Forex trading for a living pdf

Important terms in forex trading

Forex Trading Terminology: 15 Must Know Terms,#2 Currency pair is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # ). Forex trading involves significant risk of loss and is not 17/4/ · What Is The Most Important Things In Forex Trading? In terms of foreign exchange trading, the bid-ask spread has an extremely strong significance. From the standpoint of is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # ). Forex trading involves significant risk of loss and is not 17/4/ · What Is The Most Important Things In Forex Trading? In terms of foreign exchange trading, the bid-ask spread has an extremely strong significance. From the standpoint of Forex trading is growing in popularity with traders across the globe. Also known as Foreign Exchange, the forex market essentially describes trading of currencies that are used ... read more

Depending on the broker you are using, the type of spread that you might have to deal with might be different. While in most cases brokers offer you regular spreads, there are some brokers that offer traders fixed spreads which are always the same no matter the market conditions. Leverage is another very important term that every trader should know about. In fact, leverage is among the major reasons why so many people are attracted to Forex trading.

Forex offers traders access to higher leverage than other markets. But what is leverage anyway? Essentially, leverage is the use of borrowed money for increasing the volume of positions beyond the capabilities of your actual account balance.

When you are using leverage, you are borrowing a certain amount of money to open your positions. If you want to do so, you will have to use a leverage of However, as much as it can be used to amplify your profits, it does come with many risks as well.

Forex trading with higher leverage can be very dangerous, especially for beginner traders. As much as it can increase your profits, it can also increase the potential losses. In fact, because of the risks associated with higher leverage, many jurisdictions have restricted brokers from offering high leverage. There are many different types of executions in Forex trading. One of them is the STP execution , also known as the Straight Through Processing execution.

STP is actually a very popular execution type around the world for several reasons. STP Forex brokers offer traders the ability to directly send their orders to the market without the need for the orders to pass the dealing desk. Because the positions are directly sent to the interbank exchange houses or liquidity providers, STP is very transparent and offers traders numerous advantages.

Electronic Communication Network, simply known as ECN , is another very popular execution type. This digital system is able to match buyers and sellers around the world and allow brokers and investors in different geographic areas to trade without the involvement of a third party. In a sense, ECN is very similar to STP, however, there are some key differences. Although ECN is very popular and has many advantages, it does also come with several drawbacks.

For example, it is mostly associated with higher fees. ECN works in a very simple way, once you open a position, it directly goes to other market participants. While trading, you are seeing the best available bid and ask quotes from multiple market participants, after which, your order is automatically matched and executed.

No Dealing Desk is an execution type that offers traders access to the interbank market rates of exchange without the involvement of any third party. Thanks to the No Dealing Desk execution type, there is no need for a third party, and the traders are directly connected with the interbank rates.

Both of the trading execution types that we have discussed above, ECN and STP, are No Dealing Desk execution types. Although there are many advantages that this type of execution has, there also are several disadvantages associated with NDD execution.

For example, there might be additional fees and commissions charged by NDD brokers which can increase the costs of Forex trading. There are many terms used in Forex trading every single day, and one of them that you will come across very frequently is going long. To go long on a certain currency is to buy the asset and hold it for a specific amount of time. The main idea behind going long is that you believe that the price of it is going to increase in the near future.

So, to make a profit, you are going long meaning buying the asset at a lower price and holding it until the price increases. A very interesting thing about the Forex trading market is that you are at the same time going long and short when you open a trading position. The reason for this is that when you trade Forex, you are buying one currency, while at the same time, selling the other. While taking a long position in Forex trading means buying an asset, going short means selling it.

Once you buy an asset in hopes of it increasing in price and your prediction proves to be successful, you can go short. Going short means selling an asset. Traders usually go short when they think that the price of something is going to drop. By going short, they are selling the asset at a higher price before the crash. Simply put, to short a currency means to sell the underlying currency in the hopes that its price will go down in the future.

If your prediction is correct, you can buy back the currency you shorted at a lower price, and if you think that the price is going to increase, you can hold again. Arbitrage in Forex trading refers to a process when traders aim to purchase a currency pair for a cheaper price while selling it for a higher price.

