Some Important Forex Terms that You Need to Know

Forex Trading contains some terms that you need to know in order to make your activity is easier. Some essential terms in Forex Trading are like the forex broker, Real and Demo Account, leverage and many more. Below is the further explanation about each of those terms.

1. Demo Account and Real Account

Before doing the Forex Trading straightly, you can test the performance of a broker and its ability by using its demo account. This demo account is usually free. In this account, you can trade with the un-real money. It means that profit and loss will not make you lose your money or get the real money. If you felt that you are ready enough to do the real forex trading, you can start to open or create the real account. Usually you need to do some required deposit that will be used in a real buy and sell transaction where the profit that is gotten can be withdraw to your bank account.

2. Metatrader

The trading activity is done through software (special trading platform). Mostly the platform that is used is Metatrader or MT. The newest version is MT5, but the MT4 version is still good and stabile enough.

3. Technical Analysis

It is a way to decide the market movement by doing a study of the past data by using mathematic formula.

4. Fundamental Analysis

It is a way to decide the market movement by analyzing the politic and economic issues of a country. It is because those issues are taking a special role in moving or deciding the currency’s movement.

5. Pair

Pair is the currency pair that is traded. The example is EUR/USD which means the currency pair of Euro and US Dollar.

6. Lot

Lot is transaction unit in forex. The standard size of lot is $100,000. The mini lot is $10,000 and mikro lot is $1000.

7. Pips

Pips or Price Interest Points is a unit that is used to calculate the price change or we can say it as the profit and loss calculation.

8. Leverage

For every 1 transaction lot, trader must have at least $100,000. This is a huge amount and it can be a serious obstacle for the retail trader with limited fund. Leverage is leverage with the fraction of capital trader can use 1 lot.

9. Money Management

Money management is an important part that takes role for a trader’s succeed. Forex trading has a high risk and we need a management to manage that risk. The aim is to press and decrease the loss. Some factors that need to be considered in this money management are like the capital amount, account types, lot size, trading frequency and risk exposure.

10. Forex Broker

Forex broker is a company that acts as a connector between trader and world money market. Through this broker, trader can do the online buy and sell transaction. Broker is also a place where trader opens the trading account, sending the deposit, doing the buy and sell transaction and withdrawal.