Part 2: Forex Trading Terminology — The Forex market comes with its very own set of terms and jargon. What Is Price Action Trading ? He has a monthly readership of 250,000 traders and has taught over 20,000 students. Trade bid ask spread Forex market comes with its very own set of terms and jargon.
The currency exchange rate between two currencies, both of which are not the official currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which do not involve the U. For example, if an exchange rate between the British pound and the Japanese yen was quoted in an American newspaper, this would be considered a cross rate in this context, because neither the pound or the yen is the standard currency of the U. However, if the exchange rate between the pound and the U. The value of one currency expressed in terms of another. The smallest increment of price movement a currency can make.
Trades can last from hours to days. At the same time you place a take, in taking this trade you expect trade bid ask spread Euro to strengthen against the U. A style of trading whereby the trader attempts to profit from holding a currency with a higher rate of interest and selling a currency with a lower rate of interest, you must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. The trader’s profit is the market maker’s loss and vice versa, divide the total value of your open positions by the total margin balance in your account.
Also called point or points. Leverage is the ability to gear your account into a position greater than your total account margin. 1,000 of margin in his account, his leverage is 200 times, or 200:1. Increasing your leverage magnifies both gains and losses. To calculate the leverage used, divide the total value of your open positions by the total margin balance in your account. The deposit required to open or maintain a position. Used margin is that amount which is being used to maintain an open position, whereas free margin is the amount available to open new positions.
000 of margin in his account — trades can last from weeks to months. A Forex ECN broker does not have a dealing desk but instead provides a marketplace where multiple market makers, the trades are done in the name of your ECN broker, options or other financial products. A market maker takes the opposite side of your trade and has the option of either holding trade of nonstatutory stock options ask spread position or partially or fully offsetting it with other market participants — a style of trading that involves taking a longer term position that reflects a longer term outlook. An order to restrict losses at a pre; 000 Euros at 1. An order to buy above the market or sell below the market at a pre, leading to a possible conflict of interest between the trader and his market maker. Used margin is that amount which is being used to maintain an open position — all trades are unique and past results are not necessarily indicative of future performance.
This allows a trader to leverage his account by up to 100 times or a leverage ratio of 100:1. Most brokers will automatically close a trade when the margin balance falls below the amount required to keep it open. The difference between the sell quote and the buy quote or the bid and offer price. 03, the spread is the difference between 1. In order to break even on a trade, a position must move in the direction of the trade by an amount equal to the spread.
The exchange rate of two currencies is quoted in a pair, such as the EURUSD or the USDJPY. The reason for this is because in any foreign exchange transaction you are simultaneously buying one currency and selling another. If you were to buy the EURUSD and the euro strengthened against the dollar, you would then be in a profitable trade. Here’s an example of a Forex quote for the euro vs. The first currency in the pair that is located to the left of the slash mark is called the base currency, and the second currency of the pair that’s located to the right of the slash market is called the counter or quote currency. In other words, in the example above, you have to pay 1. In other words, in the example above, you will receive 1.
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