Basic Terms in FOREX Trading

The trading mechanisms of the FOREX market are similar to other major financial markets (such as the stock and commodities market). The purpose of investors and speculators in such markets is to make a profit, by buying low and selling high. The case in FOREX markets is no different.

Nevertheless, there are certain trading terms that are distinct to the FOREX market. Here is a short list of some common terminologies used. In the FOREX market, currencies are traded in pairs, where investors and speculators invest on the value of one currency against another. The currencies traded in the market are usually paired with the US dollar. For online trading, these currency pairs are represented by 6 letter codes, representing both currencies. The first three letter of the code is represents the stronger currency and the last three represents the other currency. If a trader trades on the value of the British pound against the US dollar, the code used would be GBPUSD.

The value between the two currencies is represented by a five-digit number. For example, if the current value of the GBPUSD = 1.6266, it represents that 1 British pound is worth 1.6266 US dollars. The change in the smallest unit in this figure is called a point. For example, if the value between the two currencies have changed to 1.6268, this means that the value have moved by 2 points.

In FOREX trading, traders enter the market as either a buyer or a seller of selected currency. The price that the seller is willing to sell at is known as the 'Ask' price while the price that the buyer is willing to buy at is known as the 'Bid' price. There can only be a successful trade where the Ask and Bid price is the same.

Thomas Strignano is a retired Chief Foreign Exchange Trader for a major Italian Bank. His 20 plus years of trading(Market Making) in the commercial Forex market makes him an expert in the field. He has developed his own proprietary trading systems and tested them real time in the interbank market. He has trained a number of Forex traders to be profitable, some who are still active at Major International Banks. Tom s major focus is on market timing techniques with technical analysis, forecasting(future) pivot points for major market moves. His overall objective in trading Forex, is use of good Money management, low risk, high reward positions. Please see http://www.forexconfidant.com