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Learning about the basic terminology used in the Forex market

Money & Finances

9 Sep
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The Forex market has become a popular investment field. Thousands of retail traders are joining the trading industry every single day and try to change their life. Many of them have already become a millionaire by trading the currency pairs. The journey of the retail traders is not very pleasant. Most of them become confused by seeing the different terminology used in this market and they get confused about their actions. To make your trading journey easier, we are going to discuss some of the basic terms which you must know as a trader. So, let’s start enhancing our knowledge.

Currency pairs

As a retail trader, you have to trade currencies in pairs. For instance, if you buy Euro, you have to deal with other pairs. Usually, traders buy EURO using the might U.S dollar. So, in the Forex market, we will be saying that a certain trader has bought EURUSD pair since he is expecting the price to go up. The first currency is known as the base currency and the second currency is our quote.

Spread

The difference between the base and quote currency is known as the spread. The spread usually varies depending on the broker service. Usually, the high-end brokers like Saxo offer a tight spread trading environment to their clients. However, some of the low-end brokers often offer such spread but they have horrible trading conditions. You will be facing heavy slippage during the trade execution process and thus you have to embrace big losses.

Slippage

During the intense volatility of the market, it becomes a bit hard for the low-end brokers to execute the trades at the exact price a trader wants. So, slight variations in the price take place right after the trade is executed. This variation in the price during the trade execution process is known as slippage. To avoid such problems, you should always try to find a great broker who has a fast-paced trading environment. So, take your time and chose your broker wisely. Never take decision based on emotions or promotional offers.

Online trading platform

The novice trader starts their trading career without knowing the nature of the market. If you ask them, what is Forex trading, they will give you a blank look. Trading Forex is nothing but buying and selling currencies. Since the nature of the market is dynamic, the traders usually take their trades with the help of an online trading platform. So, when you chose a broker, make sure you are relying on the top brokers like Saxo, or else you will find problems with such platforms. Thus you will fail to execute high-quality trades in the market even having professional knowledge.

Technical analysis

The traders find their trades by doing the data analysis in the market. Studying the price chart is known as technical analysis. You might be thinking that learning about the technical analysis process is a very tough task but you are completely wrong. If you carefully evaluate the overall conditions of the market and use the support and resistance level, you should be able to execute high-quality trades in the market. Moreover, you will become much more confident with your actions, and thus making a consistent profit is never going to be a tough task.

Fundamental analysis

The price of the trading instrument is greatly affected by the high-impact news. If you want to succeed as a trader, you must learn the fundamental analysis process. Without studying the news data, you will never learn to assess the volatility of the market. Thus you will keep on losing money. Some novice traders often ignore the importance of fundamental analysis and rely on technical data only. But by doing so, they are getting a partial picture of the market. And getting such an overview of the market will never help a trader in the long run.

 

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Hey, I’m April. I am an ordinary girl who does extraordinary things with her life.

A little bit about me is that I love peanut butter, squishy-faced dogs, and binge-watching a good Netflix series for hours on end.

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A little bit about me is that I love peanut butter, squishy-faced dogs, and binge-watching a good Netflix series for hours on end.

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