Forex Education

There are many forex related terms used terms in the forex markets. You need to learn all forex terms as a part of your forex education before you start trading on the forex market.

Ask:Price at which broker wish to sell.

Bid/Ask Spread:The distance(in pips), between the Bid and Ask price.

Cost of Carry / Interest / Premium:Cost,of holding an open position.(Quoted in pips/day)

Drawdown:The magnitude of a decline in account (in % or USD), as measured from peak to subsequent through.

EBS:"Electronic Brokerage System", the electronic system where banks trade between each other. EBS IS considered to be exact indicator of prices at which currencies are being traded.

Forex: Short form for "Foreign Exchange".

Leverage: The amount, expressed as a multiple, by which the notional amount traded exceeds the margin required to trade. For example, if the notional amount traded (also referred to as "lot size" or "contract value") is $100,000 dollars and the required margin is $2,000, the trader can trade with 50 times leverage ($100,000/$2,000).

Limit: An order to buy, sell at a specified price when the market moves down, up respectively to that price.

Liquidity: A function of volume and activity in a market. It is the efficiency and cost effectiveness with which positions can be traded and orders executed.

Margin: The amount of funds required in a clients account in order to open a position or to maintain an open position. For example, 1% margin means that $1,000 of funds on deposit are required for a $100,000 position.

Margin Call: A requirement by the broker to deposit more funds into his accunt in order to maintain an open position. Sometimes a "margin call" also means that the position which does not have sufficient funds on deposit will simply be closed out. This procedure allows the client to avoid further losses or a debit account balance.

Offer: Price at which broker/dealer is willing to sell. Same as "Ask".

Spot Foreign Exchange: Referred to as "interbank" market. Refers to currency traded between two major banks.

Tick: The smallest price increment in a futures or CFD price. Also known as "pip" in the forex markets.

Offer: Price at which broker/dealer is willing to sell. Same as "Ask".

Learn above forex terms by heart you need to know them before you enter forex markets. Go to this page to continue your forex education.

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