What We Have Covered in This Article
- 1 Currency Pair
- 2 Leverage
- 3 Bullish and Bearish
- 4 Bid/Ask Price
- 5 Stop-Loss and Take Profit
Last Updated on September 21, 2021 by Editor Futurescope
Becoming Forex traders, people should need to know about the terms of the Forex. It is necessary to know so that the investors can make the right decision at the right time. Before executing the trade, the traders should have a proper understanding of the market. When the person will fail to understand the situation, it will be very difficult for him to make the right decision. That’s why the traders should try to think about every discrete point of the market. Let’s know about the important terms.
There are lots of currencies in the market. People trade currency pairs for making money. Depending on the performance of the currency against the other, the person can choose the right one. In the trading field, there are eight currency pairs that people trade on. There are three types of groups, such as major pairs, exotics, and cross pairs. In the major pairs, the USD plays the role of base financial instruments and the other from GBP, EUR, JPY, AUD, EUR, and NZD. Exotics are less popular to the traders but these are also highly volatile.
The cross pairs are more volatile than the majors and do not add to the US dollar.
Leverage is mainly borrowed from the broker. The investors take this for doing more trade. However, excessive leverage can create problems for the traders as it is risky. Without keeping the large capital, the person can easily trade his preferable trading instruments. But, people should take the leverage based on the capital. When the person will able to do so, it will help them to reduce the cost. Sometimes, the newcomers do not understand this and try to take more and face difficulties. People should aware of the fact that nothing will come without any cost.
At Forex trading profession, leverage is like double edge sword. If you manage to use it properly, you can trade like the pro UK trader. If not, be ready to blow up the account. So, it is always better to use a low leverage trading account at the initial stage.
Bullish and Bearish
When the price increases, this is called bullish. On the other hand, when the price decreases, the market is in a downtrend which is called bearish. In the bullish market, the investors apply the trend trading strategies for making money. Because of the influence of different types of factors, the price movement changes. Depending on the market sentiments, the investors make the decision for taking action. So, it is very important to identify the bullish and bearish trends.
The bid price is the value in which the investors want to sell the currency pair. On the other hand, the ask price is a value in which the investors will long the financial instruments. The distinction between the bid and ask price is called the spread. These values are mainly demonstrated in the Market Watch Section.
Stop-Loss and Take Profit
Stop-loss and take profit are important factors for the traders. These are also known as the Forex order. By placing the stop-loss, people can reduce the risk. On the other hand, take profit is the certain profit level, when the price will hit this point, the trade will be automatically closed. If you want to become profitable, you have to use these. Many investors avoid stop-loss and face uncountable losses. The proportion of the stop-loss and the take profit is called the risk-reward ratio. According to the professionals, the traders should maintain the ratio of 1:3 or 1:2 so that they can able to manage the money.
People should know about these terms and their applications. Investors should not stop the learning process. As the market is continuously changing, people should be always up to date with the field as they can be required to take any type of decision in any situation. So, you should need to research the market and analyze the conditions properly to gain make more profits.