Three Top Forex Terms to Learn and Understand

No one with any knowledge of the forex markets would deny their complexity. With thousands of different factors driving market trends and patterns, the foreign exchange is undoubtedly one of the most intricately constructed industries to invest in and having a knowledge of forex terms is essential.

In order to unravel its mysteries and trade successfully, you first need to understand it, and this is often easier said than done. It takes a lot of time, grit, and determination to master the art of trading, and grasping the terminology can be a challenge in itself.

Luckily, we’ve created this quick guide to get you started…

#1: Forex

It may seem foolish to include this most basic of terms, but a surprisingly large number of people lack a comprehensive understanding of forex when they decide to start trading it.

Forex is the trading of one currency in exchange for another in order to turn a profit, and it is conducted via the foreign exchange markets. These markets trade trillions of dollars every day, and are open for 24 hours a day six days a week.

When they are in session, they’re frequented by everyone from small-time investors to major banks, multinational corporations, and even governments, each of them aiming to increase their holdings. The aim of the game is simple: to possess more money at the end of a session than you did at the start.

#2: Currency Pairs

Currency pairs form the foundation of forex trading. Investors make money by trading one currency against another, and these two opposing assets are collectively known as a currency pair or combination.

Any nation’s currency can be traded against another, but the most common pairings are known as the ‘four majors’, and are more widely bought and sold than any others. The values of these pairings against one another change constantly, due to the volatile nature of the markets, and it is in this eternal state of flux that opportunities lay

#3: Stop Loss

Another term that you ought to learn early on is ‘stop loss’, as a stop loss order will be your most important trading tool in terms of protecting your account against catastrophe.

Commonly known as ‘the trader’s best friend’, these instruments provide a means of limiting your losses, ensuring that your profits are protected irrespective of market movements, and that you never have to fear any single move going awry and destroying your overall gains.

Why not put your new knowledge to the test and start trading today with a broker like ETX Capital?

Tags: forex terms

Category: Forex