At any given moment, each currency pair has two exchange rates or prices — the bid price and the ask price. The bid price is the price at which buyers are willing to buy, while the ask price is the price at which sellers are willing to sell. Given its nature, the bid price is always lower than the ask price.

In the end, buyers buy at the ask price, and sellers sell at the bid price. This means that each price plotted on your chart represents the market equilibrium at that point of time — the price at which the majority of market participants are willing to transact.

Each time you enter into a trade, you have the pay transaction costs for that trade. Swing traders and position traders who have a longer-term approach to trading are less affected by the spread as they open a smaller number of positions and have relatively higher profit targets. A pip is short from Percentage in Point and represents the smallest increment that an exchange rate can move up or down. Usually, one pip equals to the fourth decimal of most currency pairs.

However, some currency pairs have their pips located at the second decimal place, mostly yen-pairs. A pip represents the fourth decimal place of most currency pairs, but there is an even smaller increment that prices can change. Going long simply means to buy, while going short means to sell. In equity markets, most traders are long in anticipation of rising prices. However, in derivative markets, such as options and futures, there is always an equal number of longs and shorts in the market, because each new contract that is bought needs a corresponding seller who needs to go short, and vice-versa.

Since retail Forex is mostly traded with CFDs , traders are able to bet both on rising prices and falling prices. Support and resistance are one of the most important concepts in technical analysis. Technical traders analyse only price-moves as they believe that the price reflects are available fundamental information, and support and resistance trading plays an important role in that analysis.

The markets are made of crowds of people that speculate, hedge, trade, invest or gamble in the markets. Since people have memory, they remember certain price-levels where the price had difficulties to break below in the past.

They place their buy orders around those levels, as they believe that the price will again fail to break below. This is how support levels are formed.

In other words, a support level is a previous low at which the price has a large chance to retrace and move up. While support levels are based on previous lows, resistance levels track previous highs at which the price had difficulties to break above. Traders remember those levels and place their sell orders around them, as they believe that those levels will again provide selling pressure and move the price down.

Since fresh memory is more important than old memory, recent support and resistance levels usually have a higher importance than old support and resistance levels. The Forex market is open around the clock and offers traders to profit not only on rising prices, but also on falling ones.

However, there is another reason why a large number of traders feel attracted to the Forex market — leverage. Trading on leverage allows traders to open a much larger position size than their initial trading account size would otherwise allow, and the Forex market is known for extremely high leverage ratios offered by retail brokers.

However, bear in mind that trading on extremely high leverage is very risky, as it boosts not only your profits, but also your losses. Beginners should consider trading on a lower leverage until they gain enough experience and screen time. This will reduce losses and make sure that you stay in the game in the long run. Learn more, take our Trading for Beginners course 14 Margin When trading on leverage, your broker will allocate a portion of your trading account size as the collateral for the leveraged trade.

The position size you take on the market determines the size of your profits and losses in dollar value by affecting the value of a single pip. In this post we go through the ten most commonly used and misunderstood trading slang terms and what exactly they mean. NOTE: Get the Free Forex Terminology PDF Download Below. A pip in the Forex market is a common measurement for how far the price has moved.

Whilst most brokers these days go to the fifth decimal, a pip movement is the fourth decimal. For example; 0. The image below shows where you can see the pip amount in your MT4 and MT5 order window. The spread is the difference between the bid sell and ask buy prices. This difference is the spread you will pay when making your trades.

This is crucial for you to understand because each market and Forex pair will have hugely varying spreads. The spread can severely cut into your trading profit or loss depending on a number of factors. These include the market you are trading and the type of strategy you are using. Another huge factor is the broker you are using. If you are not using a broker with small spreads , then you can often be paying far too much just to make your trades.

The bid and ask prices can vary widely depending on what market or Forex pair you are trading. The exchange rate is often simply called the price, since it shows the price of the base currency expressed in terms of the counter-currency.

A rise in the exchange rate of a currency pair shows that the base currency is appreciating against the counter-currency or that the counter-currency is depreciating against the base currency. Similarly, a fall in the exchange rate shows that the base currency is depreciating against the counter-currency or that the counter-currency is appreciating against the base currency. At any given moment, each currency pair has two exchange rates or prices — the bid price and the ask price.

