The forex market, like many other specialized professional sectors, has evolved and widely used a collection of short words or phrases known as forex trading jargon terminology.
Some of these specialized jargon terms are also used by dealers in other financial sectors, while others are almost exclusively used in foreign currency trading.
The two sections that follow define a core set of jargon that is commonly used when people trade forex. They are divided into two categories. The first section comprises words that are commonly used by professional traders, while the second section contains phrases that are more commonly used by retail forex traders who utilize online forex brokers to complete deals.
The following are some key forex jargon phrases that are often employed in professional forex trading situations:
Bid – The exchange rate at which a market maker is willing to buy a currency pair’s base currency.
Going Long – This word refers to the acquisition of a currency pair in which the base currency is purchased and the counter currency is sold.
Going Short – Going short is the counterpart of going long, and it entails selling the base currency and buying the counter currency.
Offer – The exchange rate at which a market maker is ready to sell a currency pair’s base currency.
Pip – The smallest price fluctuation allowed in a forex transaction is represented by this symbol, which stands for “Percentage in Point.” The final decimal of a currency pair’s stated exchange rate is called a pip, and it is equivalent to 0.0001 for most currency pairings. It’s also known as a “point.”
Spread – The spread is the gap between a market maker’s bid or buy price and his or her offer or sale price. The tighter the market maker’s bid-offer spread, the better the pricing seems to their consumer.
Smaller retail forex traders trading through online forex brokers would very certainly come across the following retail forex dealing jargon phrases, in addition to the majority of the terms used by professional forex dealers:
Leverage – The ratio of the amount of money you’ll need on deposit for a specific transaction size. It is expressed as a ratio. An example of such is 1:50. This means that you need $100 to open a trade of $5,000.
Lot Size – A forex broker account’s minimum trading unit. Standard accounts have a lot size of 100,000 base currency units, Mini accounts have a lot size of 10,000 base currency units, and Micro accounts have a lot size of 1,000 base currency units.
Margin – the required amount that a trader must deposit in order to trade forex. To trade a forex position with a $5,000 notional value, you’ll need $100 in margin on deposit if your leverage ratio is 1:50.