Forex Terms & Words

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.

Forex Terms

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!