I am happy that you are back as today we are going to discuss the basics of the Forex language practically. Take your pen, take a seat and let’s get started.

Each sphere of business has its own “language”, clearly speaking each area has its own terminology and Forex is not an exception. Despite the specificity of many of the terms of forex trading, they are a necessity, without which it won’t be possible to explore the forex market.

Therefore, every trader seeking to succeed in the market should master the Forex terminology perfectly ,of course if you do not want to be fooled.

Now let’s check out some basic forex trading terms:

Rate – the price of one currency expressed in units of another currency.

Base currency – the first currency in the currency pair. Its value is determined as opposed to the other currency pair. For example, if we take a currency pair EUR / USD, here EUR will be the base currency.

Quote currency – the second currency in a currency pair. Its value is defined in opposition to the cost of the basic currency. For example, in the next couple of euro / US dollar, the Quote currency is the US dollar.

Bid price -  sale price.

Ask –  purchase price.

Spread -  the difference between the sale price and the purchase price. That is difference between the bid and ask price.

Pip -  the minimum amount of change in value of the currency.

Transaction – operation of opening / closing positions.

Open position -  buy or sell a currency, thereby committing the transaction.

Close position – close the sale transaction.

Stop-loss – stop order used to limit losses. Is triggered to close the position as it moves toward the loss.

Flat (Square) — when your positions are closed and your are  in neutral state.

Order — order for a broker to buy or sell the currency with a certain rate.

Margin – a cash deposit that a market participant must have to ensure the trading operations

I think this entry will prove useful for all Forex beginners and I strongly recommend that you read them all!

If you follow up our posts then you must already have some idea about Forex market, however  I will mention that Forex ( Foreign exchange market) is the international currency market, where buying and selling of national currencies takes place.
Well we have covered this up now let’s go on.

Transactions in the Forex market are conducted through a system of institutions such as commercial, investment and central banks, insurance and other companies, as well as through brokers and dealers. Consequently all they are the main actors in  the Forex market. Each member has  its own trading volume on the foreign exchange market. For example, the highest turnover  is carried out by central banks; trading volume exceeds hundreds of millions of dollars a day. Less turnover comes from commercial banks and dealers. Daily turnover of brokers estimated 25-50 million U.S. dollars, representing only 2% of the total trading Forex. Now let’s discuss them separately.

Central banks

Central banks are responsible for currency exchange regulations on the international market. They control and prevent abrupt changes of the national currencies in the Forex international market, thus protecting the country from economic crises and supporting a balance of imports and exports. Central banks can have a direct and indirect impact on the market. Direct influence comes in the form of currency intervention and
indirect influence of the central banks is regulating  interest rates in the market and the money supply.

Among the major influential banks are: FED (Federal Reserve) – the U.S. central bank, Deutsche Bundesbank – Germany’s central bank, Bank of England – Britain’s central bank, etc.

Commercial banks

Now let’s talk about the commercial banks.

It is worth noting that the main volumes of international currency transactions are carried out exactly through commercial banks. Other participants of the Forex market open accounts in commercial banks and  with these accounts they carry out deposits, credit and foreign exchange operations. Operations with clients allows commercial banks to identify and accumulate the needs of the foreign exchange market in foreign exchange transactions.

Brokers

Individuals who are mediators that facilitate the conclusion of currency transactions, linking the seller with the buyer. The broker receives a commission for customer orders.

Dealers

Companies or individuals that operate in the financial market at their own expense and on their behalf, that mean they engage in currency buying and selling and other operations on their own money.

Well , now you already know about the main participants of the Forex market.

Come back to us for more info!

If you are a newbie in the Forex market, you surely must know that this is a very risky business. No doubt,  the trading in financial markets is a sphere of activity, which gives a chance to become rich and independent, even a simple man who has no experience in conducting financial transactions and business activities can be engaged in Forex market. This is exactly what attracts many newbies to Forex,  sad as this may sound  they usually end up losing money.

However I hope you will not be the one and if you have nevertheless decided to engage in Forex trading, then at least check out some simple tips that I have here.

The first advice to the newbie Forex trader: spend several months on reading Forex literature and studying forex market,  be sure that the knowledge that you gain during this time, will save you money in the future.

Coming up with some more simple tips:

• Decide on the amount of money that you can afford to lose
• Never aspire to earn all the money immediately
• Do not loss the whole deposit for short run
• Remember that all new tactics, strategies, indicators, etc. 80-90% are  well-forgotten old ones;
• Block others’ opinions
• If you are not sure you had better step aside
• Do not trade too many currencies simultaneously
• Find yourself a good Forex specialist  who will explain the principles and practice, who will be experienced in the techniques of successful trading;
• Always be prepared for losses and take them with dignity
• Remember that the money – it’s just money, your life is much more important.

Take these tips seriously and only after you can open a door to Forex market!

Photo credit to shadphotos

Foreign exchange market compared to other markets has a number of advantages and that is exactly what we are going to discuss in this post. Indeed, Forex is the most dynamic market in the whole world, trading is open 24 hours a day, 7 days a week, thus transactions in real time on the world’s leading trading venues distinguish the Forex market from all the others.

One of the most interesting things that i like  about Forex is that the trader can be anyone regardless of  income level,  education or ethnicity.  Ok now let’s stop beating around the bush and get down to distinguishing some advantages of Forex trading.

Forex Advantage № 1: Availability

Unlike other currency markets Forex market is available at any time of the day,  round the clock,  except Saturday and Sunday. For example when the auction ends in Asia, they start in Europe, then in countries in North and South America and this cyclical process can bring or take a lot of money.

Forex Advantage № 2: High volatility

Forex is really unpredictable, sometimes even in a few minutes you can earn good money on the market. This is achieved by a high volatility in currency pairs. Currencies are always fluctuating and it is the variability (volatility) that allows traders to make profits. However, in the pursuit of big money people forget that the risk factor also  increases, so you have to be very careful in all your operations.

Advantage Forex № 3: High liquidity

Forex market has a 3 trillion daily global turnover. High liquidity is when buying and selling is carried out during the whole day. Also it is worth mentioning that Forex market is not subject to abrupt changes even in the event of a crisis, because people will always sell and buy money, besides in case of depreciation of one currency, the rate of the other one in a pair goes up.

Advantage Forex № 4: Low cost operations

In Forex market you do not need to pay commissions on transactions.

Advantage Forex № 5: The principle of marginality

The principle of marginality increases the chances of  traders with small amount of initial capital, it allows them to enter into high cost currency transactions. For example, in case of a successful transaction, in a few seconds you can double the starting amount.

In this entry I outlined the main advantages of the Forex market and I assure that you can be better informed about Forex if you keep on reading my upcoming posts.

Photo credit to Helcim
Photo credit to MartinRobbie