Forex Platforms

Common Currency Trading Terms

When FX trading, it is a good idea to have some familiarity with basic terms that you will come across. Whether reading about the foreign currency exchange, or just understanding the jargon used by forex brokers, it is a good idea to have a basic knowledge of what common currency trading terms mean. Here are some terms forex brokers and others sometimes use in association with foreign exchange:

Leverage: This is the amount of money you are borrowing from forex brokers to make your FX trade. If you have 200:1 leverage, you pay 0.5% of what you are using to control your position, and the rest of the money comes from the forex broker.

Spread: This is the difference between the bid price and the ask price. You make a profit in currency trading when you overcome the spread.

Support: The level at which a forex trend changes from bearish to bullish.

Resistance: The opposite of support: The FX trend switches from bullish to bearish.

Pip: A term that stands for “percentage in point.” This is the smallest change that can be made to a currency rate.

Scalping: A technique that helps you get between three and five points per trade by using foreign currency pairs with low spreads. Most scalping trades last only a few seconds to a few minutes.

Margin call: Forex brokers often monitor your margin requirements. When the equity of your forex trading account drops below your usable margin, your open positions on the foreign exchange market are closed to keep your losses from mounting.

Cable: This is the nickname for the Great Britain pound and U.S. dollar foreign currency pair on the FX market.

Greenback, buck: Nicknames indicating the U.S. dollar in online currency trading.

Sterling: A nickname used for the Great Britain pound.

Fiber: A nickname used to indicate the euro currency.

Loonie: The currency exchange nickname for the Canadian dollar.

Kiwi: The FX trading nickname for the New Zealand Dollar.

Tags: currency, Forex Trading

What is Currency Trading?

One of the types of investing that is growing in popularity is currency trading. When you trade currencies, you do so on the foreign exchange (forex) market. When you trade currencies, you are actually speculating as to whether or not one currency will rise or fall against another. In reality, all “trades” take place electronically, and no currencies every physically change hands. However, even just speculating on whether or not a currency will rise or fall can be profitable. When you are right, you profit. However, it is important to be careful; when you are wrong, you lose money.

The FX market is the largest and most liquid market in the world. More than $1 trillion changes hands every day. Electronic transactions make forex currency trading easy and quick. Forex brokers like dbFX offer nearly anyone access to this market. In the past, only the rich or the connected could get access to the forex market. Now, though, with technology and new forex platform options allowing ease of trading, it is possible for nearly anyone to make money by trading foreign exchange.

When you trade currencies, you do so in pairs. Each pair offers its own trading options, and when you make an FX trade, you do so by favoring one currency over another. If you think that the euro currency will do better than the U.S. dollar, you enter a strong EUR/USD position. However, at the same time, it is possible to believe that the U.S. dollar will gain against the U.K. pound. In that case, you would enter a position that favored a weaker GBP/USD. With foreign currency trading, it is possible to think a currency will be both weak and strong at the same time, depending on the other currency in the pair.

Getting access to online forex trading is simple when one uses a good broker. dbFX is the online trading foreign exchange platform offered by Deutsche Bank. Deutsche Bank provides a number of services, and is one of the premier foreign exchange banks. It is possible, through dbFX, to take advantage of the most liquid market in the world.

Tags: Currency Trading