Knowledge of the language of Forex brokers will not make you an excellent trader, but it will help you understand the data needed to become one.
Here are the most important terms of Forex Trading:
Pip
The pip is an incremental unit of measure, that is, the pip makes it possible to measure changes in a financial asset based on its smallest unit of quotation.
The pip provides a standard unit of measurement for all assets to facilitate communication between analysts and traders around the world.
Lot
A lot corresponds to a unit of value that measures the amount of a transaction.
This is often the size of a financial contract. In other words, depending on the number of lots you trade, the amount invested will be more or less important.
The larger the number of lots, the greater the amount invested and vice versa.
Spread
The spread is the difference between the purchase price and the selling price, i.e. the difference between the supply price and the demand price (BId and Ask prices).
This price difference, the Forex spread, is part of the broker’s remuneration.
Margin
The margin is an amount temporarily retained by the broker when the trader opens a position in the market.
In margin trading, the trader borrows money from the broker (forex license) to invest and in return, the broker retains a margin that serves as collateral and is then returned to the trader when the position is closed.
Leverage
Leverage is a financial tool that allows the trader to invest larger sums of money than he actually owns in his trading account.
Thus, leveraged trading makes it possible to negotiate much larger volumes for purchase and sale.
Swap
The forex swap, also called Rollover, is interest paid by the client to the online broker for positions open from one day to the next. The word swap comes from the English “swap” which means “exchange”.
Money Management
Money management is an English term that means “money management”.
It is a term used in the world of finance and especially in online investment to refer to investment risk management. Money management is your ability to manage your gains and investment so as not to take risks outside your trading strategy.
CFD
CFDs (Contracts for Difference) are derivative contracts for difference that may have several underlyings (such as stocks, indices or commodities).
The gain or loss of a CFD is given by the difference between the position entry price and the closing price of the position.
A CFD is a way to speculate on the decline in financial markets.
Any investor who wants to start trading on currencies must understand how forex works and the basic terms of this market.
Testing forex trading on a demo account is a way to learn how to trade currencies online and better understand Forex.
Factors that influence FOREX
Several factors contribute to the variations in the quotation of currency pairs.
Learning the factors influencing these quotes (find fintech startup lawyer) allows the trader to progress in their Forex trading strategies.
The Forex market and currency prices are influenced up and down by several factors:
- Interest rates.
- Inflation.
- Political events.
- Economic events (e.g. meetings of central banks).
- Natural disasters.
- Economic growth rates.
- The supply and demand of a currency pair.
For example, some traders will focus solely on publishing economic and monetary results such as the amount of public debt, the level of inflation, the change of a key interest rate of a major central bank, the level of unemployment, job creation, etc.