Are you preparing to trade forex? If so, it is important that you understand the market, as well as the basic terms that are used. After all you don’t want to be in the middle of a trade, come across some jargon you don’t understand and make the wrong decision, right? The fact is that most terms will become well-known after a while, but if you are new to forex trading and looking at a Forex broker review, knowing what is being said can be extremely beneficial.
Some of the most common terms that are used during forex trading are highlighted here.
Bid/Ask Spread
When trading forex, the bid price is the one that you sell at, and the asking price is the one that you will pay for an asset. The spread is the difference in the two. In most cases, this will be the amount that a forex broker charges.
Base Currency
When talking about a forex pair, this would be the first one listed. It is the currency that you are purchasing when you sell a specific amount of the second currency listed. An example of this would be USD/EUR, with the US Dollar being the base currency. The pair’s price is the number of US dollars you would need to purchase on Euro.
Balance
This is the total amount of cash that you currently have in the trading account.
Bull/Bear Market
These terms are used for distinguishing between a market where the prices are either rising or falling and can also be used to illustrate what people expect from the market.
CFD (Contracts for Difference)
These are the contracts that state that the seller is going to pay the difference in the price of an asset when it is sold and when the actual contract ends. The CFDs will have different hours than the other assets.
Equity
This is the total amount that your trading account is worth currently. This refers to the balance you have, in addition to what you can make if you were to close all of your trades right away.
While there are obviously many more terms that you should know, these will get you started in the world of trading forex. Understanding what is going on and being said is essential for a successful experience.
