Beginner Traders Must Understand Basic Terms in the Forex Market, Anything Yes?
A trader in the forex market should continue to learn and know the various developments in the market in order to analyze the market well. Beginner traders who are just entering the market are also required to know well the various terms that exist in forex before they start trading activities.
For this reason, on this occasion we will try to explain to you all about some basic terms and are important to be understood by beginners.
The following is an explanation for all of you.
Spread is a term that refers to the difference between the purchase price and the selling price and is expressed in pips. For brokers or forex brokers, spread is a potential income for them. Therefore, small spreads are more profitable for traders to break even.
The above shows that the spread will greatly affect the income you get on forex trading.
Pips (Percentage in Points) is 4 numbers behind a dot, for example, 1.2345. While the pippette is 5 numbers behind the dot, such as 1, 23879.
When there is an increase in pips, it means that the difference in pips when opening a transaction is higher than when the transaction is closed. This makes you profit from transactions made on the forex market.
Next, there are lots that are standard sizes per transaction. The size of the lot depends on the type of account you use to trade on the forex market. In general, standard accounts have a lot of 100,000 units, 10,000 units for mini accounts, and 1,000 units for micro accounts.
Number of lots is a measure of transactions in forex, meaning that the greater the number of lots, the capital must be large. This of course will make the amount of profit and risk of loss even greater. As a trader, you can see the potential advantages and disadvantages of existing lot sizes.
4. Margin and Leverage
Margin and leverage are aspects of forex that allow a trader to transact in large amounts with minimal capital. This makes traders have a chance to get bigger profits, even if they only have low capital.
If interpreted simply, leverage is a loan that brokers give to traders in the market.Leverage is written using comparison ratios such as 1: 500, 1: 100, or others.That means, if you have funds of USD 100 and use 1: 100 leverage, then the funds that you have have 100 times the purchasing power or the equivalent of USD 10,000.
Furthermore, there is a margin that is a security deposit held by the broker as long as you make transactions on the forex market. The deposit will be returned to the account, when you close the previously opened position.
For example, like this, you use 1: 100 leverage when you trade USD 1,000. So, you only need $ 10 to be held by the forex broker as a guarantee.
Bid Price is the price offered, where the market is willing to buy available currency pairs.
Then there is an ask price which means the desired price and is the opposite term to the bid price .
This term refers to the conditions in which the forex market is experiencing the highest instability. This condition makes the currency move very quickly and suddenly reverses direction.
8. Forex broker
Forex brokers are companies that act as intermediaries between traders and money markets in the world. With the existence of a forex broker, traders can make online, instant, and simple buying and selling transactions. Through this broker, traders will open accounts, make deposits, make forex trading transactions and attract profits.
9. Real Demo and Account Account
Before entering the actual transaction, forex traders need to test the trading platform from a broker and test trading skills on a demo account. Demo accounts will be available and can be used free of charge by traders.
If you are ready to enter and make transactions on the forex market, you can open a real account or account. Do not forget to make a number of deposits required to be used in buying and selling transactions in real. When you get a profit, the fund can be withdrawn to a savings account that you have in the bank.
10. Technical Analysis
Technical analysis is a way that you can use to determine the direction of market movements by paying attention to data in the past and using mathematical calculations. Currently technical analysis is increasingly easy to do with the presence of an indicator of assistance available by Meta.
11. Fundamental Analysis
The last term is fundamental analysis which means a way to determine the direction of market movements by analyzing economic and political news in a country. Current economic, social and political conditions will affect the movement of the value of a currency.
You need to monitor the release of the latest news in order to make the right decision.
Thus 11 terms on the forex market need to be understood by beginners who make transactions on the market. We hope the above explanation can provide you with many benefits and inspiration.