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.

Understanding Forex: Pips And Spreads

Understanding Forex: Pips And Spreads

If we see in todays financal world many things are very difficult to understand for an average common man as they are really complicated.like for eg. people easily understands some things like equity markets as it connotes to investment in shares of different companies and nothing else but if we go on the other side of finance world which is known as Forex Market people dont have complete knowledge about it.If you ask me personally i think people do not have any knowledge of forex market and one of the reason behind this is forex markets are largely dominated by large financial institutions, banks, hedgers etc. And of course the bigger reason is the money required in forex market is on big part as common man does not have that big money to invest in forex markets. If we go on like this the story of forex market will never end but my aim for writing is to give proper understanding about some of forex markets as well as of commodity markets. So lets disscuss about some of the basic terms of the related topic.

First we will define Forex market of currencies: 
It is a market where mechanisms are applied to value different currencies relative to one another,and exchanged.it is a market where individuals or institutions buys one currency and sells another in one transaction.Foreign exchange markets are located world over and different currencies are traded on it indifferent countries; European Currency Unit, Japanese (Yen), Swiss (Franc), Canadian (Dollar) etc .Further currencies are always traded in pair like (USD/JPY or Dollar/Yen) on a floating exchange rate.

Now we will understand the term called PIPS:
In forex market the exact text book defination of PIP is change in price of one "point" in Forex trading is usually pip, and it is equal to final number in currency pair's price. Now let us understand this defination to 0.0001.In Yen a pip is counted from second decimal place, 120.94 Yen based currency are exceptions in pips.

Now let us understand term called Spreads in Forex market: 
Basically a spread is difference between bid price and ask price.

Now let us understand the term commodities in Forex market: 
It is a market where people can purchase and sell different products useful in day to day working of life with the exchange of money. Commodity market offer great potential to become a great idea of savings for market savvy investors, arbitrageurs & speculator.it is easy to understand as far as fundamentals of demand of supply is concerned.World over one will find market exists for all the commodities known like Gold, Silver, Nickel, Copper, Wheat, Corn, Coffee, Sugar, Crude Oil, Natural Gas etc.

Now let us understand Volatility & Signals in Forex market: 
Volatility is how much a price fluctuates over a period of time. A market with high and erratic price range is said to have high volatility. for example in a day trading in currencies of USD/YEN the price range was day's high was 110.10 and day's low was 103.05 so here there was movement of nearly 7 dollars and when the high of the day was 110.10 and low was 108.95 so here there will be low volatility in comparison.

Now let us understand Signals in Forex market:
It is an indication of when to trade, which could be either given by human analyst or some computer software that is observing current movement,trends related to foreign exchange market.Large investors mainly put their trades based on these signals and in many cases try to predict impact of related signals will have before making their move.In these days traders usually go to subscription based forex signal signal service which imparts its signals via real time news feed.

So i hope i have helped many of the people who are reading this article for their understanding of various terms of Forex market which will improve their knowledge about Forex market.

All trading can be a risk!