To learn Forex trading concepts is similar to learning a new language. It goes easy and smooth to understand the concepts better after learning some basic terms in Forex trading. Here are some of the basic terms and concepts defined to learn Forex trading well.
What is Forex trading?
Forex is a short form used for the term “Foreign Exchange”. Forex trading means buying and selling of foreign currency in the Foreign exchange market which is done specially by the investors, trading institutions and speculators. Buy low and sell high are the frequently used expressions in the field of Forex trading. It is a typical scenario in this market when a seller purchases foreign currencies when they are undervalued and sells currencies if they are overvalued. It is the similar thing like a stock market.
How to read a currency quote?
Since you have to compare the rate of one currency with the another, the Forex rate is quoted in currency pairs. It is a straightforward thing. For example EUR/USD at 1.41 shows the worth of 1 Euro in terms of US dollars. There are many currency pairs available to speculate in the currency market but only some of them provide a good liquidity and are termed as major currency pairs.
What does a LOT mean?
It is the smallest size of trade available with a trade provider such as XFR Financial Ltd. Standard lot size is around 1000 units. And the traders can trade with the increments of the these lots like 2000, 3000, 20000 etc.
XFR Financial Ltd Explains Leverage /Margin
One of the first things XFR Financial Ltd will teach you is that you can take the advantage of leverage where you can trade with higher amounts by using only a small amount of money as a deposit. For example if your leverage is 400:1 then you can trade with 1000 USD in market but set aside only 2.5 as a security deposit. This means that you can take the advantage of small movements in the market by trading with more money in the market than you have in your account. It is a good thing but your losses can be increased due to leverage if the movement goes negative to what you expected. Therefore investors have to take the benefit of leverage but up to a certain level only.
Margin is the specific amount of money which has to be put aside to hold a position through leverage. Margin is a good faith deposit which is required to maintain the open positions. It is not a fee or a transaction cost. It is simply a part of your account equity which is kept as a margin deposit.
Learn Forex trading above and beyond – read online tutorials
There are a variety of online tutorials and articles available at XFR Financial and online to learn Forex trading more. They describe many important concepts and terms needed to understand Forex trading and get the most benefit out of this kind of trading. We have explained some basic terms here to get an introduction to Forex trading.