The bid price is the price at which buyers are willing to buy, while the ask price is the price at which sellers are willing to sell. Given its nature, the bid price is always lower than the ask price. In the end, buyers buy at the ask price, and sellers sell at the bid price. This means that each price plotted on your chart represents the market equilibrium at that point of time — the price at which the majority of market participants are willing to transact.

Each time you enter into a trade, you have the pay transaction costs for that trade. Swing traders and position traders who have a longer-term approach to trading are less affected by the spread as they open a smaller number of positions and have relatively higher profit targets. A pip is short from Percentage in Point and represents the smallest increment that an exchange rate can move up or down.

Usually, one pip equals to the fourth decimal of most currency pairs. However, some currency pairs have their pips located at the second decimal place, mostly yen-pairs. A pip represents the fourth decimal place of most currency pairs, but there is an even smaller increment that prices can change.

Going long simply means to buy, while going short means to sell. In equity markets, most traders are long in anticipation of rising prices.

However, in derivative markets, such as options and futures, there is always an equal number of longs and shorts in the market, because each new contract that is bought needs a corresponding seller who needs to go short, and vice-versa. Since retail Forex is mostly traded with CFDs , traders are able to bet both on rising prices and falling prices. Support and resistance are one of the most important concepts in technical analysis. Technical traders analyse only price-moves as they believe that the price reflects are available fundamental information, and support and resistance trading plays an important role in that analysis.

The markets are made of crowds of people that speculate, hedge, trade, invest or gamble in the markets. Since people have memory, they remember certain price-levels where the price had difficulties to break below in the past. They place their buy orders around those levels, as they believe that the price will again fail to break below.

This is how support levels are formed. In other words, a support level is a previous low at which the price has a large chance to retrace and move up. While support levels are based on previous lows, resistance levels track previous highs at which the price had difficulties to break above. Traders remember those levels and place their sell orders around them, as they believe that those levels will again provide selling pressure and move the price down.

Since fresh memory is more important than old memory, recent support and resistance levels usually have a higher importance than old support and resistance levels. The Forex market is open around the clock and offers traders to profit not only on rising prices, but also on falling ones. However, there is another reason why a large number of traders feel attracted to the Forex market — leverage. Trading on leverage allows traders to open a much larger position size than their initial trading account size would otherwise allow, and the Forex market is known for extremely high leverage ratios offered by retail brokers.

However, bear in mind that trading on extremely high leverage is very risky, as it boosts not only your profits, but also your losses. Beginners should consider trading on a lower leverage until they gain enough experience and screen time.

Those are basic terms of the Forex market that all traders need to know. While this list is not all-inclusive, it covers the 15 most common terms regularly used by Forex traders. Some sources refer to currencies as a system of money used among people in a nation.

The United Nations currently recognise currencies that are used in countries across the world. Some examples of currencies are the US dollar, the Euro, the British pound and the Japanese yen, which all act as a store of value and which are traded on the global foreign exchange market Forex. Just like other assets, the forces of supply and demand determine the value of a currency relative to another currency. Increased supply of a currency sinks its value, while increased demand pushes its value up.

Check out: 9 of the Best Forex Currency Books to Become a Forex Expert. Each time we place a trade in the market, we have to trade on currency pairs. Currency pairs consist of two currencies — the first one is the base currency and the second one the counter-currency. In general, currency pairs can be grouped into major pairs, cross pair, and exotic pairs. Major pairs are currency pairs that include the US dollar as either the base currency or counter-currency and one of the other seven major currencies EUR, CAD, GBP, CHF, JPY, AUD, NZD.

Cross pairs, on the other hand, include any two major currencies except the US dollar. Unlike major pairs, cross pairs have higher transaction costs and, at times of lower liquidity, traders can face slippage. Cross pairs are also usually more volatile than major pairs. Finally, exotic pairs include exotic currencies which are not in the Top 10 of the most traded currencies, such as the Mexican peso, Turkish lira or Czech koruna.

Since those currencies can be extremely volatile, they should be left to be traded by the pros. The exchange rate of a currency pair is what all traders follow. The exchange rate is often simply called the price, since it shows the price of the base currency expressed in terms of the counter-currency. A rise in the exchange rate of a currency pair shows that the base currency is appreciating against the counter-currency or that the counter-currency is depreciating against the base currency.

Similarly, a fall in the exchange rate shows that the base currency is depreciating against the counter-currency or that the counter-currency is appreciating against the base currency. At any given moment, each currency pair has two exchange rates or prices — the bid price and the ask price.

