Here are the top 6 Forex terms every trader should know

The Forex trading market is very diverse and full of different types of terms, words, names, and concepts that are many times a little harder to understand for beginners. When you are new to this market, everything seems even more confusing than it already is.

So, to make your job a lot easier in Forex trading, we have decided to create comprehensive guides to some of the most important terms in Forex trading. Follow us as we discover everything that there is to know about Forex trading and the terminology that every trader should know.

Leverage in Forex trading

Forex leverage explainedFor many, leverage represents one of the most important parts of Forex trading. Leverage in Forex is the borrowed money from the broker that traders can use to increase the size of their positions. Trading with high leverage is favored by many traders, but there are a lot of risks involved. In general, it is recommended to avoid using leverage higher than 1:100.

Leverage can be very helpful for specific types of traders. For example, if you are using a scalping strategy, trading with leverage is a good idea because it will increase your turnover. Leverage should be used by traders very carefully because it comes with some challenges and risks.

Swap in Forex trading

In Forex trading, the swap is a certain type of agreement to exchange currency between two foreign parties. A very interesting thing about swaps is that they do not occur during the trading day, because of which, short term Forex traders do not have to think about it at all. However, if you are leaving your positions open overnight, you should take your time to understand swaps. There are several different types of swaps available in this market, you can learn more about Forex trading swaps here.

Spreads in Forex trading

Swap in ForexSpreads are one of the main sources of income for Forex brokers. They are some type of a commission that you pay to Forex broker when you are enjoying their services. While trading Forex, the main type of spread that you will be dealing with is the Bid/Ask spread. The bid price, in Forex, is the buying price of the currency while the ask price stands for selling.

Lot in Forex trading

Lot in Forex trading is the size of the position that you open. In Forex, the standard lot stands for 100,000 units of the base currency. There also are different types of lots available in the market, click here to learn exactly how Lot works in Forex trading.

Pip in Forex trading

Pip stands for Percentage in Point, it is a measure of the minimum price change of the currency pair. There are two types of pips available in Forex, regular pip, and nano pip. 1 pip equals 0.0001, while 1 nano pip equals 0.00001. For most of the currency pairs, 1 pip stands for 0.0001, on the other hand, for JPY currency pairs, 1 pip is 0.01.

CFDs in Forex trading

CFDs trading ForexCFDs stand for the Contract for Differences. It is a very popular way of trading. Thanks to CFDs, you can trade different types of assets without the need to actually own them.

While trading CFDs, investors are able to trade in the price movements of different types of assets. Click here to learn more about trading CFDs.

Final thoughts of Forex trading terms

Forex trading is the biggest market around the world, and there are a lot of things that go into this market. We have decided to create pages about different types of Forex trading terms to make Forex trading a lot easier for beginners. So, follow our guides and learn everything that there is to know about Forex trading terms.