Learning the Words Commonly Used in the Forex Trading Industry
Whether you are an experienced trader or just starting out in the forex market, you will hear a lot of jargon. Everyone who wants to get into this very profitable but also very hard business must know how to trade on the financial markets. By reading through this glossary, you might learn the terms and catch up so you can trade instead of reading. It should also help you avoid making rookie mistakes that can leave you without a way to get help. If you don’t know what a word or term means, you might want to rethink your plan and ask yourself if you really understand what you’re doing. This explanation of the most important phrases used in forex trading can help you get back on good terms with your MetaTrader 4 broker and, in the long run, make trading more fun.
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“Real-time charts” – During live trading on an exchange, tools for technical analysis are used to track how currency pairs move and guess where they will go. Traders use moving averages, RSI, candlesticks, and other indicators to help them spot trends and signals. Using a live chart, you can look through financial data and see how the prices of assets have changed in the past. This can help you find good deals. If you want, you can use the live charting tools on a different trading platform’s website.
“Stop loss” – It is a phrase you’ll hear a lot when trading currencies. An expert on MetaTrader 4 gave the following short explanation: A stop loss is a set price or amount at which you’d like to sell your assets to protect yourself from a possible drop in the value of your investments. “Target prices” is another important term you’ll hear a lot when you trade currencies. These are the prices you want to see when you want to buy, sell, or go long or short. Use a stop loss and a target price to protect yourself from a sudden change in the market. If the market falls below your stop loss, you can still sell at the magic number you set and make money from the price drop. You can easily get back into the market at the old price and make more money if the market moves more than your goal.
“Margins and leverage” – When you use leverage, you increase the amount of money you can trade with. Margin is what you get when you put money down to buy an asset and then borrow money against it to make more money from the trade. So, if you took out a $100 loan from yourself to buy a $1,000 stock, you would have $900 in your bank account and $100 in debt. When you trade with money you have borrowed, you are taking a risk. Your money could lose some or all of its value. On the other hand, if you used leverage to buy something worth $1,000 but had to borrow money and take a lot of risks, you would only have $100 in your hands. You would have made $1,000, though.
“Time frames for forex” – In forex, the time frame is the amount of time during which prices can be traded. For example, if you have a forex trading platform that lets you trade 24 hours a day, 7 days a week, you might find that the markets are open for trading for much longer than that. These time frames will also depend on the type of trade you are making. For example, if you’re thinking about a short-term trading plan, you might only need a short time on the markets. But if you want to change a trend or use a trading method that may work for months, you will probably need to hold on to your positions for much longer.