Basic Forex Terms You Need to Know
If you’re going to get into the world of Forex trading, then you will need to know a few terms, on order to be successful. If you don’t learn these terms you will find yourself lost and you are guaranteed to LOSE money without this basic knowledge.
The first term you need to know is “ currency pairs” or just “pairs”. A pair is the term used to describe the two currencies that are active in the trade. So if the trade is between USD and JPY, then USD/JPY would be the pair. That is fairly simple, but you still need to know it.
You’ll also need to know about Minor and Major currencies. The seven major currencies that are frequently traded are: EUR, USD, JPY, GBP, CHF, CAD, and AUD. All of the other currencies being traded are considered Minor currencies. Among the more popular Minor currencies are the SGD, NZD and ZAR.
You will also need to know what a base currency is . A base currency is the currency in a pair that is listed first, when being measured against each other. I.E. – USD/EUR = 0.717600
In this example USD is the base currency, this is telling you that 1 USD is worth 0.717600 EUR.
The next term you should know is “Cross Currency”. A cross currency is a currency pair that does not include the USD. A pair of this nature usually experiences a more complicated trade, because the trade first has to go through the USD, thereby causing 2 extra trades to complete the transaction. Meaning, if you were to initiate a CHF/AUD you’re really purchasing a CHF/USD pair, while also selling a AUD/USD. Therefore the cost for the transaction usually is higher for this type of trade.
The last basic term I will teach you about is a PIP. PIP means Percentage In Point. A PIP is the tiniest possible number change for any currency. For example if the number changes from 0.0001 to 0.0002 then that was 1 PIP. PIP’s are often used to describe fluctuations in the market on smaller scales.
If you want know more about Forex Trading, then be sure to read all of the free info on this site. The best way to keep track of your Forex Trading is with a Forex program called a bot. The best Forex Bot on the internet is by far the Forex Gridbot. If you’re looking for a program that can handle all of your Forex needs while you sleep then this is definitely it.
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