Forex education is the foundation of every trader, if it is not strong your structure(equity) will collapse.
Source
Aim
- This post is aimed at educating every reader or trader on the various terms and lingos used in the forex markets.
Introduction.
Doctors might be talking to themselves and say things like STAT dose meaning immediately start whenever you see a patient with such a condition. They might also say things like TDS meaning three times daily.
In forex, there are various standard terms that are accepted worldwide that every trader ought to know , relate and communicate with. These terms are the ways forex traders communicate to each other. They are not so difficult but they are capable of making you feel intimidated when you don't know them.
So lets start
1. Long:
This simply means to buy. This is a term you will encounter most times. Infact it is one of the most basic terms you will come across as a trader. When a trader says I went long on that trade, it means he entered into the trade with the hope it will rise (implying he bought).
2. Short:
This is just the opposite of long meaning to sell. Also a common term in the market implying entering a trade with the hope of it going down (selling).
3. Bulls and bears:
These are market participants that are responsible for pushing the price in the market either up or down. Market participants that caust the price to go up are called bulls while those that push it down are called bears. They are most times big investors, banks, hedgefunds etc. In the cryptocurrency market, they can be likened to whales. When they enter into the trade, the price goess in their direction abruptly or over time.
4. Bullish and bearish market:
In my early days of just being a crypto enthusiast, this was one thing I encountered every time either on cointelegraph or even when a group of traders are talking. When a market is on the rise, it is said to be bullish. The market being bullish implies that the bulls have greater influence on the market price than the bears. A bearish market is just the opposite of a bullish market.
5. Position:
When a trader says he has a position opened, he means, he is currently in a trade. In simple terms, position means trade in a layman’s term. When a position is opened, it means that the trade is ongoing. When a position is closed, it means the trade is over.
6. Orders:
These are different ways one enters a trade. When you enter a trade at the market price, it is called a market order. There is also a limit order and a stop order. This will be explained in my next post.
7. Stop loss:
This refers to a preset price that a trader is willing to lose. The stop loss is set by the trader and when the price is hit, the stop loss is automatically trigerred and the trade is closed automatically. In my subsequent post, I will be writing on the benefits of stop loss from my experience.
8. Take profit:
This is a pre-set price set by the trader implying how much a trader is willing to gain. When it hits that set price, it is triggered and the trade is closed with some profitsin the bag. As you know, there are two sides to most stories. It has its merits and demerits. I will be exploring that in a subsequent post too.
9. Break-even:
In trading, breaking even is an important phenomenon which means closing a trade without a profit or loss. It means closing the trade at exactly the same price you entered the trade. This means the trade became riskless at a point. This should be the aim of most traders, to either break even or make a profit. However in my experience, it is an illusion that we work towards.
10. Leverage:
Leverage is one of those terms that can be very confusing to beginners and even those who have traded for a while. Investopedia defines leverage as using borrowed capital as a funding source when investing to expand the firm’s asset base and generate returns on risk capital. Ideally trading currency requires a lot of capital, however the concept of leverage allows retail traders like you and i room to participate in the market. This is why a person with a hundred dollar account can open a position of a thousand dollars. This is the power of leverage. This is why those who market forex trading to you tell you things like you can make one thousand dollars from hundred dollar in a month.
Warning: Leverage is the most deadly and most rewarding thing when trading. Use your head!!!
in my next post, I will be talking about other advanced terms used by forex traders.