Key terms of Currency trading that every investor ought to be knowledgeable about

Pip value is the smallest unit that a currency can trade at. It is like the penny in the United States. That's the smallest unit of currency that is traded for goods and services in the U.S. In the EUR/USD, a pip is worth .0001. So a move from .8939 to .8940 is one pip.

Lots are the number or dollar quantities of a currency that may be traded. Normal currency lots are sold in $100,000 increments. So if you were to buy two lots you'd be buying $200,000 of a specific currency.

Bid/Ask Spread will be the difference between the cost to buy and the cost to sell. The Forex is unique in that there are no commissions or fees when making a trade. The person who is making the trades only makes money for the difference between the Bid and Ask price.

Bear market is defined as the market or trend declining or during a downward path.

Bull market is the alternative to a bear market. Prices are rising or in an upward trend.
Day Trading is where positions or trades are opened and closed on the same day.

Foreign Exchange, Forex, FX is the acquisition of one currency against the acquisition or sale of a second currency.

Limit Order sets price limits and when a trade is bought or sold, this is meant to limit the potential loss when the order is exited. It may also be used when entering the trade where the individual sets the price they are willing to pay to enter the trade. The example could be whenever a car is bought, the dealer wants to get a certain price but the client will only purchase the vehicle if the purchase price could be lowered to a specific level.

Spread is the difference between the bid/ask price.

Stop/Loss Order is an open position where the person really wants to get out of that trade at a specific point. It can be used to safeguard profits which have already been made or to prevent large losses if the marketplace goes against the trade. Example, I own a house that is worth $250,000, I put a stop/loss on my house a $230,000. Which means if the price of my house goes below $230,000 I want to put it on the marketplace for sale. This doesn't guarantee that I'll sell my house for $230,000, but it will be on the market. The difference in currency trading is that it really is soo liquid, which means that regardless of whether the cost is moving up or down there will always be buyers and sellers.

The Forex is known as a highly liquid market, which makes the idea to make profits very attractive. Most trades in the FX are short-term trades only lasting a number of days.

These are just a few of the terms connected to the Forex. These are the key terms that should be understood. Forex automatic trading robots will take just about all of the guesswork out of creating trades. They really simplify the process. When you finally are comfortable with the fundamental understanding of the FX, I would recommend purchasing software forex to increase your profit potential.

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