If you’re a beginner in the Forex market, chances are you’ve stumbled upon an article or forum post that include terms such as “pips”, “cross-pairs”, “margin” and others. Those are basic terms of the Forex market that all traders need to know. We’ve created a list of the most important Forex trading terminology to help get you started in the market. While this list is not all-inclusive, it covers the 30 most common terms regularly used by Forex traders
1.Pip
Pip stands for ‘percentage in point’. With most currencies, a pip is the fourth digit after the decimal point. For example, 1.8956 – the six at the end is the pip. A pip is the smallest denomination in forex trading.
2.Central Bank
A central bank is a bank that issues currency. For example, the Bank of England issues the Pound sterling and the Federal Reserve issues the US dollar.
3.Copy trading
Copy trading is where you can see the trades of other traders and choose to copy the trade they have made.
4.Mirror trading
Mirror trading is similar to copy trading but is more automated. You can pick to follow a trader and copy all their trades automatically.5.
5.Trading Signals
Trading signals can inform traders when they should make a trade. They can come in many different forms, such as SMS, email or even in-app notifications.
6. CFD
CFD stands for Contract for Difference. Today, CFD forex trading is the most common way people trade forex. When you trade CFDs, you are basically creating a contract to buy an asset at a certain price. You never technically own the asset.
7. Spread betting
Spread betting is another way to trade forex and has many similarities with CFD trading. Spread betting mostly takes place in the UK and Ireland.
8. Scalping
Scalping is a sophisticated form of trading where a trader opens and closes a large number of trades very quickly.
9. Demo account
A type of trading account offered to traders so they can see how well a broker works. You don’t trade with real money. At Trading Education, we advise traders to be cautious of demo accounts as they can give you false perceptions of the service a broker offers.
10. Broker
broker is the company that you trade through. They provide you with access to the market. Today, the majority of brokers are online firms.
11. Spread
A spread is the price difference between the bid price and the asking price.
12. Win-loss ratio
This is basically the rate in which you are winning and losing your trades. If your rate was 4:3, you have won four trades and lost three.
13. Confluence
Confluence is a great thing to look for when trading forex. It is defined as where two points meet. For example, when two indicators are signaling to you to make a trade, it can be seen as confluence. Because you have two (or more) signs to trade, it increases your chances of success.
14. Fundamental analysis
Fundamental analysis is where a trader predicts what will happen to the market based on news events.
15. Technical analysis
Technical analysis is where a trader predicts what will happen to the market based on analyzing historical charts.
16. Indicator
An indicator is a tool that measures something specific about the market that can inform a trader if they should make a trade. There are many different things indicators can measure.
17. Portfolio
Your portfolio consists of all your open positions. It might also contain stocks, cryptocurrency and other tradeable instruments.
18. Trend
A trend is an overarching direction a forex pair is moving. A trend can either be upwards, downwards or sideways.
An effective trader should know that they should trade in the direction of a trend, not against it.
19. Bull market (bullish)
A bull market or bullish market is where prices are trending upwards.
20. Bear market (bearish)
A bear market or bearish market is where prices are trending downwards.
21. Ranging market
A ranging market is when prices are neither bullish nor bearish.
22. Price action
Price action is the change of a currency pairs price marked over time.
23. Candlestick chart
The candlestick chart originates from Japan and today is the most commonly used type of chart for trading forex.
It is hugely popular because it can represent so much information in just one glance, including the opening price, closing price and the amount a currency pair rose or fell.
24. Trading Psychology
Trading psychology is a big topic that broadly covers how our mental state affects how we trade. By mastering this, we can remove mental blockers that affect our trading strategy.
25. Trading platform
A trading platform is a program that forex traders use to input trades.
26. Liquidity
Liquidity generally refers to how easy it is to buy or sell a forex pair. If a pair is very liquid, it is easy to get in and out of a trade. If it’s not very liquid, it can be difficult.
27. Volatility
Volatility relates to how much a forex pair is changing in price. If a currency pair is very volatile, it usually means that it is jumping from extreme highs and lows rapidly.
28. Inflation
Inflation refers to the general increase in the price of products. As the value of things increases, the value of a currency is not as strong. For example, £10 could buy you a lot more 20 years ago than today.
29. Leverage
Leverage allows you to borrow from your broker so you can make larger trades. Remember though, you need to pay back your broker, even if your trade fails.
30. Margin
Margin is a portion of your funds that is temporarily locked up by your forex broker when you open a position to ensure you can cover it if the trade fails.