean in terms of how much you’ll be paying for the currency. One of the best ways to get used to the numbers and what offers and buying and selling look like is to watch an experienced trader’s account. How they trade and make a profit will give you a good idea of what you should be doing.
Another important thing to research is the different kinds of currencies and their abbreviations. There are also slang terms for each of these kinds of currencies, so if you plan on doing heavy research on forex trading, you might want to learn these slang terms as well. There are a lot of other slang terms that you can pick up from reading about forex trading and using a demo program.
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