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Learn to Speak Forex
1. Sometimes it feels like your learning a new language. There are so many
words and phrases related to Forex that it sometimes feels like your
back in school, sat in class again, not paying attention, listening to your
teacher talking complete gibberish.
Well, fact is, learning to speak Forex isn't half as hard as you
might think.
To help you, I'm going to run through some of the terms specific to
placing Forex trades.
Base Currency
This is the first term all forex traders need to understand. This is the
first currency quoted in any currency price.
For example, if we were talking about USD/JPY then USD is the base
currency.
On the other side of that you have....
Quote Currency
Yes you guessed it, this is the second currency quoted in a currency
price.
so if were talking about the USD/JPY, then JPY is the quoted currency.
Both the Base and Quote currency are very important phrases when it
comes to learning Forex. These next two phrases are equally important.
Buying Long
When you're buying one currency against another, you're said to be long
on that currency.
So, if your buying say, the USD against the JPY, you're said to be 'long'
2. on the USD.
Going 'long' on something just means that you expect the price to rise.
Selling Short
Going 'short' is when you sell the base currency against the quote
currency.
You're selling the currency in the hope that you can buy it back when the
prices are cheaper.
You CAN make money even if a currency falls.
Spot Market/Spot Price
You'll often hear the word 'spot' mentioned in regard to forex trading,
either in reference to the spot market or the spot price.
Generally a spot market is one in which the financial instrument (in our
case foreign currencies) are traded and delivered immediately.
So this means in a spot Forex market, the trades themselves are
executed on that exact day.
The spot price merely refers to the prices of the currencies as they are
recorded in the spot market.
If you choose to spread bet the Forex market, you don't need to worry
about this, as the money we trade through our accounts are settled on
the day of the trade.
The Spread
The spread is the difference between the buy and sell price of a
currency.
So, if the GBP is quoted as 1.5049/1.5052, the spread is 0.0003
3. this is how the spread betting companies make money as the price you
buy or sell back your trade will always be effected by the spread.
This is only a handful of terms you need to be able to 'speak forex' but
its these phrases you need to start your foundation on starting to
understand the language of Forex and trading.
Ill be covering these phrases in more detail in future updates and also
sharing some more terminology in the future.
Happy studying
Chris (admin)