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Forex Glossary

Go through this list of the most common, important basic Forex terms. It will make your life a lot easier when dealing with the foreign exchange platforms and brokers. We have tried to put together a relatively short list, containing only the most important basic terms, so you are not overwhelmed and confused.

Ask: this is the price requested by the seller of a currency.

Appreciation: when the value of the currency goes up and the currency grows strong.

Base currency: the first of the two currencies in the currency pair. The value of the Base currency will always remain 1.

Basis Point: has a value of 0.0001.

Bid/Ask Spread: this is the difference between the Bid and the Ask prices. In other words, this is the difference between the price requested by the seller of the currency and the price offered by the acquirer of the currency.

Buy Limit: when the acquirer of a currency limits the price he is willing to pay for a currency.

Conversion rate: the price of the currency in another currency's values.

Currency Pair: the two currencies taking part in the forex trading transaction. EUR/USD is the most common currency pair in the financial world.

Counter currency: see the Quote currency.

Depreciation: when the value of a currency falls and the currency becomes weaker, compared to other currencies.

EURO: this is the currency of the European Union countries (France, Germany, Spain etc.)

Exchange rate: see Conversion rate.

Fixed Exchange Rate: official rates, as determined by a country's financial authorities.

Floating Exchange rates: rates, as determined by market forces - supply and demand.

Forward: A financial transaction for a purchase/sale of a financial instrument in a predetermined price in a future date.

Fundamental analysis: tries to forecast future currencies movements based on economic and political indicators.

Interbank rates: exchange rates valid for transactions between large banks.

Limit: the maximum price the seller is willing to pay for a currency in a Buy Limit order.

Maturity: when a financial instrument is settled or expires.

Pips: see Basis Point.

Position: an Investor's total holdings of a currency.

Quote currency: the second currency in the currency pair. Has the same value as the currency pair. Also known as a Counter currency.

Spread: the difference between the Bid and the Ask prices. The profit for the seller of a currency.

Stop Loss: an order to close a position in a certain price in order to avoid more losses.

Technical Analysis: tries to forecast future currencies movements based on past behavior of currencies. Uses charts as the analysis tool.

 

 

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