If you are considering the possibility of trading on the Forex market as a promising way of earning, first of all it is necessary to study the basic terms. This will help you to understand all the processes taking place on the market, and also develop your trading strategy.
Of course, knowledge and understanding of terms is one of the keys to successful activity on this exchange. Let’s get acquainted with the basic concepts of online trading in detail.
Main Terms You Should Know
Here is a list of terms you need to understand. For the first time, it would be enough to begin your trading activity.
- ASK (offer) is а price to buy the required volume of the Base Currency (which is always in the first place in the pair) for the Quoting currency (it is on the second place), while we sell the quote currency and buy the base currency;
- BID is a price for selling the required volume of the Base Currency (which is in the first place), where the quoting currency is the payment instrument, i.e. we buy the currency, which is in second place at the same time. The deal always takes place at the Bid price;
- Currency is a monetary unit of a country. The coding system proposed by the International Organization for Standardization (ISO) is used to indicate currencies. The first two letters designate the country, and the last one indicates the currency of that country. For example, USD: US – United States, D – Dollar. The base currency of a financial instrument (currency pair) is the one that ranks first in the pair (for EUR / USD it is EUR). The quoting currency is in second place in the pair (for EUR / USD it is USD). The volume of the transaction is expressed in the base currency;
- Volatility is a degree of variability of exchange rate for a certain period of time;
- Spread is the difference between the ASK and the BID price;
- Long Buy is a purchase of the base currency for the quoting currency in order to increase the price;
- Short Sell is a sale of the base currency for the quoting currency in order to lower the price;
- Direct quotation is the ratio of two currencies, which shows the amount of national currency per a unit of foreign;
- The reverse quote is the ratio of two currencies, which shows the amount of foreign currency per a unit of national currency;
- Cross rate is the ratio of the two currencies, flowing from their rate to the third currency.
Now you are familiar with main concepts of online trading. We are sure that it will help you to understand the world of currency trading and wish you good luck in all your endeavors!
Starting Online Trading: The Main Concepts
Look through the list of the main terms of Forex trading in order to feel yourself confident in all your future deals.
