Forex trading is an attractive way to make money for many people, but before you join this lucrative market, it is wise to get yourself familiar with the basic jargon used in currency trading. Forex market involves trading lots of world currencies and the most popular currencies to trade are the US Dollar, Euro, Great Britain Pound, Japanese Yen and Canadian Dollar. These currencies are some of the most traded ones on the market and they are traded in pairs like EUR/USD, GBP/USD, etc. The currency which is listed the first before the slash is the base currency, and the one that comes after the slash is called the quote currency. So if you see that the rate for the USD/JPY pair is 90.82, for example, then you have to pay 90.82 Japanese Yen in order to buy 1 US dollar.
Then, you should definitely know another Forex trading term, which is a “pip”. This is an acronym and it stands for percentage in point. Basically, a pip is the smallest unit of currency price. When you get into trading, you will definitely hear Forex traders say how much pips they have earned today. Let’s define the value of 1 pip. If we take the same example with the USD/JPY pair and the rate 90.82, so for this pair 1 pip is going to be 0.01. And before you try to define the value of 0.01, you should first find out what a lot is. Forex is traded in lots and the size of one lot is 100.000 units. Now you will be able to calculate the value of 0.01. You should do it this way – (0.01/90.82)x100.000 = USD 11.01. Having this formula you will be able to calculate how much money you earn.
Another thing you have to decide before you start Forex trading and you place your first trade is if you want to buy or sell currency. Forex market is very unique and it gives you the opportunity to make profits in any market condition and you can also buy low and sell high as well as sell high and buy low. You can sell high at first and then buy back. So, if you have decided to buy the currency, it means you are “going long” and if you are selling – you are “going short”.
These are only some of the Forex market terms you should learn before starting trading. These and other terms you can successfully learn at Forex trading courses, online or in class, which are strongly recommended to take before investing your money in Forex market. Forex education is a worthy investment in your future successful trading, because you will be able to make much more money than if you try trading without good Forex skills and knowledge.
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