Forex Lingo
What does BID mean?
t is the rate at which a trader would need to purchase a currency of choice.
What does OFFER mean?
It is the rate at which a trader would need to sell a currency of choice.
The difference between the above mentioned BID and ASK price is what is called as the SPREAD. Some refer to it as the brokerage or commission.
But if the broker make the profit from the spread then they make no commission generally.
The BASE or BASIC CURRENCY is the currency with which another currency is quoted.
A BULL MARKET refers to a market where the price is rising on the currency pair being discussed.
A BEAR MARKET refers to a market where the price is declining on the currency pair being discussed.
Some other important terminologies are explained below:
BOTTOM:
A bottom is the description of a price that is declining but meets heavy support and stops it from any more of a price decline.
CROSS RATES:
Cross rates refers to any currency pair where the US Dollar is not included. Examples are GBP/EUR or GBP/JPY etc….
MARGIN:
A Margin refers to money deposited which is mandatory to cover any chance of loss the trader may face when trading at the foreign exchange
MARGIN CALL:
Margin call means usually more money that would be required, to make up the minimum cash deposit needed to cover any more losses the trader may face when trading at the foreign exchange market.
VOLATILITY:
Volatility is simply just the reference to the relatively larger price fluctuation that takes place in the market. One can see volatility almost daily, but you can see major volatility specially on days of News announcements.
CABLE:
When the steel cable was connected under the Atlantic in 1850 thus linking USA with UK enabling telegraph transmission between the London and New York Exchanges, it was called ATLANTIC CABLE. Satellite and optic cables are now used, and the word CABLE refers to GBP/USD currency pair rate
Of course there are a hundred more terms that one can come across in the foreign exchange currency business, but later on our site you will see the rest of it. For now the basics are what you need know.
PIPS
It is very simple to understand what a pip is. The smallest movement that is possible in the price of any currency either upwards rising or downwards declining is called a pip. It's a point in price and this simple movement in price is what can give you profits or losses. It is multiplied exponentially with the amount you stake up and the leverage you get from your broker. The higher the leverage you take the higher you can earn or lose money.
A pip generally, is 0.0001 in value relative in price so it is 0.01% in percentage terms. Sometimes this is not as given above because we deal with currencies like the Yen where the decimal point is another location altogether. One example to show this is if a currency moves from a price of 1.4431 to 1.4432 it is said to rise 1 pip.
For any standard trading lot involving the US Dollar as the opposite or counter currency a pip would usually have a value of ten dollars, however when the US Dollar is the main or base currency, pip values will change along with the market price. Be sure to check with your broker on this, to understand the fundamentals of the market. Most Forex trading software have a help section where they will show you an example of PIP according to their own software.
