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Before entering the Forex market, you need to arm yourself with some terms that will be used in all courses or programs on this subject. The following terms have been set up with the idea of providing the novice forex trader with the basic concepts of forex trading. While they sound technical, most are easy to understand and apply.
Let us begin with the instruments that are sold in foreign exchange markets. Currencies are traded in pairs to the instrument will always be in the double name. The reason is simple: the basis of exchange is to exchange one currency against another. Thus, if the pair is the euro and the U.S. dollar, and the forex trader is taking a long position or buying the euro in the hope that it will appreciate, effectively the operator is also selling U.S. dollars to buy euros. Couples are the most active Great Britain and the U.S. Dollar Pound (indicated as GBP / USD), the Euro and the U.S. Dollar (EUR / USD pair), the Australian dollar and U.S. dollar (AUD / USD pair), the U.S. dollar and Japanese yen (USD / JPY pair), and the Canadian dollar and U.S. dollar (USD / CAD pair). These pairs has well over 80% of the total trade in the Forex market. The advantage in the negotiation of these currency pairs, they are highly liquid and allow investors to convert their holdings of cash very quickly to make a profit.
In each pair, the first currency is the base currency, the second is a place to hear the price of the pair, or commonly called "cross-currency". The second is the appearance of the pair of currencies and prices is recorded based on units of the quote currency to buy a unit of the base currency. Thus, assuming that the price of EUR / USD pair is 1.5, which means that 1.5 USD buy 1 GBP.
Each pair is quoted in terms of a bid ask spread. The price is the speed at which your broker exchange offers to buy the currency, while the selling price is the exchange rate of the broker is to seek to sell the currency to the exchange operator. The price will always be less than the selling price and the trader to buy foreign currency at the price and sell at the offer price. Prices will be quoted as asking: GBP / USD 1532 / 5, which means that the price is 1532 and the sale price is 1535.
A point of interest Pome price), as it is commonly called, is the smallest of changes a currency pair will experience, for example, a change in the GBP / USD 1532 to 1542 is a change 10 points. A margin is a deposit that is a minimum amount or a small percentage of your volume of trade you have to put in place. The remaining amount is provided by your broker. This amount may vary from 1% to 0.25%, also known as 100:1 and 400:1. Most often, forex brokers offer 200:1 to 100:1, and most customers. It is risky, but allows the operator to draw a large amount he or she would not otherwise have access.
Finally, a margin call may occur when the operator to change allows the balance in the account fall below the margin deposit percentage agreed with the forex broker. The broker to automatically sell your holdings or buy your short positions and clear account of the whole negotiation, the return of the profit margin the amount of the operator to protect the operator not to lose more money they have.
About the Author
Andrew Daigle is the owner, creator and author of many successes, including a free Web site called forex training and ForexBoost to http://www.ForexBoost.com CashCurve to http://www.cashcurve. com to learn more about other online business opportunities.
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