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Some popular forex terms and their meanings that you should know before becoming a forex trader

Foreign exchange or forex trading is considered one of the most lucrative side income avenues for individuals in 2022. With the trading industry expanding each year and foreign exchange values staying relatively stable, you might be able to achieve financial freedom if you start out as a forex trader.

However, the journey to becoming an experienced trader isn’t a bed of roses. You will have to develop a lot of trading acumen and expertise over the years before you start raking in huge amounts of money. Additionally, the domain is littered with confusing jargon and trading terminology which can be overwhelming for a beginner.

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Even if you decide to learn forex trading with a suitable trading course, you might have to put in extra work to familiarise yourself with complex forex trading terms. This blog aims to demystify and simplify some of the most common forex trading terms for you.

What are the most common forex trading terminology?

Ignorance of common forex trading terms can be a great hinderance to your career as a forex trader. Here are some of the most oft-used trading terms in the global forex domain.

  1. Currency pair: Most of the time, forex trading involves predicting one currency’s performance against a second currency. The two currencies involved in forex trading transaction is referred to as a currency pair.
  2. Leverage: Leverage refers to the money you borrow from within your trading account. Trading with leverage can allow you to trade with your favoured currency pairs without having to invest a vast amount of capital.
  3. Ask price or Bid: A bid is an amount that a forex trader quotes a potential customer for selling a currency pair. In converse, the ask price is the amount that the customer ends up paying for buying the currency pair. 
  4. Margin: Margin refers to an initial amount or capital that you need to put up or show to open a trading position. Trading with a margin requires you to invest only a percentage of the full value of your position. This allows you to play around with a larger position size.
  5. PIP: PIP is short for Percentage in Point and reflects the smallest movements in the exchange rates for a specific currency pair.
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Other commonly used forex trading terms include going long/ short, lot size, bearish and spread.

How can you learn about forex trading terms in a short time?

You can learn more about forex trading terms as and when you encounter them during your trading practice. You can also learn them if you regularly peruse trading content like white papers, trading journals, financial news, and trading books.

The best and shortest way to familiarise yourself with these terms would be to invest in a comprehensive forex trading course. This can help you sharpen your trading acumen and skills in addition to increasing your knowledge about the trading world.

Start your search for an appropriate forex trading course from a reputed trading school to become an experienced forex trader.