foreign money exchange
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FOREX versus Stocks
By David Greene
Stocks have been a popular investment for hundreds of years. Companies issue stocks to raise capital for expansion and new projects, and each share of the stock represents a partial Read more...
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Forex Trading
By Charles Fuchs
Forex trading has been growing rapidly among day traders since the 1990s, as day traders have seen the advantages that trading currencies can have over trading stocks. However, since there are fewer Read more...
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FOREX Trading Philosophy
By David Greene
Numerous beginning FOREX traders are enamored by the allure of effortless money. FOREX websites offer 'risk-free' trading, 'high returns' and 'low investment' . These claims have Read more...
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FOREX Glossary
By David Greene
Here are some of the most common terms used in trading forex.
Ask Price - Sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote, e.g. EUR/USD 1.1965 / 68 means that one Euro can be bought for 1.1968 US dollars.
Bar Chart - A type of chart used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information, the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.
Base Currency - This is the first currency in a currency pair. A quote shows how much the base currency is worth in the quote (second) currency. For example, in the quote - USD/JPY 112.13 , US dollars are the base currency, with 1 US dollar being worth 112.13 Japanese yen.
Bid Price - is the price a trader can sell currencies. The Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1965 / 68 , means that one Euro can be sold for 1.1965 US dollars.
Bid/Ask Spread - is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.
Broker - the intermediary between buyer and seller. Most FOREX brokers are associated with large financial institutions and earn money by setting a spread between bid and ask prices.
Candlestick Chart - A type of chart used in Technical Analysis. Each time division on the chart is displayed as a candlestick ? a red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the chart division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening price, and green candlesticks indicate the price is rising.
Cross Currency - A currency pair that does not include US dollars, e.g. EUR/GBP.
Currency Pair - Two currencies involved in a FOREX transaction, e.g. EUR/USD.
Economic Indicator - A statistical report issued by governments or academic institutions indicating economic conditions within a country.
First In First Out (FIFO) ? refers to the order open orders are
liquidated. The first orders to be liquidated are the first that were opened.
Foreign Exchange (FOREX, FX) - Simultaneously buying one currency and selling another.
Fundamental Analysis - Analysis of political and economic conditions that can affect currency prices.
Leverage or Margin - The ratio of the value of a transaction to the required deposit. A common margin for FOREX trading is 100:1 - This means that you can trade currency worth 100 times the amount of your deposit.
Limit Order - An order to buy or sell when the price reaches a specified level.
Lot - The size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.
Major Currency - The Euro, German Mark, Swiss Franc, British Pound, and the Japanese Yen are the major currencies.
Minor Currency - The Canadian Dollar, the Australian Dollar, and the New Zealand Dollar (called the Kiwi) are the minor currencies.
One Cancels the Other (OCO) - Two orders placed simultaneously with instructions to cancel the second order on execution of the first.
Open Position - An active trade that has not been closed.
Pips or Points - The smallest unit a currency can be traded in.
Quote Currency - The second currency in a currency pair. In the currency pair USD/EUR the Euro is the quote currency.
Rollover - Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using swap points based on interest rate differentials.
Technical Analysis - Analysis of historical market data to attempt to predict future movements in the market.
Tick - The minimum change in price.
Transaction Cost - The cost of a FOREX transaction. This is typically the spread between bid and ask prices.
Volatility - A statistical measure indicating the tendency of sharp price movements within a period of time.
Whew! That should be enough to get you started.
Don't forget that in trading "profit" means you sold a currency for more than you paid for it, or that you bought a currency back for less than you sold it for. In it doesn't really matter if a market is going up or down as long as you are on the right side of the trade.
David is a retired commodity futures and forex trader who now lives in Thailand taking it easy after over 20 years of trading fun and excitement.
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