Six Investment Terms Every Trader Should Know
There are lots of terms used in the Forex market. People need to know about these terms properly so that they cannot be confused about them. If you do not understand the terms, you might face difficulties. When beginners first take steps in the market, they should try to gain proper knowledge about the Forex field. To build a glorious career in the Forex field, investors should try to know about every single term. Let’s learn about some important terms.

Currency Pair
Traders trade currency
pairs in the market. Depending on how the currency performs against the other
one, the investor will trade
the currency. The currency pair is
divided into three groups such as major, cross, and exotics. There are eight
general pairs all of which USD is held as the bottom currency or counter
financial instrument and one from either CAD, GBP, EUR, CHF, JPY, AUD,
NZD.Cross Pairs are any two crucial currencies which do not contain the US
Dollar as the bottom or marker currency. These are considered more changeable
than significant pairs such as GBP/AUD, NZD/CAD, and EUR/CAD. Exotics are
fully precisely exotic financial instruments, lesser popular currencies which
can be exceptionally volatile in the market such as South African Rand, Polish
Zloty, and Hungarian Forint.
Leverage
Leverage is offered by
the broker to trade more with low capital. Leverage provides the chance the
investors to open a trade with a high volume with low cost. High leveraged
trading is a good way to trade investors' preferable Forex pairs. For example,
when people use a well-known Forex pair like GBP/USD, let’s see what will
happen. Depending on a contract size of 200,000 per volume, a trader without
using leverage would require around $230,000.00. If we divide the amount by $500,
the result will be, 230,000 / 500 = $460. By using 1:500 leverage, an investor
can open a trade with $260.00.The trader is now managing $230,000 for just
$460. Note that different brokers
provide different leverage ratio. Check
here and learn more about
a leverage trading account at Saxo so that you can optimize your trades easily.
Going Long/Short
When an investor is
going long on financial instruments the first of those instruments is bought
while the second is sold. On the other hand, going long or buying a currency
refers that the investors expect the value to increase. For example, if the
Forex pair is USD / AUD, that means buying the US dollar in opposition to the
Australian dollar anticipating the value of USD to increase. Going short means
‘selling’ one-half of a financial instrument expecting that the value will
decline.
Margin
Margin is the initial
deposit that investors are required to raise to open a position. Margin also
provides an investor with the option to open a larger position size. If you
want to trade with margin, you are only required to put forward a percentage of the full
value of a position for opening the position. Margin opens the door to making
money but it also increases the risk.
Bullish and Bearish
Market sentiment
provides a perspective of the performance of a specific market or the stock
market overall. When the value is increasing, the market sentiment is bullish.
This can be called an uptrend. On the other hand, if the prices are decreasing,
this is called bearish. That means the market is in a downtrend.
Pip
The acronym PIP means Percentage in Point.PIP is the smallest fluctuations contemplated in an exchange rate on financial instruments. The PIP is the 4th decimal on the value of the quote of a currency pair which is plied to quantify value. For example, if the currency pair is GBP / AUD and the price quote is 0.6872. This means that 1 GBP will enable investors to buy about 0.6872 AUD. If the PIP increasesby 0.0001 to 0.6873 this would mean that they can acquire a little bit more AUD for every £1.
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