Forex Terminology

Base and quote currency: In forex trading, currencies are quoted in pairs, with one currency being the base currency and the other being the quote currency. For example, in the currency pair EUR/USD, the euro is the base currency and the US dollar is the quote currency. The value of the base currency is quoted in terms of the quote currency.

Bid and ask price: In forex trading, the bid price is the highest price a market maker is willing to pay for a currency, and the ask price is the lowest price at which a market maker is willing to sell a currency. The difference between the bid and ask price is known as the spread, which is the main cost of trading in the forex market.

Leverage: Leverage is the ratio of the amount of money that you can trade with to the amount of money you have in your account. For example, if you have a leverage of 100:1, you could trade up to $100 for every $1 you have in your account. This means that you can potentially make larger profits, but also larger losses.

Lots: Lots are the standard unit of trading in the forex market. A standard lot is usually 100,000 units of the base currency. If you want to trade smaller amounts, you can also trade mini and micro lots.

Margin: Margin is the amount of money that you need to have in your account in order to open a new trade. For example, if the margin is 2%, then you need to have at least 2% of the required value of your trade in your account.

Order: An instruction to buy or sell a currency at a specific price.

Pips: Pips are the smallest unit of price movement in a currency pair. For example, a pip may be the difference between 1.2250 and 1.2251.

Position: A trade that is currently open.

Slippage: Slippage is the difference between the expected price of a trade and the price at which the trade is actually executed. It occurs when the market moves suddenly and there is a lack of liquidity to fill the order at the desired price.

Spreads: Spreads are the difference between the buy and sell prices of a currency pair. In other words, the spread is the cost of making a trade. The tighter the spread, the less it costs to make a trade.

Stop loss: An order to close a trade when the market reaches a certain level of loss.

Take profit: An order to close a trade when the market reaches a certain level of profit.

Volatility: The level of price fluctuation in a currency pair.