The best way to start your forex journey is to learn its language. Here are some terms to get you started:
A forex account is used to conduct currency trading operations. Depending on the lot size, there can be three types of forex accounts:
- Micro Forex Accounts: Accounts that allow you to trade up to $1,000 of currencies in one lot.
- Forex Mini Accounts: Accounts that allow you to trade up to $10,000 of currencies in one lot.
- Standard Forex Accounts: Accounts that allow you to trade up to $100,000 in currencies in one lot.
Remember that the trading limit for each contract includes the margin funds used for leverage. This means that the broker can provide you with capital in a pre-determined percentage. For example, they might put up $100 for every $1 you pay to trade, which means you’ll only need to use $10 of your own money to trade $1000 worth of coins.
- Ask: Ask (or bid) is the lowest price at which you are willing to buy a currency. For example, if you place an ask price of $1.3891 for the British pound, the number listed is the lowest price you are willing to pay for the pound in US dollars. The ask price is generally greater than the bid price.
- Bid: Bid is the price at which you intend to sell the currency. The market maker in a particular currency is responsible for constantly placing bids in response to buyer inquiries. While they are generally lower than ask prices, in cases where the demand is large, the bid prices can be higher than the ask prices.
- Bear Market: A bear market is a market in which prices between currencies are falling. Bear markets indicate a downtrend in the market and are the result of pressure from economic fundamentals or catastrophic events, such as a financial crisis or a natural disaster.
- Bull Market: A bull market is a market in which prices for all currencies are rising. Bull markets indicate an upward trend in the market and are a result of the optimistic news about the global economy.
- Contract for Difference: A Contract for Difference (CFD) is a derivative that enables traders to speculate on currency price movements without owning the underlying asset. A trader who bets that the price of a currency pair will go up will buy CFDs for that pair, while those who believe that its price will go down will sell CFDs related to that currency pair. The use of leverage in forex trading means that CFD trading can result in huge losses.
Spread: The spread is the difference between the bid (sell) and ask (buy) price of a currency. Forex traders do not charge commissions; They earn money through profit margins. The size of the spread is affected by several factors. Some of them are the volume of your trade, the demand for the currency and its volatility.
Hunting and Hunting: Hunting and Hunting is the buying and selling of coins near predetermined points to maximize profits. Brokers indulge in this practice, and the only way to catch them is to communicate with fellow traders and observe the patterns of this activity