Youve heard of Forex trading and what it entails so now you are curious about how to get involved in doing it so that you can earn some money like so many others have done. There are a lot of terms that you need to know in order to be able to effectively trade Forex like a pro.
The first are minor and major currencies. There are eight individual major currencies on the Forex market and they include CAD, NZD, AUD, CHF, GBP, JPY, EUR, and USD. Anything else is considered a minor currency. As a Forex trader all you need to know are the major currencies because the minor currencies are used by the professional traders only. You can narrow the eight majors down to the Fab Five. These are USD, EUR, JPY, GBP, and CHF. These ones are the most traded and have the greatest opportunity to earn you a profit.
Base currency and second currency are also terms you will stumble across. The base currency is the first one that is listed in the pair and the second is the second in the pair. For example, if USD/CHF is 1.48 than 1 USD is worth 1.48 CHF. In the large majority of pairs, the USD is the unit that is being matched against.
Pip is another quirky term that is frequently heard on the Forex market. It is the price given for a currency in the smallest unit possible. The pips typically contain 5 digits with 1 before the decimal place and the other 4 being after the decimal. An example may be if the EUR/USD is equal to 1.5944. The pip would be a modification of the fourth digit after the decimal place, in this example being the 4 moving up or down in number. In short terminology, you can say that one pip is 1/100 of one cent.
The margin is something that you must be clear about when you begin getting involved in the Forex market. The margin account that you open is going to have a minimum balance required which depends on the broker that you are working with. Some may allow deposits as low as $100 while others require thousands, tens, or even hundreds of thousands before they will allow you to open and execute trades in the account.
Bid is a simple enough term to understand but you must understand exactly how it functions in the Forex market which is an entirely different world to learn, know, and either love or hate. The bid is the price that the currency pair is going to be purchased at. One example of a quote would be GBP/USD 1.9375/15, where the bid price is 1.9375. One pound would be equal to 1.9375 United States dollars in the previous example.
Dont be intimidated by all the different words that exist in Forex because it is a learning process as with learning anything new. Once you get going it will all come to you bit by bit and you can be on your way to making a large profit.
