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What are the terminologies in forex trading

Published on 1 August 2021

Forex terminology

Forex trading means exchanging currencies in a global online market, to learn more about forex trading we have to learn about the forex terminologies. Terminology means small things in forex trading like Currencies, Pips, Leverage, Lot, Equity, etc. Here are the terminologies of forex trading.

Currency Pair

Normally people call one currency quoted against another currency. In forex trading, we right currency pairs like EUR/USD the first one is called the base currency.

CFD

It's a financial derivative that allowed traders to get the advantage of price increasing and decreasing for profit. The total forex market is built on the basis of this idea.

PIP

PIP's full meaning is Point in Percentage, this is the scale of measuring currency changing amounts. There are many tools available for calculating PIPS in forex trading.

Equity

Equity is the total amount that you have in your current trading account where it includes your profit and losses. There is a formula available for Equity, we use Equity = Used Margin + Free Margin + Floating P/L.

Lot

Lot is the standard size for trade units. If you trade 100000 units of currencies that means you have completed one standard lot. Nowadays there are mini and micro-lots also available in the market.  One Mini Lot = 10,000 and One Micro Lot= 1000 units of currencies.

Leverage

Leverage is a magical system in forex trading although it's risky for traders it helps to earn extra money from trading while you have a little amount of trading capital. Marin is creating leverages in forex trading. You can trade larger positions than your current account balance while using leverage from your broker.

Margin

The minimum amount of assets you need to open an exchanging position. This amount is saved by your broker with the goal that you can begin exchanging bigger volumes. Utilized Margin is the amount as of now being utilized to keep up with your vacant position. Free Margin is the sum still accessible for new exchanging positions.

Order Types

There are three order types available in trading these are Market, Limit, Stop-Loss, Take Profit, and trailing stop. These order types are used in trading for various purposes.

Type of currency pairs

There are three types of currencies in forex trading which calls Major, Minor, and Exotic Pairs. There are 6 major currencies in there EUR, USD, CAD, JPY, GBP, and AUD.

These are the common terminologies of forex trading, if want to be a trader you have learn all of these things perfectly otherwise you will not be able to be a perfect trader.