What Forex Trading Terms That You Need To Know

There are forex trading terms that you need to know because such knowledge will allow you to be aware of the operationalization of the forex world. And that awareness will lead you to negotiations with the greatest potential for success. Even if you already know the meaning of these terms, it is always good to reinforce your knowledge, even because there is the stock market that has the their own terms, that is, some confusion can be generated because in Forex, currencies are traded, not stocks.

In the previous article, we mentioned some forex trading terms, namely “Pips”, “Spread” and “Margin”. In this article, we will cite others and present their concepts:

1. Retracement: when a currency pair has a sudden price change (up or down) due to a news release, and then the currency pair returns to its normal fluctuating state, we say that a retracement has occurred.
2. Lots: refers to the amount of a given currency. A Standard Lot contains 100,000 currency units. Minilots contain between 10,000 coin units and 100,000 coin units, and Microlots contain less than 10,000 coin units. For a lot of 100,000 USD units, each pip is equivalent to 10 USD, for a lot of 10,000 USD units, each pip is equivalent to 1 USD, and for a lot of 1,000 USD units, each pip is equivalent to 10 cents. dollar.
3. Leverage: refers to a mechanism offered by forex brokers in which, for example, with 800 USD, you can have the same return as if you had a lot of 100,000 dollar units (Standard Lot). So you will get a return of 10 dollars per pip on each float, but you can also lose 10 dollars per pip on each float.
4. Base Currency: as an example, in the currency pair that compares the value of the Euro to the Dollar (EUR/USD), the Euro is the Base Currency.
5. Quote Currency: citing the same example, the Dollar is the Quote Currency. “Value of the quoted currency pair” is another term commonly used to determine the exchange value of a currency pair. E.g, EUR/USD=1.30 means that the value of this currency pair is 1.30 and you will get 1 EUR for 1.3 USD.
6. Bid/Ask: Bid is the purchase price of a currency determined by the forex broker. Ask is the selling price of the same currency determined by the forex broker. The Spread is the difference between the lowest selling price and the highest buying price.
7. Slippage: is the inability of a forex broker to handle an order at the requested price. This fact rarely occurs.
8. Stop Loss: is an order by which the trader manages to limit his losses. The trader himself is the one who sets the Stop Loss. Let’s say trader Y places a buy order (BUY) because he believes that other traders are doing the same and that, therefore, the Base Currency will appreciate. But the Base Currency is trending in the opposite direction, lowering its price because other traders are selling it. Thus, trader Y begins to lose money up to a point of devaluation of the Base Currency which he determines. At this point, we call it Stop Loss.
9. Take Profit: is an order by which the trader limits his gains.
10. Long Buy: occurs when you buy base currency and sell quote currency, that occurs when you make a profit on rising price (base currency appreciation).
11. Short Buy: occurs when you sell base currency and buy quote currency, that occurs when you make a profit on falling price (base currency devaluation).
12. Support Level: it’s the lowest price level of a certain currency at a particular time before it start moving upwards.
13. Resistance Level: it’s the highest level of price of a certain currency pair before it starts lowering.

These are common and popular forex trading terms. We hope we have clarified you even more about the forex world. If you have any questions, don’t hesitate to ask in the comments so we can answer and help you. We wish you MUCH success in your forex trading.