Trading currencies has become big business and thanks to the World Wide Web, traders can login from any location in the world and buy and sell currencies on a secure trading platform. Much like any commercial sector, the mysterious world of Forex can seem like a strange place, and with that in mind, here are some essential acronyms that you need to know when trading on the Forex market.
· Currency pairs – Currencies are traded in pairs; one currency is compared to another at the end of the trade. An example would be EUR/USD, the Euro and the US dollar.
· Leverage – Leverage is basically borrowing money to trade. You can open a trading position with a big contract with leveraging.
· CFD – Contract for differences is a method of trading; experienced traders use CFDs on Forex to pay the differences when a trade is done.
· BOS – When a price breaks a high or low, it is called Break of Structure.
· PIP – This stands for Percentage in Point; the smallest price fluctuation in exchange rate between two currencies.
· Lot size – The lot size refers to the size of the position a trader opens.
· Long to short – Going from long to short is when a trader buys the first currency in a pair and sells the second.
· Margin – This is the initial amount of money a trader must deposit when making a trade.
· Bearish/bullish – A bullish market means that prices are rising.
· SL Stop Loss – A stop loss order is a tool traders use to limit their potential losses.
· TP Take Profit – A take profit order is placed with a broker to automatically close a position if it reaches a specific price level.
· RSI – Relative Strength Index is a technical indicator used to measure speed and change of price movement.
· Bid/Ask – The bid price is the price at which a trader can sell a currency pair, while the ask price is the price a trader can buy a currency pair.
· Lot – A lot is a standardised trading size in Forex. There are 3 main types of lot; a standard lot is equal to 100,000 units of currency, a mini lot is 10,000 units and a micro lot is 1,000 units.
Trading on the Forex market requires that you register with a leading Australian Forex broker, then you can trade in real-time using a secure platform. The broker also has all the learning resources that a new trader would need, including reports, articles, blogs and even video tutorials. The great thing is, once you are registered, you can learn at your own pace and when you are ready to get used to the trading process, open a demo account, which is the same as a trading account except you are not trading with real money.
Like anything, the more you put into learning about trading, the better your chances of success.