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- By Finxpdxteam
- December 8, 2023
- 8:58 am
In Forex trading, you can make substantial gains starting with a small investment, but it’s important to remember that significant risks are involved. Learning of currency markets is essential for effective risk management.
In Forex trading, you can make substantial gains starting with a small investment, but it’s important to remember that significant risks are involved. Learning of currency markets is essential for effective risk management.
Forex/Foreign Exchange
DEFINITION
The global marketplace for buying and selling currencies.
Currency Pair
DEFINITION
This refers to the quotation of two different currencies, with the first currency referred to as the base currency and the second as the quote currency. For example, in the pair EUR/USD, EUR is the base currency, and USD is the quote currency.
Major Pairs
DEFINITION
These are the most traded currency pairs in the world, typically involving the US dollar. Examples include EUR/USD, GBP/USD, and USD/JPY.
Minor Pairs
DEFINITION
Currency pairs that do not involve the US dollar, such as EUR/GBP or EUR/AUD.
Bid and Ask
DEFINITION
The bid is the price at which the forex broker is willing to buy a currency pair, and the ask is the price at which the broker will sell it. The difference between these two prices is known as the spread.
Leverage
DEFINITION
A feature offered by brokers that allows traders to control larger positions with a smaller amount of capital. Leverage is usually expressed as a ratio, like 50:1, meaning for every $1 of your own, you can control $50 worth of a currency pair.
Pip
DEFINITION
It stands for “percentage in point” and represents the smallest price movement in the exchange rate of a currency pair. Typically, a pip is 0.0001 for most pairs.
Margin
DEFINITION
The amount of money required in your account to maintain an open leveraged position.
Swaps
DEFINITION
Overnight or rollover interest paid or earned for holding a currency pair position overnight.
Lot
DEFINITION
A standard unit of a transaction in the Forex market. A standard lot typically consists of 100,000 units of the base currency.
Margin Call
DEFINITION
A broker’s demand to deposit more money or securities to cover potential losses on leveraged positions.
Risk Disclaimer: FinxpdX will not be held liable for any loss or damage resulting from reliance on the information contained within this website including market news, analysis, trading signals and Forex broker reviews. The data contained in this website is not necessarily real-time nor accurate, and analyses are the opinions of the author and do not represent the recommendations of FinxpdX or its employees.
Currency trading on margin involves high risk, and is not suitable for all investors. As a leveraged product losses are able to exceed initial deposits and capital is at risk. Before deciding to trade forex or any other financial instrument you should carefully consider your investment objectives, level of experience, and risk appetite. We work hard to offer you valuable information about all of the brokers that we review.
