Forex trading

Market Order: his is a request to buy a currency for the current asking price.

Bid: The amount at which Forex brokers buy a currency.

Ask: The amount at which Forex brokers sell a currency.

Spread: This is the difference between the asking and bidding amount. It is most often measured in pips. As far as the Forex dealer is concerned: the smaller the spread, the better. 

Carry cost (also known as 'Premium' or 'Interest'):This is the amount (mostly in $ or # of pips) to keep a certain position open. 

Fundamental Analysis: An assessment as a strategy or macro. Currencies are traded using factors with exception to the action of the price. These factors are inclusive of the country’s state (of that particular currency), policies, and certain additional fundamental factors. 

The future of currencies: This term is used for contracts for the future in a certain exchange, in particular the ‘CME’, better known as the Ch

Limit: This is a request to buy or sell when the market reaches a specific amount.

Liquidity: When the market liquidity improves, smaller bids or spread will be quoted. Liquidity is about volume and market activity. It determines how cost effective positions and orders can be traded. 

Margin: The margin is the sum needed in a customer account to be able to open up a position or to keep a position open. E.g.: For a position of $100,000 and a margin of 1% that means that $1,000 in funds are needed.

Leverage: Leverage is a loan that is provided by an investor by the broker that is handling the dealers Forex account. Usually the amount of leverage provided is either 50:1, 100:1 or 200:1, depending on the broker and the size of the investment. To trade $100,000 worth of currency with a margin of 1%, the investor will only have to deposit $1000 into their margin account. This is a leverage of 100:1.

Offer: An offer is the amount at which a forex broker is able to ‘sell’.

Spot Foreign Exchange: Better known as the ‘interbank’ market. Currency is traded between two parties, mostly between banks. The Spot Foreign Exchange mainly trades based on margins, and the website mainly focuses on this. The Spot Foreign Exchange is popular and more liquid than currency futures, especially for big organizations and investors. 

Pip: In terms of currency this is the tiniest increment. Many people call it ‘ticks’ when dealing in the future markets. E.g.: A change from .9015 to .9016 in EURUSD is 1 pip. In addition a change from 128.51 to 128.52 in USDJPY is also 1 pip.

Stop: This is a request to buy or sell at a time when a currency reaches a specific price.

Technical Analysis: An analysis made based on examining past market data. This analysis helps to make trading decisions.

Drawdown: A measure of the largest loss that a trader’s account can expect to have at any random interval. The drawdown is stated in dollars or a certain percentage. An example: The value of a traders’ account has gone up from $10.000 to $20.000, then it went down to $15.000 and up again to $25.000. In this case the maximum drawdown is $5.000 (the drop from $20.000 to $15.000) But the traders account did not suffer any losses.

Premium: This is the cost of holding the position ‘open’. 

Margin Call: A call to prevent a trader from going into a negative balance on the Forex market. When a margin call is being used all the trader’s open positions on the Forex market will be automatically closed to prevent the trader from going into debt..