Forex trading arbitrage is known in the market as a very low-risk trading strategy and the main aim of it is to purchase a cheaper version of expensive currency. There are different types of Forex arbitrage available in the market, such as statistical Forex arbitrage, triangular Forex arbitrage, and so on. The triangular arbitrage is one of the most popular arbitrage trading strategies in the market and involves opening positions with 3 currency pairs. These opportunities in Forex trading tend to be very rare and only traders with advanced computers, programs, and knowledge use this strategy.

Margin in Forex trading refers to the minimum capital that you are required to have to open and maintain a trading position.

But, what does margin really mean in trading? In general, currency pairs can be grouped into major pairs, cross pair, and exotic pairs. Major pairs are currency pairs that include the US dollar as either the base currency or counter-currency and one of the other seven major currencies EUR, CAD, GBP, CHF, JPY, AUD, NZD.

Cross pairs, on the other hand, include any two major currencies except the US dollar. Unlike major pairs, cross pairs have higher transaction costs and, at times of lower liquidity, traders can face slippage. Cross pairs are also usually more volatile than major pairs. Finally, exotic pairs include exotic currencies which are not in the Top 10 of the most traded currencies, such as the Mexican peso, Turkish lira or Czech koruna.

Since those currencies can be extremely volatile, they should be left to be traded by the pros. The exchange rate of a currency pair is what all traders follow. The exchange rate is often simply called the price, since it shows the price of the base currency expressed in terms of the counter-currency. A rise in the exchange rate of a currency pair shows that the base currency is appreciating against the counter-currency or that the counter-currency is depreciating against the base currency.

Similarly, a fall in the exchange rate shows that the base currency is depreciating against the counter-currency or that the counter-currency is appreciating against the base currency. At any given moment, each currency pair has two exchange rates or prices — the bid price and the ask price.

The bid price is the price at which buyers are willing to buy, while the ask price is the price at which sellers are willing to sell. Given its nature, the bid price is always lower than the ask price.

In the end, buyers buy at the ask price, and sellers sell at the bid price. This means that each price plotted on your chart represents the market equilibrium at that point of time — the price at which the majority of market participants are willing to transact. Each time you enter into a trade, you have the pay transaction costs for that trade.

Swing traders and position traders who have a longer-term approach to trading are less affected by the spread as they open a smaller number of positions and have relatively higher profit targets. A pip is short from Percentage in Point and represents the smallest increment that an exchange rate can move up or down. Usually, one pip equals to the fourth decimal of most currency pairs. However, some currency pairs have their pips located at the second decimal place, mostly yen-pairs.

A pip represents the fourth decimal place of most currency pairs, but there is an even smaller increment that prices can change. Going long simply means to buy, while going short means to sell. In equity markets, most traders are long in anticipation of rising prices. However, in derivative markets, such as options and futures, there is always an equal number of longs and shorts in the market, because each new contract that is bought needs a corresponding seller who needs to go short, and vice-versa.

Since retail Forex is mostly traded with CFDs , traders are able to bet both on rising prices and falling prices. Support and resistance are one of the most important concepts in technical analysis. Technical traders analyse only price-moves as they believe that the price reflects are available fundamental information, and support and resistance trading plays an important role in that analysis.

The markets are made of crowds of people that speculate, hedge, trade, invest or gamble in the markets. Since people have memory, they remember certain price-levels where the price had difficulties to break below in the past. They place their buy orders around those levels, as they believe that the price will again fail to break below.

This is how support levels are formed. In other words, a support level is a previous low at which the price has a large chance to retrace and move up. While support levels are based on previous lows, resistance levels track previous highs at which the price had difficulties to break above. Traders remember those levels and place their sell orders around them, as they believe that those levels will again provide selling pressure and move the price down.

Since fresh memory is more important than old memory, recent support and resistance levels usually have a higher importance than old support and resistance levels. The Forex market is open around the clock and offers traders to profit not only on rising prices, but also on falling ones. However, there is another reason why a large number of traders feel attracted to the Forex market — leverage.

Trading on leverage allows traders to open a much larger position size than their initial trading account size would otherwise allow, and the Forex market is known for extremely high leverage ratios offered by retail brokers.

However, bear in mind that trading on extremely high leverage is very risky, as it boosts not only your profits, but also your losses. Beginners should consider trading on a lower leverage until they gain enough experience and screen time.

This will reduce losses and make sure that you stay in the game in the long run. Learn more, take our Trading for Beginners course 14 Margin When trading on leverage, your broker will allocate a portion of your trading account size as the collateral for the leveraged trade.

