Forex Glossary: 12 Important Terms You Need To Know
Pips: a pip is short for Point in Percentage, it is the movement measurement of price as per the last digit. For example: 1.1012, the 2 is the last digit and one movement of the last digit is known as 1 pip.
Volatility: a statistical measure that shows just how high or low price movement will go within a specific period of time. The higher the volatility the higher the chance to make a profit.
Currency Pair: Two currencies in which a traded uses in order to make a transaction. For example: EUR/USD.
Technical Analysis: This kind of analysis is based on historical market data in order to predict what that market's future movements might be. The technical focus on charts and analytical tools which helps a trader evaluate where the prices might reach.
Fundamental Analysis: Unlike technical analysis, fundamental analysis analyses economic and political events and their effect on the market. In the end it helps the trader decide what position to take. If the currency is underpriced, the trader will likely buy and if the currency if overpriced the trader will probably sell.
Ask Price: The price the market offers traders to buy currencies.
Bid Price: The price the market offers traders to sell currencies.
Base Currency: The first currency in a currency pair, for example: USD/GBP the US Dollar is the base currency, meaning that with 1 Dollar you can buy X Pounds.
Economic Indicator: A statistical report the government issued by the government stating economic conditions in a country.
Leverage: Usually the leverage in Forex is 200:1 meaning you invest 1,000 Dollars of your own money and trade 200,000 Dollars.
Major Currency: The US Dollar, the British Pound, The Yen, Euro, Swiss Franc.
Minor Currency: The Canadian Dollar, the New Zeeland Dollar and the Australian Dollar.
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