The bid price is the price at which buyers are willing to buy, while the ask price is the price at which sellers are willing to sell. Given its nature, the bid price is always lower than the ask price. In the end, buyers buy at the ask price, and sellers sell at the bid price.

This means that each price plotted on your chart represents the market equilibrium at that point of time — the price at which the majority of market participants are willing to transact.

Each time you enter into a trade, you have the pay transaction costs for that trade. Swing traders and position traders who have a longer-term approach to trading are less affected by the spread as they open a smaller number of positions and have relatively higher profit targets. A pip is short from Percentage in Point and represents the smallest increment that an exchange rate can move up or down.

Usually, one pip equals to the fourth decimal of most currency pairs. However, some currency pairs have their pips located at the second decimal place, mostly yen-pairs. A pip represents the fourth decimal place of most currency pairs, but there is an even smaller increment that prices can change. Going long simply means to buy, while going short means to sell. In equity markets, most traders are long in anticipation of rising prices.

However, in derivative markets, such as options and futures, there is always an equal number of longs and shorts in the market, because each new contract that is bought needs a corresponding seller who needs to go short, and vice-versa. Since retail Forex is mostly traded with CFDs , traders are able to bet both on rising prices and falling prices. Support and resistance are one of the most important concepts in technical analysis.

Technical traders analyse only price-moves as they believe that the price reflects are available fundamental information, and support and resistance trading plays an important role in that analysis. The markets are made of crowds of people that speculate, hedge, trade, invest or gamble in the markets.

Since people have memory, they remember certain price-levels where the price had difficulties to break below in the past. They place their buy orders around those levels, as they believe that the price will again fail to break below. This is how support levels are formed.

In other words, a support level is a previous low at which the price has a large chance to retrace and move up. While support levels are based on previous lows, resistance levels track previous highs at which the price had difficulties to break above. Traders remember those levels and place their sell orders around them, as they believe that those levels will again provide selling pressure and move the price down.

Since fresh memory is more important than old memory, recent support and resistance levels usually have a higher importance than old support and resistance levels.

The Forex market is open around the clock and offers traders to profit not only on rising prices, but also on falling ones. However, there is another reason why a large number of traders feel attracted to the Forex market — leverage. Trading on leverage allows traders to open a much larger position size than their initial trading account size would otherwise allow, and the Forex market is known for extremely high leverage ratios offered by retail brokers. However, bear in mind that trading on extremely high leverage is very risky, as it boosts not only your profits, but also your losses.

Beginners should consider trading on a lower leverage until they gain enough experience and screen time. This will reduce losses and make sure that you stay in the game in the long run. Learn more, take our Trading for Beginners course 14 Margin When trading on leverage, your broker will allocate a portion of your trading account size as the collateral for the leveraged trade.

The position size you take on the market determines the size of your profits and losses in dollar value by affecting the value of a single pip. In the Forex market, one standard lot standard position size equals to Fortunately, traders with smaller account sizes can take smaller trades with mini-lots Some brokers even allow you to trade on nano-lots units of the base currency. In any case, calculate your lot size in dependence of the size of your stop-loss so that you remain inside your risk-management boundaries.

So, you want to become a day trader and join the hundreds of thousands of day traders who are living in the UK? Then this…. Day trading is one of the most popular trading styles in the Forex market. However, becoming a successful day trader involves a lot of blood,…. Want to day trade for a living? Online trading allows you to trade on financial markets from the comfort of your home.

All you need to start trading is a computer with…. Next: Step 2 of 4. Phillip Konchar April 25, Read: How Do Forex Brokers Make Their Money Naughty Broker Practices you Should Take Note Of Some Cool Forex Trading Examples 7 Spread Each time you enter into a trade, you have the pay transaction costs for that trade.

Get started in trading. We encourage you to learn more by starting with these: Take our free course: Getting Started with Charts Take our free course: How Traders Interact with the Markets Take our premium course: Trading for Beginners. For example. A leverage allows a trader to open a position that is a hundred time larger than their initial deposit. Learn more, take our Trading for Beginners course.

Categories: Industry. Phillip Konchar. Related Articles. Joe Bailey October 8, Phillip Konchar June 2, Joe Bailey September 29, Phillip Konchar August 28, Phillip Konchar July 16, Forex Leverage: The Risks and Rewards of Leverage in Forex Trading — Finance High Tech — Investing and Stock News September 30, Request a Free Broker Consultation.

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