The position size you take on the market determines the size of your profits and losses in dollar value by affecting the value of a single pip. In the Forex market, one standard lot standard position size equals to Fortunately, traders with smaller account sizes can take smaller trades with mini-lots Some brokers even allow you to trade on nano-lots units of the base currency.

In any case, calculate your lot size in dependence of the size of your stop-loss so that you remain inside your risk-management boundaries. So, you want to become a day trader and join the hundreds of thousands of day traders who are living in the UK? Then this….

One of the most annoying parts of learning to trade forex is understanding all the jargon people use. When I first started, I had a really hard time figuring out what pips, margin calls as well as all the other terminology meant when I first started.

This glossary will teach you all the important trading terms in forex as well as what their definitions are. Someone who analyses assets and makes buy and sell recommendations. The time Asian traders are active in the market — pm — am GMT. A term someone uses when they think the price of a currency will fall. A website that allows you to trade or invest in the forex market.

A term someone uses when they believe price is going to rise. A fee charged for buying or selling an asset. Most forex brokers charge a spread explained later on whenever you open or close a trade, which acts as your commission for buying or selling the currency. In forex, you close a trade by using the opposite order.

One or more trades placed to offset or reduce the risk of another, typically much bigger trade. The term used to describe an exchange rate. The time UK traders are active in forex. Runs from am — pm GMT. Forex pairs are quoted to either 4 or 5 decimal places. A 1 pip move means a rise or fall in the last decimal place by 1 point.

So if price fell from 1. A rise from 1. A real-time graph that visually shows how the price of a currency has changed over time and is changing right now. A variety of Price Charts exist, with each displaying the price differently or showing different information about the price. A computer program that trades or invests on your behalf, placing orders and buying and selling without requiring any human input.

When US traders are active in forex — 7 am — 4 pm GMT. A term used to describe how prone a currency is to suffering large fluctuations in price.

Volatility can either be high or low and changes over time as a result of various market forces. The ask price is the lowest price someone is willing to sell at. The way forex brokers make money is from the spread, as everyone has to pay the difference when they open or close a trade. The size of the spread is determined by the size of the market. You should always have this option selected when placing trades.

A phrase used by someone who plans on buying a currency. Going short is what someone says when they plan on selling currency. A method of trading and investing where you borrow money to increase the potential profit on a position. Most forex brokers allow their clients to use substantial leverage. Make sure you always use a small amount of leverage relative to your account size.

A type of order used for buying and selling currency. A limit order allows you to set a price where a certain amount of currency will be bought or sold upon being reached. Describes how easy it is to buy and sell a currency without its price being majorly affected. Another type of order you can use to buy or sell a currency. Unlike limit orders, market orders allow you to buy or sell a currency immediately at its current price. What you receive if your account balance falls below the required amount to keep a leveraged trade open.

When you use leverage to increase the potential profits from a trade, you have to keep a certain amount of funds in your account for the trade to remain open — this is usually called the maintenance margin. A trade or investment you currently have open at a profit or loss. Designed to limit the amount of money that can be lost on a trade or investment , a stop-loss order allows you to set a price where some or all of your currency is sold upon being reached.

This is what happens when an order to buy or sell including stop orders is executed at a different price to what you wanted. However, it can still happen during periods of high volatility, such as news announcements and sharp rises and declines. A take profit order allows you to set a price where some or all of your currency is sold automatically at a profit if reached. The amount you want to buy or sell. Due to the size of the forex market, most brokers quote trade size in micro-lots and nano lots, which is equivalent to buying and units of a currency respectively.

A special type of stop-loss that automatically decreases risk and secures profits by moving in the same direction as price when in a profitable trade. Arbitrage is a strategy based around exploiting the price difference between two brokers.

Arbitrage used to be a popular strategy in the very early days of forex trading. Probably the most well-known type of strategy. A fast-paced style of trading where the aim is to make money from short term price moves that last anywhere from a couple of hours to an entire day. Day traders use many of the same techniques and trading strategies as traders using other styles, only adapted for use on much shorter timescales.

A defensive strategy used by people who want to offset the risk of a trade or investment by placing a trade or investing in a currency or asset negatively correlated — i. e moves in the opposite direction — to the main currency being traded or invested in. Similar to buy and hold, position trading is a style of trading centered around holding a currency for 6 months to a year. A medium-term style of trading where the objective is to make money from price swings; large rises in price that last anywhere from a few days to a couple of weeks.

