Forex Market Jargon

Forex market jargonLike all traders, Forex traders have their own jargon. Whether you’re new to trading or an experienced trader moving into the Forex market for the first time, these are some important terms you need to know.

Ask Price: The price at which your broker will sell the base currency.

Base Currency: The base currency is the first currency listed in the quote series. The quote shows how many units of the second, or quote, currency are required to by one unit of the base currency. In the quote series USD/EUR the USD is the base currency and the EUR is the quote currency.

Bid Price: The price at which your broker will buy the base currency of the trade.

Broker: This is the person or company you have your account with. They’re the middle man between you and the currency markets.

Cable: A nickname for the GBP/USD currency pair. It comes from a time when the exchange rate was cabled across the Atlantic Ocean.

Currency Pair: Forex traders trade currency pairs. Units of one currency are traded for the other currency. A pair consists of a base currency and a quote currency, and shows how many units of the quote currency are required to buy one unit of the base currency.

Fibonacci Retracements: A tool traders use to determine levels of support and resistance during an uptrend or downtrend. Traders expect support for pullbacks around 38.2% during an uptrend and resistance at 50% and 61.8% during a downtrend.

Fundamental Analysis: Determining market conditions based on economic, political and social factors and using those factors to predict future price movements.

Leverage: This is the amount of money you can borrow to increase the potential return of a trade.

Long: When you go “long” on a trade, you buy the base currency and sell the quote currency.

Lot: A group of units of the base currency. The size of a trade is measured in lot sizes. There are three types: Regular, mini and Micro. Regular lots are 100,000 units of the base currency, mini lots are 10,000 units and a micro lot is 1,000 units.

Pip: The smallest possible change of a given exchange rate.

Quote Currency: The quote currency is the second currency listed in a quote series. The quote itself tells you how much of the quote currency one unit of the first, or base, currency is worth. In the quote series USD/EUR the USD is the base currency and the EUR is the quote currency.

Resistance: A price the quote doesn’t want to move above. When traced on a graph it will look like the price is hitting a ceiling and dropping back down from a resistance level.

Sentiment Analysis: Gauging the market sentiment to determine the probability of future price movements.

Short: You short a trade you sell the base currency and buy the quote currency.

Spread: The difference between the ask price and the bid price of a currency pair. Brokers make their money from the spread.

Support: A price the quote doesn’t want to drop below. When traced on a graph the price will appear to bounce upwards off levels of support.

Technical Analysis: Analysis based on price swings. A trader can look at past historical price movement, determine the current trading conditions and then predict price movement.

 

To learn more forex market jargon, be sure to visit the professionals of Lucror FX today.

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