A Glossary of Online Forex Trading Terms
To be able to come up with online forex trading deals that are more effective and profitable, you need to know how to talk the talk. And one way of doing that is to familiarize yourself with the commonly used online forex trading terms - terms that up till now, you may only vaguely understand.
Online Forex Trading Term #1 - Appreciation
No, this doesn't have anything to do with feelings of admiration. When a currency's said to appreciate, it indicates how its price goes up because of the increase in demand.
Online Forex Trading Term #2 - Balance of Trade
This is a key factor for all your online forex trading deals. It reflects the difference between a country's exports and imports.
Online Forex Trading Term #3 - Base Currency
Let's just say that it's the currency chosen by a dealer to compare other foreign currency rates.
Online Forex Trading Term #4 - Bid/Ask Spread
This is a very common term and it refers to the discrepancy between the amount of the bid and the price offered for a particular currency.
Online Forex Trading Term #5 - Broker
Think of him the way you think of a stock broker. But this time, he's there to help you make smart forex deals rather than stock transactions.
Online Forex Trading Term #6 - Clearing
This is the time you rub your hands in glee because it refers to the process of settling or completing the transaction.
Online Forex Trading Term #7 - Day Trading
Also known as short-term trading, this is an activity that involves investments made and closed on the very same day.
Online Forex Trading Term #8 - Deficit
Remember balance of payments? Well, this is the term used when there's a negative balance of payments or when imports far exceed exports.
Online Forex Trading Term #8 - Flat / Square
A trading term for "breaking even" because of a reversed decision. Let's say you bought $1,000 worth of Euros and traded it back for the same amount; that's flat!
Online Forex Trading Term #9 - Hedge
This term refers to a position/s that a trader takes to reduce the risks of his primary position in the market. Usually, only the big players and the high risk takers are able to do this effectively.
Online Forex Trading Term #10 - Margin Requirement
This refers to the amount of money you need to deposit in order to effectively take a position in the market - even if the value of that position far exceeds what you have in your forex account. |
