Friday, 17 February 2017

Basic forex terminology two

                                      Basic forex terminology two

BASE CURRENCY;A base currency is the first currency quoted in a currency pair on forex. It is also typical considered the domestic currency or accounting currency for accounting purposes, a firm may use the base currency to represent all profit and losses---investopedia.

COUNTER CURRENCY;In this currency pair USD/EUR the euro(EUR) is considered the counter currency. In pair, units of counter currency are per unit of base currency.

MARGIN CALL;If the market moves against a trader resulting in losses such that the trader lacks a sufficient amount of margin, there is an automatic "margin call". The Forex dealer closes the trader's positions and limits the losses for the client because this stops the account from turninig into a negative balance.

COMMISSION/FEES;This is a certain amount that a trader pays for every trade that is placed with a forex broker. These cost vary from broker to broker, but they are usually a relatively low amount. These are usually the only cost that you are likely to incur.

ROLLOVER Charges;Rollover charges are determined by the difference between the interest rate of the country of the base currency and the interest rates of the other country.
The greater the interest rate differential between the two currencies in the currency pair, the greater the rollover charge will be. For example, when trading GBP/USD, if the British pound has the greater interest differential with the U.S.
dollar, then the rollover charge for holding British pound positions would be the most expensive. On the other hand, if the Swiss Franc were to have the smallest interest differential to the U.S. dollar, then overnight charges for USD/CHF would be the least expensive of the currency pairs.

CROSS CURRENCY;In forex, when a currency quote is given without the U.S. dollar as one of its components, this is called a cross currency.The most common cross currency pairs are the EUR/GBP, EUR/CHF, and EUR/JPY. These currency pairs expand the trading possibilities in forex market, but it is important to note that they don't have as much of a following as pairs that include the U.S. dollar, which also are called the majors.

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