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Forex Jargon

Basic Forex Jargon  


Are you planning to start online forex trading? If yes, then you would definitely need to know these basic forex jargons to be able to trade in the currency market.
 

Cross Rate
-Currencies are always quoted in pairs. However, if the currency pair is quoted in a country where none of the two currencies traded is the country’s own currency, then your broker would mention the term Cross Rate. Do ask your broker for a zero brokerage account when you open an account with him to start trading in the forex market in India.
 

Exchange Rate
– Exchange Rate is the value of one currency which is expressed in the value of another currency.
 

Pip- Pip - It is the smallest increment in the price movement which a currency pair can make.  

Leverage- When you trade forex, you get a lot of leverage. This means that your broker lets you trade for a higher amount keeping the capital invested by you only as a margin. You can use the forex brokerage calculator to calculate the brokerage that your broker is charging you for the trade. Leverage is good since your profit percentage increase. However on the flip side it also increases your loss, should the trade not move in your direction.
 

Margin – Margin is the amount of money that you need to deposit with the brokerage firm to be able to start trading the forex market. Since the broker gives you leverage, you can trade for an amount over and above the margin. However, in case you are in a trade and start making huge loss, then you will receive a “margin call” from the broker asking you to deposit more margin.  

Spread - Spread is the difference between the sell price and the buy price.  

Bid and Ask price Bid - The price at which the broker will buy the currency from you. Ask – The price at which the broker will sell a specific currency to you. . When you trade the forex market, you always trade a currency pair. The stronger currency is written to the left of the weaker currency. You are thus buying one currency and selling the other, each time you make a trade.    
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