October 27, 2010
Forex trading………..?
By Planet Wealth
Anyone please clarify the terms like pips,leverage and others in forex trading in one or two lines..not in huge paragraphs..
Topics: trading tips | 7 Comments »
7 Responses to “Forex trading………..?”
Comments
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October 27th, 2010 at 12:44 pm
Leverage
The ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as ‘gearing’.
Pip
The smallest unit of trading in a foreign currency price.
Question
The quoted price at which a customer can buy a currency pair. Also referred to as the ‘offer’, ‘question price’, or ‘question rate’.
Bid
The quoted price where a customer can sell a currency pair. Also known as the ‘bid price’ or ‘bid rate’.
Margin / Security Deposit
The amount of money needed to open or maintain a position.
More terms at http://www.forex2u.com/glossary-forex-terms.html
October 27th, 2010 at 12:44 pm
See the basics tutorial at http://www.forexlane.com for an introduction to all the terms in the forex market. There is also an explanation on the more complex technical and fundamental strategies.
October 27th, 2010 at 12:44 pm
Pips are the monetary units used to describe price movement. When you enter the market and make a trade you either make money or lose money. It is measured in pips. Leverage is the ability to control large amounts of money by putting up small amounts of money..i.e..use $100 to control $10,000. Some brokers allow you to use your small account to control transaction amounts that are larger by a factor of 10 or 100. This means you can either win huge or lose huge. Forex trading requires study to know the lingo but once you do it is not hard to get started.
October 27th, 2010 at 12:44 pm
i guess it would be better if you read an ebook instead. you will learn forex on a wider coverage. you can get one free from this source. all the best.
October 27th, 2010 at 12:44 pm
Hi,
There are few concepts and rest you can find in the link below:
Leverage: Leverage is used to trade the forex market’s day to day very small movements. Most trading platform enables a yield of profits from a relatively small amount: an initial investment of $100 at a 200:1 leverage, generates yields from an amount of $20,000. With leverage, a .5% rise in the rate of a currency turns to a profit of 100% on your initial deposit amount!
Margin: The concept of leverage increases the trader’s initial investment, or margin, by hundreds of percent. This initial sum is considered a deposit in "excellent faith" which establishes the ratio of leverage, and helps the trader withstand his losses, which, in any case, cannot be higher than the sum of the margin.
Pips: The smallest changes in currency rates are measured by Pips. Since the Forex Market is characterized by relatively small fluctuations, the pip is, in most cases, the fourth digit after the decimal point. Yet in some currencies, such as the Japanese yen, the pip is the second digit after the decimal point. By using pips, the difference between the question and bid prices can be measured at any given time, as well as the daily volatility of these values, which ultimately determines profit or loss.
Market Order: This order is the most common order in the forex world, and it is used by dealers in order to trade instantly – sell or buy –at the current market price. This order is used by traders interested to quickly merge with the market’s steep rise, or to leave quickly when the market is at an extreme weakening trend.
October 27th, 2010 at 12:44 pm
one pip is – the fourth decimal place in a price of a currency pair (ie 0.0001), so 0.8608 – 0.8601 bid/offer prices have here 7 pip spread.
leverage is- the amount of multiples of your deposit that you are trading. eg $1000 = $100,000 worth of leveraged cash you are potentially trading with at 1:100
Hope it helps!
October 27th, 2010 at 12:44 pm
Many new traders will place very tight orders in order to take very small profits. This is not a sustainable approach because although you may be profitable in the small run (if you are lucky), you risk losing in the longer term as you have to recover the difference between the bid and the question price before you can make any profit and this is much more hard when you make small trades than when you make larger ones. Like the trader who tries to take small incremental profits all the time, the trader who places tight stop losses with a retail forex broker is doomed. As we stated above, you have to give your position a honest chance to demonstrate its ability to produce. If you don’t place reasonable stop losses that allow your trade to do so, you will always end up undercutting yourself and losing a small piece of your deposit with every trade.