Before you start trading, it’s important you become familiar and comfortable with some of the common lingo you will hear when you’re in the Forex industry. You want to not only understand what other traders in your community are referring to right off the bat, but you need to understand what your education and training is discussing without having to look things up.
- PIP: the smallest increment of price movement a currency can make. You can also expect to hear this called point or points.
- Leverage: ability to gear your account into a position greater than your total account margin, increasing your leverage magnifies both gains and losses.
- Margin: is required to trade. It's known as the deposit required to open and maintain a position.
- Spread: pip difference between the bid and ask price of an underlying asset. It's essentially the cost of making a trade, so it's very important for traders to know what spreads are and be able to identify them.
- Volume: is a way to measure how many transactions are happening in the market at one time.
- Slippage: slight difference between the price you expect and the actual execution price. The execution price is the price when the trade is made. It's common to see this as a trader, and it can either be a negative or a positive experience for the trader. The main reason for this “slippage” to happen is due to volatility and execution speeds.
- Bid Price: the price at which the market (or your broker) will buy a specific currency pair from you. Thus at the bid price, a trader can sell the base currency to their broker.
- Ask Price: the price at which the market (or your broker will sell a specific currency pair to you. At the ask price, you can buy the base currency from your broker.
- Bid/Ask Spread: spread of currency pair varies between brokers and the difference between the bid and ask price.
Trading is not the easiest career choice by any means. Preparing yourself for the ups and downs the market will bless you with is the best possible way to make sure you can be not only successful but profitable in the market. Shawn Lucas is the head trader at The Apiary Fund which is where I have learned all I know about trading, and I still continue to grow and learn while currently on my trading journey, and although he makes trading look easy, it's far from it. Shawn Lucas encourages every individual to get better at trading by going through the educational portion of The Apiary Fund, working with your 1 on 1 coach, communicating with other traders that are on the journey with you, and practicing as much as possible in their demo account before you switch to your live account. Trading can give you 100% financial freedom and support, you just have to be willing to learn and master the trade.