Get Started with Forex: Trading Terminology

In what way do I begin trading?

It’s easy. Register on the website of a reputable broker, then fund your account with the desired investment amount. The majority of brokers accept a wide range of alternative payment methods, which change depending on where you live. Typically, they allow deposits made by bank wire transfers, the majority of popular credit or debit cards, and e-wallets. To learn about the payment options you have, get in touch with your account service manager by email or Live Chat. You’re prepared to begin trading as soon as your deposit has been received.
You can open a free trial account to try trading and practice trading under actual market circumstances without risking any real money if you are new to forex or are not yet ready to start trading.
However, trading in a real account with real money is the only way to truly comprehend the psychology of trading. Opening a micro account with a tiny initial deposit and executing modest trades will get you started.

Trading Terminology: What a Beginner Trader Needs to Know

Here are a few words you will encounter when planning your first deal in order to get you started:.

Long and Short.
Margin and leverage.
Stop loss and take profit.
Hold position.

What is a pip?

One pip is the smallest unit of change in price. It stands for ‘percentage in point’. Because most currency pairs are quoted with four decimal points, one pip usually equals 0.0001 but there are some currency pairs such as the USD/JPY where 1 pip equals 0.01.

What is a spread?

There are always two prices when looking to trade a currency. The asking price, also known as the buy price, is located on the right side of the screen. The sell price, also known as the bid, is located on the left side. Keep in mind that when you buy a pair, you are buying the base currency and selling the counter, and when you sell a pair, you are selling the base and buying the counter. The spread, which is the difference between what you pay to buy a currency and what you receive when you sell it, is the price difference between these two values.
The spread ultimately determines how much it will cost you to trade. Brokers may advertise low spreads, but be sure to look into any additional fees and commissions they may be billing you.

What does “long” and “short” mean?

You can trade both ways on the currency market since it is bidirectional. Depending on your approach, you can buy or sell. When you go “long,” which means to buy, you are anticipating a rise in price. Going “short” means selling because you anticipate a decline in prices. In currency trading, selling short is just as prevalent as buying long. If you are “square” or “flat,” it means that your buy positions perfectly balance out your sell ones, or that you have no positions at all.

Margin and leverage

Leverage allows traders to invest a little sum of money and trade substantially greater deal sizes. This is advantageous since currency rates can fluctuate by very small amounts, and larger trades reflect larger gains or losses for each pip shift in the rate.
Because you “leverage” your free balance to open a larger trade, leverage enables you to trade with more money than you have in your account.
Leverage is displayed as a ratio, such 1:100. Be aware that leverage can increase both potential gains and losses.

Stop loss and take profit

You can lower your risk by establishing a stop loss. By selecting the stop loss rate, you establish your potential maximum loss in advance. Your contract will be automatically closed if the market moves to that price. You control your investment because you determine the rate.
The same principles apply for determining a take profit rate. Your contract is automatically concluded when the profit rate you have selected is attained after you choose a desired profit amount. By utilizing a take profit rate, you can manage your trade without constantly keeping an eye on your position.

Order types

You have the option of starting a day trade, limit order, or forward order.

An order to purchase or sell at the best price possible is referred to as a day trade or a market order. Normally, this kind of order is carried out right away.

A limit order is a request to start a day transaction at a specified rate when and if the market reaches that rate. Until the market hits that rate or the time runs out, the limit order will remain pending (i.e. waiting to be converted into a day trade). It has the typical characteristics of a day transaction, such as a margin requirement.

A forward order is an open trade with a value date that is later than the spot value date. It has the typical characteristics of a day transaction, such as a margin requirement.

To assist you control your risk, you may establish customized stop loss and take profit rates for each of the three types of orders.

How long should I leave my position open?

Since you often don’t maintain your position open for more than a day during day trading, the term “day trading” was coined.
A medium-term trader will try to predict the market’s broad direction and profit from more major changes in exchange rates. Many of the same abilities needed for day trading apply to this type of trading, especially when it comes to entering and leaving positions.
But it also necessitates a larger perspective on the markets, more in-depth analysis, and far more patience.

Written by Dork

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