As Forex trading becomes increasingly popular, more of your friends will expand their vocabulary...and you don't want to be left behind! Jason Fielder has laid it all out below and is willing/able to answer any of your other questions about Forex via the comment section. So try to stump him in the comments, and check out his Triad Formula if you're ready to take the next step in your Forex trading.
One aspect of trading the Forex, or even talking to Forex traders, that can be really intimidating is that the Forex market has an awful lot of jargon. For those of us who have been trading for years, the jargon comes as second nature. If you’re just getting started, then it’s easy to see how intimidating that can be.
This article will set out to help you get started. There is a lot of Forex lingo, but at least now you’ll be able to jump into the game a little bit more after knowing these common Forex terms:
The major currencies There are eight major currencies, which are: the U.S. Dollar, Canadian Dollar, Australian Dollar, New Zealand Dollar, the Euro, Japanese Yen, the British Pound, and the Swiss Franc.
Minor currencies This is any currency that does not belong to the major eight. So even currencies of large economies like Brazil, Mexico, Russia, China, and India are all still considered minor currencies.
Base currency This is the first currency listed in a currency quote, and is always measured in a unit of 1.
Cross currency The second currency listed in a currency quote.
The Aussie A slang term for the Australian Dollar.
The Kiwi A slang term for the New Zealand Dollar.
The Bid Refers to the bid price, which is the price the market will currently purchase a specific currency pair for. The bid price will always be higher than the ask price.
The Ask Refers to the ask price, which is what you will sell a currency for. The ask price is the one used when selling.
The Spread The difference in value between the ask price and the bid price. This miniscule difference is how some brokers make their money off Forex traders instead of charging a commission.
Bull Market A market distinguished by an overall rise in price.
Bear Market A market distinguished by an overall fall in price.
Lots This is more than lingo, and not a word referring to a lot of something. Lots are the bulk amounts of currency required for trading in the Forex market, generally $100,000.
Margin This is the minimum amount of money needed to put up to place a trade with a broker. As long as you have this minimum amount in your account you can trade. When your account falls below that amount, all your positions are closed out.
Margin Call A margin call is made when, due to losses, your account falls below the allowed minimum for a broker account, then the broker makes a margin call, which will close out all your positions.
Limit Order This is an order to execute a trade only if it hits a specific price or better.
Carry Trade Depending on what Forex traders you hang around with, you could hear this one a lot. A carry trade is a trade where you choose a currency pair in which you go interest positive, meaning that you are earning daily interest on your trade because of the difference in interest rates between the two nations.
Counter-Trend Many people think this means trending downward, but that is NOT correct. A counter trend market is a market that is not trending either way, meaning all movements are basically staying within the same channeled area.
GTC Order Good Till Cancelled Order. This is an order placed for a currency pair that will remain in play until the trader shuts that position down.
OCO Order One Cancel Other. A type of trade using two orders that are set up by trigger values. When a currency pair hits a trigger, that trade goes into effect while the other is automatically cancelled.
Once you understand this principal your trading will get an instant boost - enjoy!