As Forex trading becomes increasingly popular, more of your friends will expand their vocabulary...and you don't want to be left behind! Jason Fielder has laid it all out below and is willing/able to answer any of your other questions about Forex via the comment section. So try to stump him in the comments, and check out his Triad Formula if you're ready to take the next step in your Forex trading.
One aspect of trading the Forex, or even talking to Forex traders, that can be really intimidating is that the Forex market has an awful lot of jargon. For those of us who have been trading for years, the jargon comes as second nature. If you’re just getting started, then it’s easy to see how intimidating that can be.
This article will set out to help you get started. There is a lot of Forex lingo, but at least now you’ll be able to jump into the game a little bit more after knowing these common Forex terms:
The major currencies There are eight major currencies, which are: the U.S. Dollar, Canadian Dollar, Australian Dollar, New Zealand Dollar, the Euro, Japanese Yen, the British Pound, and the Swiss Franc.
Minor currencies This is any currency that does not belong to the major eight. So even currencies of large economies like Brazil, Mexico, Russia, China, and India are all still considered minor currencies.
Base currency This is the first currency listed in a currency quote, and is always measured in a unit of 1.
Cross currency The second currency listed in a currency quote.
The Aussie A slang term for the Australian Dollar.
The Kiwi A slang term for the New Zealand Dollar.
The Bid Refers to the bid price, which is the price the market will currently purchase a specific currency pair for. The bid price will always be higher than the ask price.
The Ask Refers to the ask price, which is what you will sell a currency for. The ask price is the one used when selling.
The Spread The difference in value between the ask price and the bid price. This miniscule difference is how some brokers make their money off Forex traders instead of charging a commission.
Bull Market A market distinguished by an overall rise in price.
Bear Market A market distinguished by an overall fall in price.
Lots This is more than lingo, and not a word referring to a lot of something. Lots are the bulk amounts of currency required for trading in the Forex market, generally $100,000.
Margin This is the minimum amount of money needed to put up to place a trade with a broker. As long as you have this minimum amount in your account you can trade. When your account falls below that amount, all your positions are closed out.
Margin Call A margin call is made when, due to losses, your account falls below the allowed minimum for a broker account, then the broker makes a margin call, which will close out all your positions.
Limit Order This is an order to execute a trade only if it hits a specific price or better.
Carry Trade Depending on what Forex traders you hang around with, you could hear this one a lot. A carry trade is a trade where you choose a currency pair in which you go interest positive, meaning that you are earning daily interest on your trade because of the difference in interest rates between the two nations.
Counter-Trend Many people think this means trending downward, but that is NOT correct. A counter trend market is a market that is not trending either way, meaning all movements are basically staying within the same channeled area.
GTC Order Good Till Cancelled Order. This is an order placed for a currency pair that will remain in play until the trader shuts that position down.
OCO Order One Cancel Other. A type of trade using two orders that are set up by trigger values. When a currency pair hits a trigger, that trade goes into effect while the other is automatically cancelled.
Once you understand this principal your trading will get an instant boost - enjoy!
16 thoughts on “Speaking Like a Pro: Learn Forex Jargon”
The article stated, "The Bid Refers to the bid price, which is the price the market will currently purchase a specific currency pair for. The bid price will always be higher than the ask price.
The Ask Refers to the ask price, which is what you will sell a currency for. The ask price is the one used when selling."
This is wrong. The ask price is the price at which the base currency is offered by the market maker, i.e., the price which you, the trader, must pay to buy the base currency, & is always higher than the bid price which is the price at which the base currency the market maker will pay when you, the trader, sell the base currency. As stated by fxinfo.com,
"The Forex Bid Price
The Forex bid is the price at which the Forex trading online investors are prepared to buy a certain Forex currency pair for. This is the price that is set for the selling of the trader's base currency. The bid price is seen on the left side of the Forex quote. For example, for the EUR/USD quote 1.2728/31, the bid price is 1.2728. This means you can sell one Euro for $1.2728.
The Forex Ask Price
The ask price is the price at which the market is willing to sell the currency pair. This is the price that is set for the buying of the currency pair by the trader. When you place a Forex order, The ask price is seen on the right side of the Forex trading quote. In the previous example of the EUR/USD 1.2728/31, the ask price is 1.2731. It means you can buy 1 Euro for $1.2731."
How much is the Triad Formula...???...website is confusing. Is it theory or an actual computer program that signals when to enter and exit the market...???
Pip The smallest price increment a currency can make. Also known as points. For example, 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY.
You missed one:
Pip - The smallest price increment a currency can make. Also known as points. For example, 1 pip = 0.0001 for EUR/USD, or 0.01 for USD/JPY.
Hey Brad - really useful list of Forex terms. Sometimes lots of unfamiliar terms and technical jargon can put off potential traders. When I started Forex Trading I didn't have access to this kind of information - a very good resource.
Dear people at Ino.Shalom.
The above written terminology shoud have been sent as first educational matteria months ago and if I may suggest,not all
of us entering this industry are geniusses,so as I suggest that every
2-3 months send this educational trading terminology for new players
and,all in all,your educationals are verry good.
Thanks to Mr.Poulos and Mr.Nison for theeir webinars of what can be
understood from their NONDICTIA US English,not everywhere arround the world people are Anglophiles,nevertheless,thankyou for everything also
By the way,I wrote you in past,due to my age,my mental cappacity cannot
deal forex (73)too late,I'm trying other markets,tks again,Jay.
The Bid: Refers to the bid price, which is the price the market will currently purchase a specific currency pair for. The bid price will always be higher than the ask price.
The Bid is always higher than the ask price?!
Why is the Bid and Ask prices opposed to the stock market?
In the stock market, I (as an individual) buy at ASK and sell at BID
And ASK > BID
Why Forex is the other way, or is it a typo
Here's 5 small cap stocks, 3 pharmaceutical, 1 gaming and one technology, all with earnings and low PE's.
What is best set up for meta trader4 stochastic and macd? MT4 came with a default setting for both but I don't know what it's saying because the line are crossing each other so often that it make no sense to me.
@ annie, you can go to forex.com or anyother broker that accepts international trade and get info on their numbers. With that you can set up an international acoount via phone and make orders via phone, online or using their trading platform
i'm in australia too. Just type Forex brokers australia into your seach engine and you'll get a number of companies to choose from. Most have demo account facilities and training that will get you started.
i've only just started on this Marketclub and its very good education.
Ilick to learn how to trade FOREX. thank you for the useful free educational imformation, I can across forom time totime.
Apart from education, I need first to open up account, and I don't know how to go about it.
I suppose I have to find a broker that accept local(AUSTRALIA),and
international trade, on line or by phone.
How can help?
hi annie, have a look at cmc markets they have a base in sydney and trade all markets and cfds.
Start by looking at brokers with offices in Australia. It is not necessary, but in case of some dispute in the future, it always easier to resolve it if you are based in the same jurisdiction. Nowadays even brokers abroad from you will set up accounts in your currency. Virtually all your trading will be done on line, but choose a broker which has a phone customer service.
Don't forget to open the "demo account" first. Devise some strtegies, test them out and, most importantly, learn how properly place all the veriations of orders, stops and limits, as well as other technical issues of the platform, like size and leverage. An unbelievable amount money is being lost due to mistakes people make just placing orders.
Practice for a while, and when you are comfortable, open real account and start small. Good luck trading.
Try FX Solutions Australia, open a demo account then you can play around
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