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Capital Investor Forex Terminology

 Trading Forex Glossary

Here is the basic terminology regarding the Forex market that every capital investor should be aware.

 

What is Bid / Ask Price

 

All Forex pairs are quoted with two prices: the bid and the ask price. The bid price is the price at which a Forex broker is willing to buy and thus a Trader can sell a currency at that price. The ask price, is the price at which a Forex broker is willing to sell and thus a Forex Trader may buy at that particular price.

 

What ist he Forex Spread

 

The spread which is measured is pips is the difference between the bid and the ask price of a Forex currency pair. Narrow spreads are better for Forex traders. Popular Forex pairs and especially EUR/USD are enjoying lower spreads than other unpopular pairs. A typical spread on EUR/USD for example is 1.2 pip.

 

What is Pip

 

A pip is the minimum incremental move of any Forex currency pair. For example, a pip is equal to a EUR/USD movement from 1.3500 to 1.3501.

 

 

FXCC Forex Trading

 

What is Trading Leverage (Margin)

 

In a typical financial market, a capital investor in order to execute a trade worth $1,000 he must first deposit $1,000. This is not the case in the Forex market. In the Foreign exchange market, an investor can execute a trade only by depositing a small part of the value of the trade which is called MARGIN. The ratio between the value of the margin required and the value of the trade is called LEVERAGE. A typical trading leverage when trading Forex is 100:1, but some brokers are offering leverage up to 500:1. A trading leverage of 100:1 means that only 1% margin is required in the investor’s account balance in order to open a position of 100%.

 

What is Forex Lot

 

A lot is the smallest size in Forex trading. For USD-based currency pairs, the lot size is 100,000. That means that the smallest amount that you can buy or sell is 100,000, regardless the size of the margin. The smaller your lot size, the more flexible you can be when it comes managing your trades. A lot is categorized according to its size as follows:

1) Micro Lots (essential for the beginner capital investor)

A micro lot is the smallest tradable lot of 1,000 units of a currency. If a trading account is funded in USD then a micro lot worth $1,000 of the base currency. Thus when trading a US dollar based pair, 1 pip is equal to 10 cents.

2) Mini Lots (essential for the middle-exprerianced capital investor)

A mini lot is 10,000 units of the trading account funding currency. In a US dollar based account, each pip worth $1.

3) Standard Lots (Pro Capital Investor)

A standard lot worth 100,000 units. In a US trading account a standard lot worth $100,000. The typical pip size in a standard lot account worth $10.

 

» FAQ for Forex Beginners at OnlineForex.biz

» FSA UK Forex Regulator

» CFTC US Regulator

 

More on Forex: » Forex for Beginners | » Currency Trading | » Forex Tips | » Rating Brokers | » Compare Brokers

 

Capital Investor

Capital Investor’s Forex Trading Terminology

Forex Trading for Beginners

One of the favorite market of every capital investor is the Foreign Exchange Market. The Foreign Exchange Market which is also called as the Forex or the Fx market is a huge financial market with daily market volumes of $3-4 trillion. The Forex market is the larger and more liquid financial market in the world.

 

Forex Market History

The Forex Market began during the 1970s after 30 years of government restrictions regarding the foreign exchange transactions. The Forex market begun after the end of Bretton Woods Agreement which actually became a global monetary system for 30 years. The Forex market was born as the world's major countries gradually switched from fixed currency rates (Bretton Woods) to floating exchange rates.

 

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Forex Market Characteristics

1) Continuous 24-hour operation, 5 days per week (Operating from Sunday 20:15 GMT to Friday 22:00 GMT

2) Large size and enormous liquidity

3) Wide geographical distribution

4) Low margin requirements and high capital leverage

 

Forex Market Participants 

Many different types of investors are operating within the Forex Market: 

1) Central Banks

2) Commercial Banks

3) Global Trade Companies

4) Forex Brokers

5) Institutional Investors

6) Retail Traders

 

Central Banks: US Federal Reserve | European Central Bank | Bank of Canada | Bank of England | Bank of Japan | Reserve Bank of Australia | Swiss National Bank

 

Forex Market Trading Sessions 

There are three main Forex sessions for the winter time zone and three for the summer time zone: 

Forex Time Zone

GMT (open-close)

EST (open-close)

Winter Time Zone (October to April)

 

 

New York

1:00 PM
10:00 PM

8:00 AM
5:00 PM

London

8:00 AM
5:00 PM

3:00 AM
12:00 PM

Tokyo

12:00 AM
9:00 AM

7:00 PM
4:00 AM

Summer Time Zone (April to October)

 

 

New York

12:00 PM
9:00 PM

8:00 AM
5:00 PM

London

7:00 AM
4:00 PM

3:00 AM
12:00 PM

Tokyo

12:00 AM
9:00 AM

8:00 PM
5:00 AM

 

Forex Volume Analysis 

The daily volumes in Forex are absolutely huge, in a $4 daily trillion volume a typical break-down would be as follows: 

  • $1.765 trillion in foreign exchange swaps
  • $1.490 trillion in spot transactions
  • $0.475 trillion in outright forwards
  • $0.207 trillion in options and similar products
  • $0.043 trillion in currency swaps

Chart: The distribution of Forex daily volumes

 Forex Industry

 

Related Links» Forex Basics at Trading Center | » What-is-Forex.com 

More on Forex» Currency Trading | » Forex Terminology | » Forex Tips | » Rating Brokers | » Compare Brokers

 

Capital Investor

Forex Trading for Beginners

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