Updated : Feb 21, 2020 in All posts

Understanding Forex Trading Terms


Understanding Forex Trading Terms

In case you are not a seasoned veteran in the FX markets, it is very important to understand what exactly the terms "Forex"Foreign Exchange" means. A forex trading floor is the place where all the currency of the world is traded. Currency that is not tracked by the currency market is called "Foreign Exchange".


A Forex trader buys currencies in the foreign exchange market for immediate purchase or sale. The buyer exchanges currency for money at a given point of time. A Forex investor buys a currency and sells it at a certain price (called spot or forward market price) at a later point of time.


The spot market is the currency's value at the time the transaction is completed. Once the transaction is completed, the buyer pays the seller then pays the buyer. The trader stands to gain the most by selling at the lowest market price and buys at the highest market price. As an investment, the currency is sold and bought back at lower prices, thereby increasing the trader's profit.


The futures market is a contract that holds the currency to a set price. Once the contract is fulfilled, the seller will receive his currency and the buyer will receive a fixed amount. The buyer is supposed to pay the full amount when the contract is fulfilled.


Futures contracts are traded on currency exchanges. Most traders will buy and sell currency based on the news.


Another major aspect to Forex trading is the currency pair, which is a technical term that describes how the currencies of two different countries or financial institutions are exchanged. The major pairs include USD/CHF, USD/GBP, EUR/CHF and USD/JPY. In any given day, there can be a large number of currency pairs.


The best time frame to tradeis the closing timeframe, which is usually three hours from the market opening. Timing of Forex trade is critical to make money or lose money. Otherwise, you may go into your trades and end up losing money instead of making money.


When entering a market, it is important to know the trends and factors that affect the price of the currency. While trading, these factors must be kept in mind.


There are several basic concepts to Forex trading. The most important of these is the interest rate. Interest rates in a particular country vary, so it is necessary to use the market. When investing in Forex trading, it is important to learn to use the current interest rates.


The Forex trading markets are open around the clock, but because of the nature of foreign exchange trading, you should open your trades while the market is open, which means after the market opens. To ensure that you will have maximum profits, do not wait until the markets close.


Make sure you enter the currency market when the prices are low. These times are referred to as the entry price. It is advisable to avoid buying a currency at a high price and holding it for a long period of time before trading.


If you are a beginner, it is best to get some experience with Forex trading before deciding on a currency to invest in. If you are not knowledgeable in the nuances of the currency markets, it is advisable to get some expert guidance. You can ask for help from a seasoned currency trader.