Basic terminology in Forex Trading

Basic terminology in Forex Trading

Basic terminology in Forex Trading

By observing the fluctuations in the currencies one can predict if a certain country's currency is going to rise or fall. Thus one can buy a currency when it is at a low price and sell it once its price has risen to a certain level. Although it looks really easy but having basic knowledge about the dynamics of the Forex market is a must to be really successful in this trade. Forex trade is really magnanimous all over the world and beats all other trades like share trading in its volumes of revenue that is traded almost everyday.

It is important to know the terminology and acronyms used in Forex trading so that once you start trading you are not looking around for the meanings of the technical terms that are spoken in the trading circles.

Limit Order:

It is the boundary that a investor creates for his fund. Values are defined for the maximum profit that should be earned and is communicated to the forex broker. Thus when your fund will book that amount of profit your forex trader will withdraw your funds along with the profits that have been booked. Same ways instructions are sent to the forex broker to buy currency when it falls to a certain level. Thus an investor need not check time and again the position of the market or the rates at which his trading pairs are, as the forex trader will take care of them within the Limit Order.

Stop Loss Order:

This limit is specified to limit the losses. Thus a Forex Trader will cut off a current trade once a specified low is hit in order to limit losses.

PIP :

PIP is the smallest change in value that a currency pair exchange rate can make, either increasing or decreasing. It is the last decimal point in a quotation; for currency's it is equivalent to a ten thousandth (1/10,000) of a unit of that currency.

Same ways we ave other terms like Exotic currency used to define a currency that is not being traded by many people. A hawkish trader is one who takes a aggressive stance while trading currencies and a Davish is one who has a passive or non-aggressive stance while trading currencies.

Once you are into forex trading you have to be very particular about getting into the know how of these terms as they will go a long way in deciding your success rate in the forex Market.

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