Forex trading glossary

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If you’re new to forex trading, this forex trading glossary will help you understand the most  used terminologies in forex trading.

No need to memorize these terms, simply familiarize yourself with them for future reference.

  • BullBuyers.
  • Bullish movement — Uptrend or upward movement.
  • Bear — Sellers.
  • Bearish movement — Downward movement.
  • Divergence —  A situation where two or indicators are showing opposite signals.
  • Head and shoulders
  • pattern — Is a bearish chart pattern that has  three prominent peaks that are formed with a middle peak(head) slightly higher than the other two peaks (shoulders) . It almost look like a human.

Also read: How to trade head and shoulders patternhere

  • Long — Buy.
  • Short — Sell.
  • Lot size Size of your transaction.
  • Leverage — Leverage is offered to you as a retail trader by your forex broker when you open a trading account with them to maximize your buying power by giving you ability to deposit small amount money and trade larger lot sizes.

Also read: leverage simplified

  • Margin — Amount of money you need to have in your forex account to maintain an open position.
  • Margin call — When your forex brokers automatically closes out your trades due to loses.
  • Pip — (Also called “percentage in point”) a pip, in forex terms is the smallest price change in currency pair. For example, if the EUR/USD moves from 1. 12080 to 1. 12085, that is 5pips. Most of the currency pairs are quoted out to 4 decimal places.pips are used to calculate profit and loss.
  • Risk:reward ratio — How much you willing to risk on a trader ,and how much you stand to gain if a trade go as anticipated ,for example, if you risk $50  on a single trade to make $200 then your risk:reward  ratio is 1:4. This simple means you make 4 times more than you risk.

Here I wrote an article about the importance of risk/reward ratio. Make sure you read it because it can help you grow your trading account fast.

 

bid and  ask price

  • Bid — Price a trader is willing to sell a currency for.
  • Ask — Price a trader is willing to buy a currency for.
  • Spread — Difference between the bid and the ask price.
Three types of traders
  • Scalper — A scalper is a trader that enter and exit the market very quickly for small gain in a matter on minutes, usually using smaller time frames.
  • Intraday/day trader — Enter and exit the market within a day.
  • Swing trader — Hold positions for days, weeks or even months, usually using longer timeframes like daily, weekly and monthly charts.
  • Fundamental analysis — The use of political and economic events to predict the future movement of currencies.
  • Technical analysis — Is the study of the forex market movement using the charts to predict the  future movement.

If you think this post is useful, please share it with other traders you know so that they can also come here and benefit from this Website.

Though I did definitely covered the most important terminologies here. If you have any questions at all Or if you think I forgot some other important terminologies that might be useful to other traders, especially to novice traders please feel free to leave me a comment below and I’ll be glad to answer your questions. Otherwise, good luck!

Cheers,

Leonard

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