Forex Trading Jargon: Complex Processes

Forex trading is a science of world currency movements and status and the mathematics of how to profit from them. In its complex nature, currency trading has difficult terms to use. Plunging deeper into money trading requires more familiarization with trading jargon.

When we want to see the current price at which we may sell the base currency of a currency pair, we seek the "sell quote"--also called "bid price" in forex trading. For instance, the EUR/USD quotes at 1.3200/03, we may trade 1 EURO at the sell quote or bid price of US$1.3200.

"Buy quote," is the rate at which we may purchase the base currency of a currency pair. This is also called the "offer price" in forex trading. Say, we see that EUR/USD quotes at 1.3200/03, then this means we may purchase 1 EURO at the buy quote or offer price of US$1.3203.

"Pip" is the smallest unit increase in price a particular currency is allowed to make. This is also called "points" in forex trading. For instance, a pip is equal to 0.0001 for EUR/USD. Another example is a pip of 0.01 for USD/JPY. The "pip value" is either fixed or permanent, or a variable or changeable according to currency pair and base currency of our account. "Lot" in forex trading is the accepted size per unit of a transaction. Like, a typical lot is 100,000 base currency units. It we have a "mini lot" then we have 10,000 units. With a "micro lot" we have 1,000 units.

A "spread" is the result when we subtract the sell quote from the buy quote (or the bid from the price). An EUR/USD that quotes 1.3200/03 we have a 3-pip spread - the result we get when we subtract 1.33203 from 1.3200. "Standard account" is when we deal in lot sizes according to standards, which is often 100,000 base currency units in forex trading.

"Mini accounts" are those that involve trading in small lot sizes which has something like 10,000 base currency units. "Micro accounts" are those with about 1000 base currency units. When we want to maintain or open a position in forex trading, we make a deposit called "margin." Let's say we want to control a $100,000 position. Then we must make a $1000 margin, which is 1 percent.

More advanced forex trading terms and concepts help us move more confidently in the world of trading and help us know more about trading concepts and processes. Then we trade more effectively.