In this article, I thought being able to discuss the most common language you will encounter while trading in the Forex markets was important so you don’t feel as if you’re in completely over your head. You should be prepared enough to follow along with the lingo when going through your education to learn how to trade, and I’m hoping to provide you with some of the most common language you can expect to see beforehand. The first most common term you can expect to see a lot of is Pips. The following are 12 terms you're likely to encounter:
- Pips is short for price interest point, and is the smallest commonly quoted unit in exchange rate of currency pairs.
- Leverage is the ability to control a large amount of money in the forex market.
- Margin is a term given to the amount of money required in your account in order to open a trade.
- Hedging is the opening of a new position in the opposite direction of an existing position on the same 'entrustment.'
- Lots are the way we traders measure our position size; or how much we’re trading in the currency market.
- Equity is the total amount of money in your trading account including your profits and losses.
- Position is a trade you hold open during a certain period of time.
- Long/Short position is a way you can describe your position. You can remember which is which by using “long” to describe you thinking your position will go up, “short” to describe your position going down.
- Take profit is a trade that closes your trade as soon as it has reached a certain level of profit.
- Stop Loss is an order to close your trade as soon as it has reached a certain level of loss.
- Strategy is a technique used to determine whether to buy or sell currency pair at any given rate.
- Indicator is a tool one would use to help identify the market participant sentiment and going off of this, attempt to define possible price movements.
One thing I love doing when feeling overwhelmed when trading is falling back on some of the thing I have learned from our head trader, Shawn Lucas. Shawn often holds video sessions of him live trading, and you can watch him from wherever you may be, and know he will be as detailed as possible in describing what he is doing and why. I learn so much from these video sessions with Shawn, and love how they're open to everyone who is a part of the Apiary Fund. I hope you can start your trading journey off right by making the plunge and trying it. I will admit it's not for everyone. You have to have discipline and be motivated and dedicated to take charge and control of your financial future. But if you’re willing to do so, I suggest you start by trading!