You’ll encounter a lot of jargon when trading currencies, whether you’re a seasoned trader or just getting started in the forex market. Everyone who wishes to enter this highly lucrative but also quite difficult industry must possess the ability to trade the financial markets. By working your way through this glossary, you may become familiar with the terminology and catch up so that you can concentrate on trading rather than reading. Furthermore, it ought to aid you in avoiding novice errors that can abandon you without a means of support. It may be time to reevaluate your plan and consider whether you truly understand what you’re doing if you don’t know what a word or term means. This explanation of the most important phrases used in forex trading can help you get back in good standing with your MetaTrader 4 broker and, eventually, make trading more fun.
1. Live Charting
Technical analysis tools are used while trading on a live exchange to track the movements of currency pairings and predict their direction. Moving averages, RSI, candlesticks, and other indicators are used by traders to assist them identify trends and indications. You can use a live chart to search through financial data and examine how asset prices have changed in the past to identify prospective deals. You can use the live charting tools on the website of a different trading platform if you want.
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2. Target Price and Stop Loss
While trading currencies, you’ll frequently hear the phrase “stop loss.” Here is a succinct explanation from a knowledgeable MetaTrader 4 epxert: To safeguard yourself against a potential drop in the value of your investments, a stop loss is a predetermined price or sum at which you’d like to sell your assets. The other crucial term you’ll hear a lot when trading currencies is “target prices.” When buying and selling, or taking a long or short position, these are the prices you want to see. To safeguard yourself from a jarring market move, employ a stop loss and a target price. You can still sell at the magic number you set up and profit from the price decline if a market dips below your stop loss. You can easily re-enter the market at the previous price and profit more from market movement if the recovery is bigger than your aim.
3. Margin and Leverage
When you increase the amount of money you are trading with, you are using leverage. When you put money down to purchase an asset and then borrow money against it to increase the profit from the trade, this is known as margin. Hence, if you borrowed $100 from yourself to buy a stock worth $1,000, you would have $900 in your possession and $100 borrowed. When you’re trading with borrowed money, you are essentially taking a risk. Your investment could end up losing some or all of it. On the other hand, if you borrowed money and took a lot of risks to acquire an asset worth $1,000 using leverage, you would only have $100 in your hands. Yet, you would have made $1,000.
4. Forex Trading Time Frames
The timeframe when prices are available for trading in forex is referred to as the time frame. For example, if you have a forex trading platform where you may trade 24 hours a day, 7 days a week, you might find that the markets are open for trading for much longer than that. The type of trade you are conducting will also affect these time frames. For instance, if you are considering a short-term trading plan, you may simply require brief access to the markets. But, you will probably need to hold onto your positions for far longer lengths of time if you wish to reverse a trend or apply a trading method that may be effective for months.