Learning forex trading would mean that you should also learn the language. Otherwise, there are a lot of things you will not understand. Below are some important forex terminologies that you should understand and know by heart for you will be using them daily when you are already doing your own trading. Knowing these words will not only help you understand forex trading properly but would also arm you with powerfu- terms that could easily impress your friends, relatives, colleagues and those that you specifically want to impress like your girlfriend or a date. Giving meaning to al- the important forex terminologies will already enable one to make a book. I will therefore just mention the more important terms and their basic meanings. Below are the words that I think you will need to know at this stage in your forex education.
– Aggressor – a Forex trader dealing on an unfilled price in the market.
– Appreciation – the increase in the price of an asset in response to the demand of the market
– Arbitrage – Buying or selling of an instrument and synchronized taking of an identica- and opposite position in an associated market, to be able to profit from the smal- differences in the price of one currency pair traded between more than one market.
– Ask – is the price at which the market is now ready to sel- a particular currency pair in the spot currency market. At the ask price, you can purchase the base currency (this could be seen at the right side of the quotation).
– For example, in the quote GBP/USD 1.5415/18, 1.5418 is the ask price. This quotation implies that you can buy one British pound for 1.5418 US dollars.
– Also called the “offer price,” “ask price,” or “ask rate”
– Asset – any item that has marketable or exchange value.
– Back office – the department or the location of the office where the financia- transactions are dispensed.
– Base currency – the first currency in any pair of currencies
– by measuring it against the second currency, the worth of the base currency will be shown (for example, if the EUR/CAD rate equals 1.8436, then one EUR is worth CAD 1.8436. In the Forex markets, the U.S. dollar is usually considered to be the base currency for al- quotes, with “quotes” being expressed as units of one U.S. dollar per whatever the other currency is in the currency pair. There are exceptions to this rule, with the Euro, the British pound being primary ones.)
– Bear market – comprehensive period of decline in the genera- price. A decline of a security, an asset, or a market.
– Basically a market that can be distinguished by its declining prices.
– Bid – is the price at which the market is now ready to purchase a particular currency pair in the spot currency market. At the bid price, the trader can sel- the base currency (this could be seen at the left side of the quotation).
– For example, in the quote EUR/USD 1.9912/45, 1.9945 is the bid price. This quotation implies that you sel- one Euro for 1.9945 US dollars.
– Also called the “bid price” or “bid rate”
– bid/ask spread – or simply “spread”
– is the difference between the bid price and the ask price
– Big figure quote – is the expression used by dealers to refer to the first few numbers of an exchange rate. These numbers, most of the time, are removed in dealer quotes. For example, the USD/CAD rate might be 176.20/176.28, but can equally be quoted verbally without the numbers “176” as “20/28”.
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