Forex Glossary

These are the most traded currencies in the Forex market:
USD - U.S. Dollar, EUR - Euro, GBP - British Pound, JPY - Japanese Yen, CAD- Canadian Dollar, CHF - Swiss Franc, NZD - New Zealand Dollar, AUD - Australian Dollar

Margin trading: Banks always give you the privilege of investing a low amount to play on a much higher amount. It is determined as a percentage of the original value. A margin deposit of 1% means you can operate on one million dollar, provided you deposit just $100

leverage: It is the ratio of investment to actual value. So if you buy a forex contract of $1000 by paying a $10, you are leveraging at 1:100 ratio.

Base currency and variable currency: Forex Trading necessarily means that the currencies have to be exchanged between buying and selling. The buying currency is called as Base currency whereas the selling currency is termed as variable currency.

Online Forex Trading: Trading of Foreign exchanges online using Internet and mainly through various websites, that have emerged in the recent past.

Forex trading software: Software implemented by various companies engaged in diversified activities in Forex trading. Any user registers in an website, where he intends to perform the online forex trading, has to be aware of the security part of the software, they use.

Essential components: The principal amount, the agreed exchange rate and the corresponding currencies to buy and sell.

Ask: The Offer price of the Broker/ the market maker, at which he wants to sell

Bid: The Price, at which the broker/ Market maker wants to buy

Pip: Pips or Ticks are the smallest incremental price in a particular currency

Spread: The difference between the Bid and Ask prices (Buy & sell) of the Market maker. It is measured mostly in pips

Some influencing economic indicators: GDP of a country, Retail Sales of a country, Consumer Price Index

Fundamental Analysis: The price determination based on various market fluctuations.

Limit: Fixation of price as the higher or lower limit, which has to be maintained irrespective of market fluctuations.

Stop Loss: An order to the broker to limit the maximum and minimum price for buy and sell, which implies the 'buy' can take place only after the market reaches a certain threshold limit and sell only if the market falls below the threshold limit. Threshold limits are determined by the original buyer or seller.

Spot Foreign Exchange: traded between two parties mostly the major banks on the spot