Forex Trading Concepts

These flashcards contain vocabulary terms and definitions related to Forex trading concepts.

Forex

Also known as foreign exchange or currency trading, Forex is one of the most traded markets in the world.

Currency Pair

Currencies are always traded in pairs, allowing traders to speculate on the value of one currency compared to another.

Bid Price

The price at which a trader would sell (or the broker is willing to buy) the first named (base) of a currency pair.

Ask Price

The price at which a trader would buy (or the broker is willing to sell) the first named (base) of a currency pair.

Pip

A value of price change that is typically the second to last decimal in currency pairs.

Point

The minimum value of price change, which is the last decimal.

Spread

The difference between the current Ask and Bid prices of an instrument, representing the main profit of a market maker broker.

Leverage

The ability to control a larger amount in the market with a smaller amount of capital.

Margin

The amount of money needed as security to open a position with a broker.

Equity

The amount of funds remaining in an account if all open orders are closed.

Profit/Loss

The financial result of a transaction, calculated in the quote currency.

Trading Volume

The total size of trades measured in lots and determined by the number of lots multiplied by the contract size.

Contract Size

A fixed value that denotes the amount of base currency in one lot, typically 100,000 units for standard lots in Forex.

Buy Position

A position opened at the Ask Price and closed at the Bid Price, considered profitable if the price moves up.

Sell Position

A position opened at the Bid Price and closed at the Ask Price, considered profitable if the price moves down.

Pip Value

Calculated as Lot size x Contract size x Pip size, indicating the monetary value of one pip.