Dissecting Commonly Used Jargons in Forex Trading | Chillicious …
The learning curve for Forex trading can be rather steep especially for those who have no prior experience to trading in any financial market. Even though there are only 30 currency pairs in the currency exchange market, compared to the thousands of stock offerings in the equity market, the numerous methodologies and theories inherent to it can pose a real challenge. Being familiar with commonly used jargons is therefore necessary before you even start speculating on the foreign exchange market. Currency Pair Quotes
When you do preliminary searches regarding Forex trading, you probably came across quotations which show two currencies beside each other. For instance, if you compare the value of the US Dollar against the Japanese Yen, you would see it written as USD/JPY. The 1st item on this quotation is called a quote, the 2nd currency is termed as the base. When you see a USD/CAD quotation = 1.027, it means that every United States Dollar is valued at 1.027 Canadian Dollars.
Going Short, Going Long
These jargons are heard when making a trade. If traders go short, they want to put a currency up for sale. Short positions are taken when the price for a particular currency is expected to fall in value. If investors go long, they are simply buying a security. Therefore long positions mean buying a particular currency with the expectation that its value will rise.
Fundamental analysis vs. Technical Analysis
No other market that facilitates the trading of securities shows the same degree of volatility as the currency market. This is because the rates existing between any currency pair are affected by several factors, economy being one of the most potent. Having said such, speculating on the Forex market requires evaluating important economic factors. This method is called fundamental analysis.
Forex traders can also base their decisions solely by following price movements that are displayed on updated graphical charts. This technique is referred to as technical analysis and many investors give preference to this method.
Margin Buying
To put it simply, using leverage in Forex trading allows you to control large positions for a relatively small cash outlay. Leverage is often considered a double-edged sword because it can magnify your profits when price movements go in your favor. But if it?s the opposite, it can also amplify your losses.
The advantages of the MetaTrader software far outweighs its disadvantages. It is a free software so try it now to help boost your forex trading. For more information on the above topic click forex.
Posted by Nicholas Gladvin on Sep 29th, 2011 and filed under Investing. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.
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