• Currency major and minor
The 8 most used currencies (USD, EUR, JPY, GBP, CHF, CAD, NZD and AUD) are known as the "majors". In all other currencies are called "minor currencies." No need to worry about the minor currency, since you do not occupy them perform. The currencies USD, EUR, JPY, GBP, and CHF are the most popular and most liquid market.
• Base Currency
The base currency is the first currency in any currency pair. Shows how much the base currency is worth against the second currency. For example, if the USD / CHF has a rate of 1.6350 means that 1 USD is worth CHF 1.6350. In the forex market the U.S. dollar is often considered the base currency for quotes, quotes are expressed in units of $ 1 over the other currency in the pair.
Some exceptions to the rule are the British pound, euro, Australian dollar and New Zealand dollar.
• Price quoted
The quote currency is the second currency of the currency pair. This often goes under the name "currency-pip" and any unrealized gain or loss is expressed in this currency.
• Pip
A pip is the smallest unit of price for any currency. Almost all currencies consist of 5 significant digits and most pairs have the decimal point immediately after the first digit. For example EUR / USD = 1.2538, in this case a pip is the smallest change in the fourth decimal place, which is 0.0001. So if the quote currency in any pair is USD, a pip is always equal to 1/100 of a cent.
A notable exception is the USD / JPY where a pip is equal to $ 0.01.
• Purchase price (bid)
The purchase price (bid) is the price at which the market is ready to buy a specific currency in the Forex market. At this price, you can sell the base currency. The purchase price shown on the left side of the budget. For example, in the GBP / USD = 1.88112/15, the price is 1.8812. This means you can sell a GPB for 1.8812 dollars.
• Price (ask)
The selling price (ask) is the price at which the market is ready to sell a specific currency pair in forex trading. At this price, you can buy the base currency. The sale price is shown on the right side of the budget. For example, EUR / USD = 1.2812/15, the selling price here is 1.2815. This means you can buy one Euro for 1.2815 dollars. The sale price is also called the offer price.
• Bid / Ask Spread
All Forex quotes include two prices, the bid (offer) and ask (demand).
The bid is the price at which the broker is willing to buy the base currency in exchange for the quote currency. This means that the bid is the price that you, the investor can sell.
The ask is the price at which the broker is willing to sell the base currency in exchange for the quote currency. This means that the ask is the price with which you will buy. The difference between bid and ask is popularly known as the spread.
• Transaction costs
The transaction cost, you could say that is the same as the spread is calculated as: Transaction Cost = Ask-Bid. The number of pips that are paid to enter a trade. The final amount also depends on the size of the operation.
Importantly, depending on the broker and the volatility, the difference between the ask and the bid may increase, making it expensive to open a trade. This usually happens when there is a lot of volatility and low liquidity, such as during the announcement of some important economic data.
• cross currency
A cross currency is any couple where one currency is U.S. dollars (USD). These pairs show an erratic price action when the operator opens two operations in U.S. dollars. For example, opening a long operation buying EUR / GPB means buying EUR / USD and sell GBP / USD. Cross currency pairs carry high transaction cost.
• Range
When you open a new bank account with a Forex broker, you must deposit a minimum amount of money to your broker. This minimum varies from broker to broker and can be as low as $ 100 higher amounts as $ 100,000. Each time you run a new operation a percentage of the balance of the margin of your account will be the initial margin requirement for a new operation based on the underlying currency pair, the current price and the number of units (or lots) of the operation .
For example, suppose you open a mini account which gives a leverage of 200:1 or a margin of 0.5%. The accounts work with mini mini lots. Suppose a mini lot is $ 10,000. If you are about to open a mini lot, instead of having to invest $ 10,000, you only need $ 50 ($ 10,000 x 0.5% = $ 50).
• Leverage
Leverage is the ratio of capital used in a transaction to the required deposit. The ability to control large amounts of dollars with relatively little capital. Leverage varies drastically depending on the broker, can range from 2:1 to 400:1.
• Margin + Leverage = dangerous combination
Trading foreign exchange on margin lets you increase your buying power. This means that if you have $ 5,000 in a margin account that allows 100:1 leverage, you can buy currency then $ 500,000 and you only have to invest a percentage of the purchase price. Another way of saying this is that you have $ 500,000 in buying power.
With more buying power may increase the total recovery of the investment without cash outlay. But be careful, work with a profit margin increases and losses.
