Forex and the most important terms used in currency trading

Forex or the foreign exchange market is the largest financial market in the world, where an amount of 5 thousand billion dollars is traded on a daily basis through trade in currencies, unlike all other financial markets, and the forex market does not have a specific physical place or a clear center for exchange In it, where it is operated through an electronic network linking banks, companies and individuals who trade in one currency against another, and through the forex market, investors and traders buy and sell different currency pairs according to their view and expectations of the market, and this market includes the participation of various types of traders From banks, hedge funds and governments, as well as ordinary people from all over the world, through the following article you will learn about the most important terms that you should be aware of before entering the world of trading and the financial markets.

forex trading

forex trading

Indications

Indices measure the performance of the forex and stock markets and thus measure the performance in general of the economy, so the indicators in the financial markets play an important role, and among the most famous indices in the world are the SP 500, FTSE 100, DAX, and the Nikkei index, and there are indicators that measure the performance of a currency against a basket From other currencies unlike the dollar index and the euro index, while these indicators would benefit traders in anticipating the general trends in the markets, and at the present time it has become possible to trade these indicators in the same way that other financial instruments such as foreign currencies are traded and stocks.

margin

Margin or margin, is the amount of money that the financial broker requests in order to be able to trade through it, through the margin system, the trader can carry out the process of trading with an amount of money that exceeds the amount that he deposited in multiples, and whenever the margin requirement decreases, the greater the financial leverage For example, if the margin requirement of a broker is 10%, the leverage will be 10:1 or 10 times the amount you have in your account, which means that you will need only $10,000 to trade the equivalent of $100,000.

Forex Terminology

Forex Terminology

 

long position

A long position is the purchase of a financial asset, whether it is a stock, a currency pair or a futures contract, to be sold at a higher price in the future, for example: when a trader buys an asset, we say that this trader opened a long position.

short position

Short position is the process of selling a financial asset, to be bought in the future at a lower price, and it is also called short selling or short selling, and traders enter into short selling deals when they expect a decrease in prices, and they can enter at any time and easily In short selling deals on foreign currencies and futures contracts, in contrast to the stock markets, where it is difficult to enter into short selling deals, and in order to open short selling deals on stocks, you must borrow them from the financial intermediary in order to be able to sell them, while the short sales In the currency market, you buy the counter currency in the currency pair you want to sell.

Spreads

The price difference is the difference between the ask price and the offer price on a financial instrument at a specific moment in time, and the price differences are affected by the volumes of liquidity in the market.

Pip the point

It is the smallest unit of the price of any currency. Almost every two currencies price consists of five large numbers. As in the example of the euro / dollar, it is equal to 1.2538. In this example, one pip is equal to the smallest change in the fourth decimal, which is 0.001. If the currency price in any dollar pair, then pip is always One equals 1/100th of a cent, the obvious exception being the USD/JPY pair in which a pip is equal to $0.01.

Trading orders

Trading orders are defined as the orders that the trader sends through the trading platform to the company that acts as the intermediary when he has the desire to open or close a specific buy or sell deal, and trading orders are the orders that were made in the past period through the phone, which used to take time A drum, but nowadays, with a few clicks of a computer mouse, you can quickly and easily execute a buy or sell order.

 

Mohamed Abdel Khaleq
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