The forex market is a new world of opportunities for traders. With the popping out of different Forex trading platforms, the market is now more accessible to new traders. Every other day a beginner is stepping into the forex market with a belief to unleash unlimited wealth. However, to get the most out of the market, prior homework is important. To be a master in trading, every trader must know several terms and acronyms.
The Forex market is loaded with complex terms and acronyms that often confuse new traders. Therefore, the beginners develop a resistant attitude and avoid these terms and end up losing their money in the market. So, getting used to a set of terms of forex for beginners is extremely essential to make big money. Not understanding the depth of some selected terms can severely impact your trading experience and cause a hindrance in profitability.
So, today we will make the terms easier for you to understand. Make sure to read the complete article to build your forex trading knowledge.
Leverage
Leverage is one of the most crucial components of forex trading. It allows a trader to easily open a position with low expenditure and high contract size. Setting the leverage high can be extremely beneficial if you want to trade your favorite cryptocurrencies, currency pairs, or more, but you don’t want to put huge capital into trading.
Let’s take an example to simplify it –
If we consider the popular currency pair GBP/USD.
Let’s assume we have a contract size of 100,000. So, if we trade it without any leverage we will be risking over $130,000. But, if we set the leverage as 1:500, we can easily open a position with capital as low as $260. Therefore, it’s pretty clear that leverage accelerates trading gains and minimizes the risks.
Ask/Bid Price: If you are using a forex trading app, it’s pretty obvious you came across the terms Ask and Bid Price. So, what are these? The ask price is nothing but the price at which a trader purchases a currency pair. While the bit price is the price at which the trader is willing to sell his currency pair.
Margin: Margin is the initial funds that a trader needs to put in the forex market to open a position. As per the margin, the trader can define the size of his/her position. Margin is the ladder to leverage trading. This unlocks the doors to both profits and loss depending upon the market and the trader’s experience.
PIP: If you are a trader using the top online trading platforms, PIP is something you may have often heard about. PIP abbreviates Percentage In Point. It depicts a minute moment reflected in the exchange rate of currency pairs. PIP is typically the 4th decimal value on the quote price of a currency pair.
Let’s take an example to make it more clear –
For a currency pair AUD/USD, let the price quote be 0.6876.
This implies that with 1 Australian dollar you will be able to purchase 0.6876 US dollars.
Bullish Market/ Bearish Market: If you are using a currency trading or commodities trading platform, market sentiment is something to worry about. It gives a detailed report of the market’s performance. The market sentiments are referred to as Bullish when the prices are quickly climbing the ladder. While it is quoted as Bearish when it’s gradually touching the ashes Forex trading platforms.
Conclusion
Forex trading can be one of the riskiest steps for the new trader. However, gripping all terms and having the access to the right tools any trader can make unlimited profits in the forex game. So, if you are a beginner make sure to open your trading account with the top forex brokers and kick start your trading experience now!!
