Understanding all the terms affiliated with the Forex & Blockchain industry can be challenging. When it applies to new investors, they’re already learning the introductory measures for the MT4 and MT5 platforms. Subsequently, most of these terms are forgotten in a short period. Not understanding the language of online forex trading will hinder the growth of traders. This is why we’ve compiled several terms that are frequently used with forex trading. Reading through this guide will provide investors with accurate definitions and explanations.
Currency Pair
Circulating 195 countries are 180 globally recognized currency pairings for forex trading. The performance of these currencies is determined by research and analysis, which informs investors how that respective currency will perform in global markets. That currency is matched against another, creating a pairing that has similar performance capabilities. Typically, this results in pairs like EUR/USD or USD/CAD. Those that select the USD/Cad Pairing are betting that the United States Dollar will perform stronger than the Canadian dollar in global markets. After extensive research and analysis, most investors will learn which currencies perform best in specific scenarios or demographics.
Pairings are split between three groups. Those include significant pairings, exotics and crosses. Those selecting Major Pairs are engaging with the highest-performing currencies in global markets, resulting in a minimal reward. Exotic currencies are the exact opposite, allowing investors to bet on volatile markets with the South African Rand or Polish Zloty. The silver-lining to both these options are cross pairings, which combine a high performing currency with a volatile market. The result can be substantial payouts on traders. Those that engage with the MetaTrader Four or Five Platforms have access to fifty-five pairings.
Leverage
The second term new investors should memorize is leverage. This is when traders borrow an influx of money, which requires the agreement of a highly-valued contract. Mastering this form of forex trading takes knowledgeable skillsets, with it being one of the few legalized and regulated methods for cryptocurrency trading. The most popular Forex Pairing leveraged is the GBP/USC. On average, acquiring one of these leveraged contracts costs $260.00 from trading accounts. This’ll provide investors with a $100,000.00 settlement. However, there are few exchanges to maintain leverage of 1:500. Standard leverages are listed at 1:30 to 1:50 in the European Union and the United States.
Margin
One of the most critical terms investors need to know is Margin. Anybody wanting to start a contract, position or pairing must maintain startup capital. This is called Margin in forex trading, with a minimum percentage of the trades cost required before it received. Marginal investing teaches new traders the protocols needed for leveraging. It should be noted that the Margin applies to losses and profits, across spreads or contracts-for-difference.
Bid / Ask price
When it’s time to engage with fellow investors for global trades, two terms are used to define the method of engagement. Those wanting to sell their currency pairings state they require a bid price on this trade. Individuals wishing to purchase pairings must request an asking price. Typically, the costs needed for each respective trader is noted on the left-hand side in Market Watch with the MT4/MT5 Platforms. The difference between these two valued prices is named The Spread.
Going Long / Short
There are two methods players can sell their currency pairings. The 1st is called Going Long and the 2nd, Going Short. Those that select the Going Long method will sell the pairings in two parts over a prolonged period. The second sale could be higher valued than the original or worth less than anticipated. Going Short is the exact opposite, with individual traders looking for an immediate sale at lowered rates. However, only one half of their pairing is sold in Going Short.
PIP
Percentage in Point stands for the smallest alterations in valuation for currency pairings or exchange rates. These points apply to the 4th decimal point and are used to measure the future value of currencies. An example would be the Australian dollar, which is worth 0.6875 USD. Percentage in Points could be recorded whenever an increase of 0.0001 was seen or higher.
Lot Size
The Lot Size is the most confusing term that new investors will learn. It stands for the size of the position or trade about to be opened. Whenever an investor purchased a lot size with forex exchanges, their purchasing an influx of a selected currency. One hundred thousand units of a respective currency are provided through a singular lot. Those engaging with the Percentage in Point strategy can perfect this form of trading. One hundred thousand units of EUR/USD Pairings would prompt $1,000.00 in profit for every 0.0001 PIP acquired. Combining these two methods could see investors earn a thousand days before the contract is re-sold.
Summary
We hope that the definitions and explanations provided in this article to assist our readers with learning and building their skillsets with forex trading. This form of investing will be one of the hardest beasts you’ve ever tamed, but with the right education and tools, anybody can earn profits with global digital currency markets. We recommended our readers engage with exchanges that operate under the MT4 or MT5 Platforms, such as EagleFX. Traders will receive increased executive speed, tighter spreads and 200+ assets for investing.