Important Forex Terms to Know

If you want to enter the forex market, you should be familiar with these basic forex terms so that you can navigate this complex market. Therefore, in this article, we will tell you about the basic terms of the foreign market.

1. Foreign exchange, commonly known as Forex, involves a unique set of terms that traders should be familiar with.

2. Currency Pair Its a pair of two separate currencies, one against the other. The base is the first listed currency in a currency pair, whereas the quotation is the second listed currency that serves as the benchmark.

3. “Pip,” which stands for “percentage in point” and represents the smallest price move a given exchange rate can make.

4. “Leverage,” which allows traders to control larger positions with less capital. “Spread” refers to the difference between a currency pair's buying and selling price, influencing trading costs.

5. “Margin” is essential in Forex trading, as it refers to the initial deposit required to open a position.

6. “Stop-Loss Order” is a risk management tool that helps traders limit potential losses by automatically closing a position at a predetermined price level. “Take-Profit Order” is another important term, that allows traders to set a specific price target to lock in profits.

7. “Base Currency” refers to the first currency in a currency pair, while the “Quote Currency” is the second currency.

8. “Bid Price” is the price at which traders can sell a currency pair, while the “Ask Price” is the price at which they can buy.

9. “Liquidity” is crucial in Forex trading, representing the ease with which assets can be bought or sold without causing significant price changes.

10. A lot is a standardised measure of the quantity of a financial instrument that can be traded. The size of the lot

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