What does spread mean? What do open positions and positions mean? When your friends ask you for foreign exchange related knowledge, if you can’t answer the above questions, it will be very embarrassing.
As a foreign exchange investor, you must learn some specific technical terms before entering the foreign exchange market. This is like when we study classical Chinese, we must understand the most basic concepts of the text before we can understand the text.
There are many professional terms involved in foreign exchange trading, especially for novices, they may not know what they mean. Today we will sort out the most basic foreign exchange terminology in foreign exchange trading for you.
Currency Related Terms
Major and Minor Currencies: The eight most commonly traded currencies (USD, EUR, JPY, GBP, CHF, CAD, NZD, and AUD) are called major currencies. Currencies other than these types of transactions are called minor currencies.
Base Currency: The base currency is the first currency in any currency pair and is always valued in units of 1. Regardless of buying/selling, you are trading the base currency.
Quote Currency: is the second currency in any currency pair. It is often called pip currency.
Cross currency: Refers to the transaction between two non-US dollar currencies, for example: EUR/GBP, EUR/JPY. Cross currency pair transactions usually cost more, that is, the spread is higher.
Unit Related Terms
Point: The smallest moving unit that represents the exchange rate. Normally one pip depending on the market environment: 0.0001 in EUR/USD, EUR/CHF currency pairs, 0.01 in USD/JPY currency pairs.
Spread: The spread refers to the difference between the buying price and the selling price of the commodity quoted by the platform, which is the transaction cost for investors.
Slippage: It refers to the phenomenon that there is a gap between the designated point when the trader places an order and the final actual transaction point. Like spreads and commissions, slippage is one of the costs of Forex trading.
Position: Also called a position, it is a market agreement that promises the initial position of buying and selling foreign exchange contracts. Those who buy foreign exchange contracts are long positions; those who sell foreign exchange contracts are short positions.
Contract: also known as unit, the standard unit of certain foreign exchange transactions.
Number of hands: The foreign exchange market trades with "hand" as the basic contract unit. A standard lot is worth $100,000, and a mini lot is 1/10 of a standard lot, which is worth $10,000.
Current Hand: The number of hands of the latest transaction that has been completed.
Volume: reflects the number of transactions. The unit is the sum calculated on the basis of both buying and selling sides.
Exchange rate: The exchange rate between two currencies, usually composed of the exchange rate of the two currencies, most currencies use the exchange rate against the US dollar.
Position related terms
Position: The net holding of a given currency. A position can be short, even, long (buy more than sell) or short (sell more than buy).
Open position at market price: A transaction order established at the current market price.
Market price liquidation: liquidate the existing position at the current market price.
Opening a position at an index price: Customers set a non-market price according to their own wishes, and when the market reaches this price or crosses this price, the transaction is executed at the set price.
Take-profit closing: Close the position according to the take-profit price set by the customer.
Stop loss closing: Close the position according to the stop loss price set by the customer.
Backhand open position: When the customer closes the position at the market price, he can choose to open the warehouse receipt in the opposite direction according to the market changes.
Full position: without keeping funds, buying or selling all contracts is a full position, keeping half of it is called a half position, buying after a fall is called a cover position, and buying something new from scratch is called a position building.
Lock-up: refers to an operation strategy in which investors lock up the profit or loss of their own positions when encountering an unclear market direction during the transaction process, so that market price fluctuations have nothing to do with their profit or loss.
Liquidation: When the available margin in our account is 0, it is a forced liquidation. Usually the forced liquidation starts from the order with the largest loss until the margin ratio returns to the ratio stipulated by the platform.
Open interest: open interest refers to the sum of the value of the bought (or sold) position before the open position is closed.
Margin Related Terms
Margin: Margin is a kind of performance guarantee. It is a proof of the transaction order holding a certain percentage of funds that must be invested when opening a position. Margin allows investors to hold positions higher than the value of the account.
Margin ratio: net value ÷ used margin = margin ratio, when the margin ratio is lower than a certain ratio, the system will force liquidation.
Variation Margin: An additional margin requirement that a broker places on a client due to market fluctuations.
Leverage: A ratio between the capital required for foreign exchange trading and the required margin. The leverage ratio of foreign exchange margin trading varies with different brokers, ranging from 2:1 to 500:1.
Price related terms
Bid price: The bid price is the price at which the market intends to buy a currency.
Ask price: The ask price is the price at which the market intends to sell a particular currency pair.
Highest price: refers to the highest price among the prices traded on that day.
Lowest price: Refers to the lowest price among the prices traded on that day.
Market price transaction: To trade with the latest quotation of a certain transaction target (such as EUR/USD), it must be executed within the range that can be traded.
Settlement price: The average price of the buying price and selling price 10 minutes before the closing of the trading day is taken as the settlement price, and the settlement price is used as the basis for calculating the profit and loss of the day and the position price of the commodity on the next trading day.
profit and loss related terms
Profit and loss: Changes in funds due to price changes, divided into position profit and loss, floating profit and loss, and settlement profit and loss.
Position profit and loss: the profit and loss caused by the intraday position being closed, the actual profit or loss.
Settlement profit and loss: Under the daily debt-free settlement method, it refers to the profit and loss caused by the change of settlement price after the market closes, resulting in actual capital changes, which are directly transferred to the capital account.
Floating profit and loss: The position profit and loss caused by the fluctuation of the latest price in the intraday is not the actual profit or loss.
technical terms
Stalemate: The market situation is unknown, and the trading range is narrow.
Consolidation: Order and fluctuate within a range after a period of rise or fall.
Bearish: Factors and news that cause prices to fall in favor of bears.
Bullish: It is the factors and news that stimulate the price rise and are beneficial to the bulls.
Go long: be bullish (think it will go up) and enter the market to buy.
Short: Be bearish (think it will fall) and enter the market to sell.
Short-covering: Sellers in a falling market start buying (buying long or closing short) on news or data, and prices rise.
Long covering: The buyer in the rising market starts to sell due to news or data (short entry or long closing), and the price falls.
Support level: also known as upper gear. The price shows a downward trend within a certain period of time, and it falls to a certain price range and stops falling.
Resistance level: also known as the lower level. The price shows an upward trend within a certain period of time, and rises to a price where the price rises in a certain price range.
Add
