If you are going to trade in the Forex Market you are going to need to know what in the world they are talking about.
If you can’t make out what the other traders are saying how can you be sure of what is really going on…..
As a trader, it’s important to have a good understanding of these terms and their meanings to avoid any confusion or misunderstandings.
In this article, we’ll cover some of the lesser-known forex trading terminology that every trader should know.
Here is some of the terminology that you will hear around the water cooler….
Black Swan Event
- A rare and surprising event that has a large impact on the market.
- These events cause extreme volatility in the market.
- Examples of black swan events include natural disasters, major political events, or unexpected economic downturns.
Margin Call
- A call from your broker that your account has fallen below the required margin level.
- You are then required to add more money to your account to meet the margin requirements.
- Not doing so may result in your positions being closed out by your broker.
Drawdown
- The shrinking of a account value from the peak to the trough of a trading period.A drawdown can be caused by bad trades, unexpected market events, or terrible trading decisions.
- It’s important to have a plan in place for managing drawdowns and minimizing losses.
Stop Loss
- An order placed by a trader to automatically close a position when a certain price level is reached.
- Stop losses can be used to limit potential losses on a trade and protect against unexpected market movements.
- It’s important to set stop losses at appropriate levels to avoid being stopped out prematurely or suffering excessive losses.
Pip
- The smallest unit of measure in forex trading.
- A pip is equal to 1/100th of 1% or 0.0001.
- Pips are used to measure price movements and determine the profit or loss on a trade.
Spread
- The difference between the bid price and the ask price of a currency pair.
- The spread is essentially the cost of trading and can vary depending on market conditions and the broker you are using.
- It’s important to choose a broker with competitive spreads to minimize trading costs.
Slippage
The difference between the expected price of a trade and the price at which the trade is executed.
- Slippage can occur when there is a sudden change in market conditions or a lack of liquidity.
- Slippage can result in unexpected losses or missed profit opportunities.
Leverage
- The ability to control a large amount of capital with a smaller amount of your own capital.
- Leverage allows traders to amplify their potential profits but also increases the risk of losses.
- It’s important to use leverage responsibly and only trade with funds you can afford to lose.
Position Size
- The amount of currency you are trading in a particular trade.
- Position size is usually measured in lots, with each lot representing a certain amount of currency.
- It’s important to carefully consider your position size to avoid overexposing yourself to the market and risking excessive losses.
Candlestick Chart
- A popular type of chart used in forex trading.
- Candlestick charts display price movements over a certain period of time using a series of candlesticks.
- Each candlestick represents the open, high, low, and close prices for a particular time period.
In the End
Forex trading terminology can be complex and maybe even a bit confusing, but understanding these terms is important for you to know to win the game of FOREX TRADING.
By mastering these uncommon ideas and bullet points, you can increase your knowledge and confidence in the forex market.
Remember to always stay informed and up-to-date on the latest market trends and news, and never trade with funds you cannot afford to lose.
