15 Common conditions of the financial market

Before we start with the terminology associated with Forex trading, what exactly is Forex trading? Forex trading is the exchange (buying/selling) of virtual currencies and commodities on a decentralized online market. The Forex market (foreign exchange market) is the most traded market, churning out over 6 trillion dollars daily. Now for the terms;

1. Long: Going long in the Forex market means buying the base currency and selling the quoted currency at the same time

2. Short: Going short in the Forex market means selling the base currency and buying the quoted currency at the same time

3. Currency Pair: Used to display the exchange rate between two different currencies traded simultaneously in the foreign exchange market. Currencies are not traded separately, but in pairs.

4. Brokers: Brokers provide a platform through which traders can make assessments in the Forex market. i.e. they help traders execute their long or short orders

5. Candlesticks: Also known as Japanese candlesticks, they represent market movement. (either; up, down or sideways) in the foreign exchange market in a given period. it consists of a body and a wick, but in some cases it may consist of only a body or a wick.

6. Bears: The term bears is used to describe sellers in the forex market (traders who go short in the forex market)

7. Bulls: the term bulls is used to describe buyers in the forex market (traders who are long in the forex market)

8. Pip: A pip (percentage point movement) is a unit of measurement used in forex, just like "meters or pounds", it is used to measure the rate of movement/price change in the forex market for currency pairs and other commodities. A pip is represented as the fourth decimal place for most currency pairs except the Japanese yen pair, i.e. 0.0001

9. Pipette: This is a fraction of the pip movement, which is usually displayed as the fifth decimal place, i.e. 0.00001, for most currency pairs except Japanese Yen pairs

10. Spread: Spread in forex represents the difference between the bid and offer price of a currency pair or any other commodity, i.e. trading costs charged by the broker

11. Bid: This is the price at which market sellers are willing to sell a specific asset (currency pair or commodity)

12. Ask: Ask price is the price at which market buyers are willing to buy a specific asset (currency pair or commodity)

13. Lot Size: Represents the percentage of the trader's money (equity) the trader is willing to risk on a move in the forex market per pip. For example, 0.01 lot means that the trader is risking 10 cents per pip movement in the forex market. while 0.1 lot-size means that the trader risks 1 dollar per pip movement in the forex market. 1 batch = 100,000 units

14. Equity: This is the available equity that a trader has after deducting or adding losses or gains of open trading positions from/to the opening balance.

15. Leverage: This is a term used to describe the percentage of the trader's capital given to the trader as a loan from the broker. leverage allows traders to take larger market positions that their capital/equity alone would not be capable of, leverage is expressed as: 100 : 1, 500 : 1. and this means that for every 1 dollar invested they have access to 100 dollars trading leverage and so on

16. Margin: This is the minimum amount that a Forex trader must maintain/deposit in his trading account in order to place a trade order in the forex market through a brokerage. this can be determined mathematically: Total Lot Size / Leverage

Conclusion: There is a lot of terminologies associated with Forex, but these are some of the basic terms you need to know. we will explore other dates in the future.