A type of price chart that shows price changes through bars. A bear trap is a fake signal a currency has reversed in price. It occurs when the price, after falling during an up-trend, suddenly reverses, causing the up-trend to unexpectedly continue. A term used to describe what happens when the price of a currency consistently falls without many large rises taking place.

A candlestick more on these in a minute that shows the price fell for that period of time — these are red or black on most trading platforms. A candlestick that shows price increased for that period of time — these are coloured green or blue on most charting platforms. The opposite of a bear trap. A bull trap is when the price, after consistently declining for a long time, suddenly rises before falling again. An old phrase that comes from investing. A type of chart that shows price changes through tiny bars.

Someone who uses charts and graphs to make decisions on when to buy or sell. A type of price chart that shows price changes via small bars of information called candlesticks. Refers to a candlestick that, upon formation, signals the price may be about to rise or fall. Candlestick patterns can either form on their own or in a sequence of two or three. A chart pattern is a much bigger version of a candlestick pattern.

Whereas a candlestick pattern consists of 1 — 3 candlesticks, a chart pattern is made up of dozens that together form a simple shape or structure, like a triangle. e a point where the price has a high probability of either rising or falling. Describes what takes place when the price of a currency predominantly moves sideways instead of being in an up-trend or down-trend. Currencies can be correlated to both other currencies or other assets entirely. Positive correlation — this means they move in sync with each other.

Negative Correlation — this means they move the opposite to each other i. e when one rises the other falls and vice versa. A sudden recovery that makes people think a down-trend is over. Ultimately results in the down-trend resuming, causing the people who bought during the recovery to lose money. One of the main types of analysis people use to trade and invest in forex.

A simple chart that shows price changes through a line. The Moving Average Convergence Divergence indicator MACD is a tool that shows information on the strength, direction, and momentum of the current trend. A Moving Average is a tool that shows how the average price of a currency has changed.

Can be set to show how the average price has changed over different timescales. Describes a decline that takes place during an up-trend or a rise that occurs during a down-trend. A sustained rise in price. Can occur in both down-trends and up-trends.

The RSI is an indicator that gives information on the direction, strength, and momentum of the current trend, as well as whether the current price is high or low. A price where, historically, the price of a currency has encountered significant selling pressure. A price where a currency has historically encounter significant buying pressure.

Tools traders and investors use to get information about the price of a currency that cannot be gained easily via normal means i. e from you looking at a chart.

The Moving Average, MACD, RSI, and Bollinger Band tools mentioned earlier are all common technical indicators people use when trading and investing. The other main type of analysis traders and investors use. Technical analysis is centered around using mathematical tools indicators and price information to make decisions on when to buy and sell a currency. Sometimes known more simply as Ozzie or Oz.

Trading Terms,Leverage in Forex trading

17/4/ · What Is The Most Important Things In Forex Trading? In terms of foreign exchange trading, the bid-ask spread has an extremely strong significance. From the standpoint of 25/8/ · Beginner Forex Trading Terms Currency Pair. It is actually the first terminology you will be introduced to when trading for the first time. The term Bid. The key goal is to "catch" is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # ). Forex trading involves significant risk of loss and is not Are you looking for the most important terms in Forex and their definitions? Check out our guides and learn how they work is a registered FCM and RFED with the CFTC and member of the National Futures Association (NFA # ). Forex trading involves significant risk of loss and is not 17/4/ · What Is The Most Important Things In Forex Trading? In terms of foreign exchange trading, the bid-ask spread has an extremely strong significance. From the standpoint of ... read more

GET YOUR BONUS. Bid The key goal is to "catch" the best possible price to buy or sell an asset. No matter what, by understanding the most important Forex trading terms, you can become a better trader. Swing Trading This scenario is often seen as the opposite of day trading. Traders are advised to go along with the trends, rather than trade against them. Describes a decline that takes place during an up-trend or a rise that occurs during a down-trend.

Naked traders focus on the market, rather than indicators. Read more about the short selling. Knowing the basic terms of Forex trading will prevent you from feeling stranded once you have entered the trading platform. Forex Market Definition. Looking for a great broker? Remember Me.