Forex Terms
Forex is an exceptional market with a lot of terms and own concepts. Even so, there’re terms and concepts that normally have matching in the stock market. Getting to learn the meanings of different Forex terms is usually one of the major steps to take prior to getting into the Forex market.
Share
Share is usually the smallest solitary unit of any stock. Every share of a company stock normally represents partial ownership in that company. Owning stock generally gives the investor the right to vote on some corporate matters. The shareholder also receives dividend from stock ownership depending on the number of shares he or she has.
Pip
A pip is a basic increment of the price movement in the Forex market. Its value may vary and this depends on the currency market as well as the contract size being traded.
IPO
The IPO (initial public offering) is the procedure in which a company tenders its first shares to trade on the floor of a public market. When a company goes public, it receives financing from people (investors) purchasing its shares.
Bid
This is the price at which a trader sells a currency pair in the Forex.
Ask
This is the price at which a trader may pay money for a currency pair in the Forex.
Bid-Ask Spread
Bid price is normally the current price in which a buyer is willing to buy a certain stock while the ask price is usually the current price in which a seller is willing to sell a stock. Therefore, the bid/ask spread is the disparity between a bid price and the ask price. When one enters the market order to sell or buy a stock, that order is carried out at the current bid or ask price, respectively.
Mutual Fund
The mutual fund is generally a managed fund that usually invests in bonds, stocks and other financial tools. Once an investor buys shares in the mutual fund, he/she gains exposure to all instruments that the fund invests in. Generally, mutual funds present an easy technique of diversification.
ETF
An ETF (exchange-traded fund) shares some similarity with the mutual fund in giving investors exposure to other underlying investment vehicles. For instance, some ETF tracks commodities like gold, while others track a range of market indices. Simultaneously, ETFs are normally traded in shares over main stock exchanges similarly to an individual stock. The ETFs basically offers a cheaper, easier mode of investment in underlying assets that they track than you can find by buying each one asset by yourself or even by investing in the mutual fund.
Rollover
Rollover is the interest that is debited or credited to your account while holding a certain position overnight. It reflects the interest rate disparity between 2 currencies in the currency pai
Currency Pair
Every individual Forex market is normally a combination of a two currencies. Its price is signified by the exchange rate between the 2 currencies. Some of the examples of the currency pairs are the GBP/USD, USD/JPY and EUR/USD.
Base Currency
This is the first currency that is listed in the currency pair. When a Forex trader sells or buys a currency pair, he/she is selling or buying base currency against quote currency. For instance EUR/USD (euro/dollar), euro is generally the base currency.
Quote Currency
Quote currency is the 2nd currency that is listed in the currency pair. Its value is 'quoted' in the form of its value in relation to quote currency. For instance EUR/USD, US dollar is generally the quote currency.
FOREX trading has become one of the most popular methods for day trading and short-term investing since the introduction of Internet based currency brokers. Anyone can take advantage of the thrilling opportunities on the currency trading right from home.
All trading can be a risk!
