Forex market is a large, rapid growing and liquid financial market that operates round the clock, except for weekends. Foreign exchange market is not a traditional market since it has no physical location and is not controlled. Forex market has many participants, such as banks, large corporations, insurance companies, brokers and individuals. The latter group of market participants is mainly interested in price speculations.
Forex Basic Terms
Forex terms play an important part for the beginners who want to step in trading activity. The most important ones are mainly provided directly in the websites of the Forex brokers, in the Glossary section. Surely the number of such terms are quite big, because they refer to basic of trading, financial instruments, technical analysis and many more. However, it is worth to mention a few important ones.
Currency pairs: In Forex market currencies are traded in pairs. When one currency of the pair is bought the other one is sold. The first currency of the pair is the base one, while the other is the quote.
Foreign currency exchange rate: Currency exchange, as it can be implied from the name, is simultaneous exchange of one currency for another. An exchange rate is the value of one currency expressed in units of another. Exchange rates are not stable prices, instead, they are highly volatile.
Rollover/ swap: Positions that are left open at the end of the business day in Forex market are rolled over to the next day.
Spread: The difference between bid and sell price is spread. Spreads can be both fixed and floating.
Pip: The smallest price increment a currency can make is known as a pip or a point.
Margin: Amount that was used to maintain an open position is margin. The amount available to open a new position is a free margin.
Leverage: Leverage is the relationship between the volume of the opened position and the margin. Different brokers offer different leverages. Leverage creates a possibility to trade with higher volume.
Learn more about What is Leverage in Forex
Surely these are only a few terms that are among so many. They come across during studying the market, trading on the platform. The definitions of these terms are important to be known by everyone who is inetersted to start trading, as they are inseperable part of this activity.
The importance of Forex Fundamentals
Often individuals request information about Forex market, trading and the way to make trading decisions, to make profit and manage risks. The professional support managers surely advise them to read, study articles, open demo accounts to get practice and many more. Unfortunately there are clients that skip some parts of learning or just get theoretical knowledge without using it in practice and they come across problems during trading. That is why it is important to pay attention to educational materials, the necessity of opening a demo account before investing real funds and all other things that comprise the pillars of Forex fundamentals.
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