Forex Fx Trading

Glossary

Bear (Bearish)

If a market is bearish this means the market is going down.

Bull (Bullish)

This is the opposite of bearish.

Cable Trading

This refers to trading on the GPB/USD currency pair.

Currency Pair

A currency pair is made up of two parts, the base and the quote currency. In the example of the EUR/USD the EUR is the base, and the USD is the quote currency.

Day Trader

A trader who opens and closes positions within the same day of trading. This form of trading is known as 'intraday'.

Going Long

This is opening a trade based on the prediction that a currency will go up in value.

Leverage

Leverage is how you can open a trade with minimal outlay. It is fixed with some brokers, and they will 'lend' you between 100 and 200 times your 'stake'. With other brokers, you can decide your level of leverage, and use up to 400 times the value of the stake for the trade.

Lot

A lot is a unit of trading. A standard lot is 100,000 units of the base currency, a one pip movement (see below) is equal to one dollar. A mini lot is equal to 10,000 units, a one pip movement in this case is equal to one dollar. A micro or midi lot is equal to anything 5,000 units or lower, with a pip being equal to 50c or lower.

MM

MM is the abbreviation for Money Management which is an integral element of trading succesfully.

Margin

Margin is the amount of cash needed to open a trade. This varies from broker to broker, and some brokers give you the option to choose your margin level by offering different rates of leverage (see above). If you are trading for example 10,000 units of currency you do not need the whole amount, you just need the margin, which in some cases can be as little as .25% of the lot size. For example you can open a $10,000 trade with a mere $25 margin.

Pip

A pip is a currency price movement. This is generally measured as the fourth decimal point, i.e. an upward movement of 1.4260 to 1.4290 is a movement of 30 pips, which in a standard lot size account would be equal to $300. Note, this does not apply to the YEN.

Short Selling / Going Short

Short selling means opening a trade in the belief that a curencies value will go down.

Stop loss

A stop loss is one of the risk management options. You set it at a point where you want your deal to be closed down if you are losing. For example, you can set a stop loss at $100, which means that you trade will close if it hits $100 in the wrong direction. Note: if you trade overnight, your stop loss may be 'jumped over' - due to gapping. Gapping occurs when trading hours are closed, however the price in a curency may fluctuate due to external reasons. In this case your broker software will not execute the stop loss, and you may lose more than your $100.

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