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Basic Forex Terms

ForexZig.com August 21, 2012
Forex terms

Basic Forex Terms

Pips – the smallest price quotation in the currency. In the futures, the term tic is often used. For example, if EUR/USD moves from 1.3055 up to 1.3056, this is one pips.

Spread – the difference, usually in pips, between the quotes buy and sell. A narrow spread is positive for the trader, because of the lower transaction costs.

Cost of Carry, Interest, Premiumthe interest that is often quoted in dollars, pips or rent for maintaining an open position.

Leverage – the ratio, with which the trading sum exceeds  the demanded margin for the transaction. For example, if we have a transaction for 100 000 dollars, the necessary margin is 2000, it is traded in leverage 50 to 1.

Limit Order– an order for buy or sell on a particular price.

Market Order – an order to buy or sell on a present market quotes.

Stop Order -  an order for buy or sell on a particular price, when it comes, it closes or opens new position.

Margin – the necessary sum for a client to open a position or maintain one. For example, if you have a demand for 1% margin, then with 1000 deposit you can maintain a position for 100 000 dollars.

Margin Call – a request from the broker to deposit more funds, in order to maintain an open position. If it does not happen , the broker has the right to close the position, in order to avoid any loss.

Technical Analysis – analysis that are based on historical price movements on the market, using charts and various indicators.

Fundamental Analysis – analysis that are based on the economic conditions of the country, monetary policy, as well as other macroeconomic elements.

Terms:

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