1. Pips
Definition: The smallest price movement in the forex market, usually represented as a four-decimal-place number (e.g., 0.0001).
2. Currency Pair
Definition: The quotation of two currencies, indicating their relative value. Examples: EUR/USD, GBP/JPY.
3. Bid and Ask Price
Bid Price: The price at which the market is willing to buy a currency pair.
Ask Price: The price at which the market is willing to sell a currency pair.
4. Spread
Definition: The difference between the bid and ask prices of a currency pair, representing the broker's profit.
5. Lot Size
Standard Lot: A trading position size of 100,000 units of the base currency.
Mini Lot: A position size of 10,000 units.
Micro Lot: A position size of 1,000 units.
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6. Long and Short Positions
Long Position: Buying a currency pair with the expectation that its value will increase.
Short Position: Selling a currency pair with the expectation that its value will decrease.
7. Leverage
Definition: The ability to control a larger position in the market with a smaller amount of capital, amplifying both profits and losses.
8. Margin
Definition: The collateral required to open and maintain a leveraged position in the market.
9. Stop-Loss Order
Definition: An order placed to limit potential losses by automatically closing a trade at a specified price.
10. Take-Profit Order
Definition: An order placed to automatically close a trade when it reaches a specified profit level.
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11. Margin Call
Definition:
A notification from the broker requiring additional funds to cover losses and maintain open positions due to insufficient margin.
12. Risk-Reward Ratio Definition:
A ratio comparing potential profit to potential loss in a trade, helping traders assess the potential return against the risk.
13. Technical Analysis Definition:
Analysis based on historical price movements and chart patterns to predict future price movements.
14. Fundamental Analysis Definition:
Analysis based on economic, political, and social factors influencing currency values.
15. Forex Broker Definition:
A company or financial institution that provides a platform for traders to buy and sell currencies in the forex market. Understanding these forex trading terms is crucial for beginners to navigate the market and communicate effectively within the trading community. Continuously expanding your knowledge of these terms will help build a strong foundation in forex trading.
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