Friday, 17 February 2017

Basic forex terminology

             Basic forex terminology

SPREAD;The spread is the amount of pips between the bidding price and asking price.
The spread is what forex brokers use to make money on every forex trade placed through their network. For example, the forex broker may be paying a price of 1.3700 for buying or selling. The broker will then allow you to buy the currency for 1.3701 or sell it for 1.3699

PIPS;A pip is the most common increment in a currency value. It is the smallest price change that any currency can make. Most pips are equal to a 0.0001 price change. For instance, the EUR/USD currency pair  might change from 1.4030 to 1.4031-this is a one-pip movement.
However, where a currency has a low unit value, the price is only quoted to 2 decimal places, not 4, in this case, a pip is 0.01 rather than 0.0001. The example is the Japanese yen-if the USD/JPY currency pair increases from 104.22 to 104.23, this is a one-pip change.

LOTS;A lot is simply the bundle of units in trade.The standard lot is the equivalent to 100,000 units of the quote currency in forex trade.
A standard lot is similar to trade size. It is one of the three commonly known lot sizes;the other are mini-lot and micro-lot.
Furthermore, A standard lot represents 100,000 units of any currency, whereas a mini-lot represents 10,000 units and micro-lot represents 1,000 units of any currency.

LEVERAGE;Leverage is the ratio of the amount capital used in a transaction to the required security
deposit (margin). It is the ability to control large dollar amounts of a security with a
relatively small amount of capital. Leveraging varies dramatically with different brokers,
ranging from 2:1 to 400:1.
Margin + Leverage = Possible Deadly Combination
Trading currencies on margin lets you increase your buying power. Meaning that if you
have $5,000 cash in a margin account that allows 100:1 leverage, you could purchase up
to $500,000 worth of currency because you only have to post one percent of the purchase
price as collateral. Another way of saying this is that you have $500,000 in buying power.
With more buying power, you can increase your total return on investment with less cash
outlay. But be careful, trading on margin magnifies your profits AND losses.

BID;The bid price is the price at which the buyer or buyers are willing to pay for a security.
For example, in the quote GBP/USD 1.8812/15, the bid price is 1.8812. This means you
sell one British pound for 1.8812 U.S. dollars.

ASK;The ask price represent the minimum price that a seller or sellers are willing to receive for the security.
For example, in the quote EUR/USD 1.2812/15, the ask price is 1.2815. This means you can buy one Euro for 1.2315 U.S. dollars. The ask price is also called the offer price.

ORDER;The term "order" refers to how you will enter or exit a trade.

Trade forex on diverse forex trading platforms PDA,mt4,mt5 and tablets, Open a free forex trading account now and earn bonus up to 200%,high leverage,  pip refunds and free deposits etc.

No comments:

Post a Comment