These basic definitions should help create the basis of understanding the forex trading market and will help moving towards becoming an expert. The next step is to begin using a forex practice account to learn the market tricks.
Exchange Rate: This is the value of one currency when compared to another. For example, in EUR/USD 1.4004, one Euro is worth 1.4004 US dollars.
Currency Pair: The two currency units that make up an exchange rate. These currencies will typically be written in ISO form.
Base Currency: The first currency listed in a currency pair. This term also is used to demark the currency that an account trades in.
Counter Currency: The second currency in the currency pair.
ISO Currency Codes: The common abbreviations used to denote a specific country's currency. The most common examples and the chief currencies used in forex trading are listed below:
AUD = Australian Dollar
CAD = Canadian Dollar
CHF = Swiss Franc
EUR = Euro
GBP = British Pound
JPY = Japanese Yen
NZD = New Zealand Dollar
USD = United States Dollar
Order: The command by an investor for money to be transferred to another currency through a forex broker.
Automatic Execution: An order that is carried out without needing a dealer.
Manual Execution: An order that is implemented with dealer intervention.
Forex ECN Broker: Short for Electronic Communications Network of the forex broker. Like the stock market, this network has bankers, traders, and market makers that allow a forex trading platform to operate.
Lot: The amount of currency per transaction. Standard Lots are measured in 100,000 units of the base currency. A Mini Lot is 10,000 units and sometimes Micro Lots are typically 1,000 units. Some forex brokers deal in lots as small as one unit.
Pip: A currency's smallest increment, usually a ten thousandth of one unit (1/10,000) or four decimal places. Also known as points.
Currency Pair: The two currency units that make up an exchange rate. These currencies will typically be written in ISO form.
Base Currency: The first currency listed in a currency pair. This term also is used to demark the currency that an account trades in.
Counter Currency: The second currency in the currency pair.
ISO Currency Codes: The common abbreviations used to denote a specific country's currency. The most common examples and the chief currencies used in forex trading are listed below:
AUD = Australian Dollar
CAD = Canadian Dollar
CHF = Swiss Franc
EUR = Euro
GBP = British Pound
JPY = Japanese Yen
NZD = New Zealand Dollar
USD = United States Dollar
Order: The command by an investor for money to be transferred to another currency through a forex broker.
Automatic Execution: An order that is carried out without needing a dealer.
Manual Execution: An order that is implemented with dealer intervention.
Forex ECN Broker: Short for Electronic Communications Network of the forex broker. Like the stock market, this network has bankers, traders, and market makers that allow a forex trading platform to operate.
Lot: The amount of currency per transaction. Standard Lots are measured in 100,000 units of the base currency. A Mini Lot is 10,000 units and sometimes Micro Lots are typically 1,000 units. Some forex brokers deal in lots as small as one unit.
Pip: A currency's smallest increment, usually a ten thousandth of one unit (1/10,000) or four decimal places. Also known as points.
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