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The Basic Forex Terms that You Should Know

While understanding what Forex Exchange is all about, it is also important to know the basics of the trade. There are some terms and terminologies that expert traders use in describing the flow of the exchange, which you might not really understand. Some are self-explanatory, but most are not. It may be complicated at first, but once you have a better understand how the trend works, it will just be easy.

Every day, traders talk about the information presented on the forex market. The terms used that we don’t really understand is part of the Forex Language or jargon. If you are new to forex trading, absorb and fully understand the complexity of the terms that are used in trading.

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The Common Terms and Terminologies in Forex Exchange.

Before you start with your Forex trading career, you must understand first the most common terms that traders use.

  • “Bulls” and “Bears”. These two terms are usually heard from traders. Bulls and bears are metaphors used to describe the direction of the market, whether up or down. Using these metaphors came from the days when blood sports such as bull or bear fights were common.
  • The 8 Majors. These are the currencies that have a huge part in the forex market. These are:
  • Eurozone (EUR)
  • United States (USD)
  • Japan (JPY)
  • Great Britain (GBP)
  • Switzerland (CHF)
  • Canada (CAD)
  • Australia (AUD)
  • New Zealand (NZD)
  • Currency Pair. The currencies are usually paired together, for example, EUR/USD. This means that the euro and the US dollars are paired. Every pair has a standard layout where the base currency is the first of the two.
  • Base Currency. This is the first currency in a pair and is the base of the value of the pair. For example, EUR/USD = 1.2500, this means that 1 euro is equivalent to 1.2500 USD dollars.
  • Terms Currency. The second of the two in a pair which is also called the “counter currency.”
  • Bid vs Ask. The buying price is “bid” and the selling price is “ask.” The dealer will usually make the bid price lower than the asking price.
  • Short and Long. “Long” is referring to open a buy position, where “Short” is to open a sell position.

Tips to Better Understand The Forex Language.

In understanding the Forex Language, it’s just like learning a new dialect or language. It takes time and a lot of practice for you to be fluent in these foreign exchange languages. You have to educate yourself. Look for more articles online that talk about forex trading. You can watch ‘how-to” videos and also online newsletters about the forex market in general. Forex education does not happen overnight.

Another tip is to do the classic way of researching. Read books about the forex market. If you visit a bookstore, there are loads of investment books that you can get this information from. Make yourself be well-versed about foreign terms by using the glossary or the dictionary. Some people use the internet to learn things these days. This is the same with Forex Education. You can visit forums where you would be able to interact with other traders. You can learn a lot from people who already have experience with Foreign Exchange.

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