Forex Terms & Words
Foreign Exchange Market or commonly known as Forex refers to any market wherein a currency is traded to the other. It has come to be known as one of the biggest market in the world today. To understand Forex and know precisely how to gain from it, one needs to know the relevant keyword and terminology Forex trader uses. Here is a listing of some of the most significant terms in the Forex Industry.
Pips -
Is known as the Performance Index Paper, it refers to the smallest measure of change that happens while trading. It is a standard unit in the Forex industry.
Leverage -
It is a financial tool that gives an individual the option to increase market exposure to a level that is above their actual investment.
Broker -
A Forex broker refers to an individual that provides currency traders access to the trading application, this is where traders buy and exchange currencies.
Stop-loss -
Called as the stop-loss order, an order given to a broker to sell security when it reaches a desirable price. It is designed to limit the loss of security of every investor.
Currency Pairs -
Any currency that has an exchange rate in the Forex market that is available for trading. The exchange rates serve as factors by which the main currency is multiplied to produce an equivalent value of the foreign exchange.
Commodity Pairs -
Refers to the three pairs mainly USD/CAD, USD/AUD, USD/NZD. These pairs are based in the actual changes in the commodity price, that is why traders that aims to gain exposure in the commodity fluctuations take advantage of the commodity pairs.
Bear Squeeze -
Is the changes that occur in the market condition that forces investors attempting to profit from price declines. The profit is then used to buy back the actual investment at a much higher price.
Circus Swap -
Refers ton the combination of an interest rate swap and currency swap wherein the fixed-rate loan is swapped with the floating-rate loan in another currency. It converts the basis of the liability of the interest rate and the liability of the currency rate.
Fixed-rate Loan -
Is the interest rate in the liability, such as payments and mortgages that is fixed for the entire time or only for a part of the term of the investor. It is attractive to new traders that who thinks that the interest will increase over the term of the loan, this increases their interest expense.
Asset Swap -
A swap wherein the fixed investment are mixed with the floating investment.
Adjustable Peg -
Is the exchange rate policy used by different countries wherein the national currency is being fixed with a different currency, but can be adjusted from time to time.
Carry Grid -
Is a foreign exchange rate strategy that is able to profit from a grid of currency positions. It gives the currency of is willing to pay a high interest rate.
These are only some of the essential Forex Terms that you can find. There are hundreds more that can heighten the knowledge of an individual that is interested in joining the Forex community.
