dictionary - FX24 Broker

Currency pairs are considered one of the most important terms in the Forex market. This term refers to the foundation of the Forex market. In fact, the Forex market is designed in such a way that each currency is traded against another currency. Currency pairs are considered a basic concept in the Forex market.

The main currency pairs are as follows:

EURUSD

GBPUSD

AUDUSD

NZDUSD

USDJPY

USDCHF

The unit of measurement for the amount of a trade is called a “lot,” which is used to measure the size of a position. Generally, in Forex, one lot is equivalent to 100,000 dollars.

Spread is one of the terms in the Forex market that refers to the difference between the bid price and the ask price, which means the difference between the buying price and the selling price of an asset. Finding the best spread for trading is a priority for every trader, as it directly impacts the potential profit earned. However, finding the lowest spread in Forex can be challenging because there are numerous Forex brokers. Consequently, they all offer different spreads, making it difficult to find the lowest one.

A pip, or point, is the unit of measurement for price movements and fluctuations in the currency market. For example, if the USD/EUR currency pair moves from 1.4121 to 1.4807, it has moved 68.6 pips.

A pipette is the smallest unit of price fluctuation in the currency market. Since it is very minor, it is not commonly used, and traders typically use the term “pip” instead. (If you divide a pip into ten parts, a pipette is one part or one-tenth of it.) For example, if the USD/EUR currency pair moves from 1.4121 to 1.4807, it has actually moved 686 pipettes or 68.6 pips.

Commission refers to the fee or amount that a broker charges as compensation for executing a trade on behalf of a client.

One of the basic concepts and terms in Forex is this: it means that an individual purchases an asset or currency in this market with the hope that its value will increase in the future, and in effect, the currency’s position will rise on the chart.

In Forex terminology, when individuals sell their currency, it is referred to as taking a “short position.” This means that a person sells their currency because they believe its value will decrease on the chart in the future. This term, along with the previous one, are common terms in Forex trading.

The **ask price** of an asset in the Forex market is the price at which it is available for purchase. The ask price is the opposite of the bid price. In this case, the situation is reversed because you set a price for your asset or currency and ask potential buyers to purchase it at your asking price. In other words, the ask price is offered by sellers, while the bid price is offered by buyers.

In Forex, the **Bid** is the price at which the market or broker is willing to buy a specific currency pair from you. In other words, it’s the price at which you can sell the base currency. For example, if the EUR/USD price is quoted as 1.2000/1.2002, the **Bid** price is 1.2000. This means you can sell euros for 1.2000 dollars. In Forex trading, the **Bid** price is always lower than the **Ask** price, which is the price at which you can buy the base currency. The difference between the Bid and Ask prices is known as the spread, which represents the cost of the trade in the market.

Leverage is one of the basic concepts and terms in Forex. It means that an investor or trader in the Forex market can use leverage to increase their trading power and manage their capital more effectively. Leverage is not only used in the Forex market but also in other economic markets. By using leverage, individuals can potentially increase their profits, and it serves as a tool to prevent stagnation in trading markets.

Margin is a Forex market term that refers to the minimum capital required for trading and the deposit needed to open a position in the market. Margin is the amount of money used in a single trade in the market. Simply put, margin is a portion of your funds that the Forex broker sets aside from your account balance to keep your trade open, allowing you to manage potential losses.

In Forex terminology, a margin call refers to the complete loss of your assets in a broker due to the failure to manage risk and capital during trading. To explain it more clearly, when you open a trade, you commit a certain amount of capital to it. If your trade starts incurring losses and no stop-loss is set, or the stop-loss is set at the level of your entire capital, once the price reaches a point where your losses exceed your total capital, the broker will withdraw your assets entirely, resulting in a margin call on your account.

Stop Loss is an essential risk management tool in Forex trading. It helps traders limit their potential losses. Simply put, a Stop Loss is an automatic order that closes a trade when the price of a currency pair reaches a certain level. For example, if you have opened a long position and the market price starts to drop, setting a Stop Loss level ensures that your trade will automatically close if the price reaches that level, thus preventing further losses. Stop Loss allows traders to remove emotions from their decisions and stick to their trading strategy. Proper use of this tool can play a crucial role in long-term success in the Forex market.

Take Profit is another key tool for managing trades in the Forex market. It allows traders to automatically close their trades with a profit. In other words, a Take Profit is an automatic order that closes a trade when the price of a currency pair reaches a specified profit level, thereby locking in the gains. For example, if you have opened a short position and the market price is falling, you can set a Take Profit level. When the price reaches this level, your trade will automatically close, securing your profit

Swap in Forex refers to the interest that is either charged to or credited to your account for holding a trading position overnight. This amount depends on the difference in interest rates between the two currencies in the traded currency pair. In Forex trading, each currency pair consists of two different currencies with varying interest rates. When you open a long or short position and hold it past the end of the trading day, depending on the interest rate differential between the two currencies, a swap may either be added to or deducted from your account. For example, if the currency you bought has a higher interest rate than the currency you sold, you might receive a positive swap, meaning interest is added to your account. However, if the sold currency has a higher interest rate, you may incur a negative swap, resulting in a deduction from your account. Swap is particularly important for traders who hold their positions for extended periods, as these costs or gains can accumulate over time and affect overall profitability.

A Buy Limit is a type of pending order in Forex trading that allows you to purchase a currency pair at a specified price or lower. Specifically, you use a Buy Limit when you expect the price of a currency pair to first decrease and then rise again. For example, if the current price of EUR/USD is 1.2000 and you believe that the price will drop to 1.1950 before rising again, you can place a Buy Limit order at the 1.1950 level. This order will be executed when the price reaches 1.1950 or lower. This type of order is useful for traders who want to buy at a lower price than the current market price but do not want to constantly monitor the market to catch the desired price

A Sell Limit is a type of pending order in Forex trading that allows you to sell a currency pair at a specified price or higher. This order is used when you expect the price of a currency pair to rise first and then fall. For example, if the current price of EUR/USD is 1.2000 and you believe that the price will increase to 1.2050 before starting to decline, you can place a Sell Limit order at the 1.2050 level. This order will be executed when the price reaches 1.2050 or higher. This type of order is suitable for traders who want to sell at a higher price than the current market price but do not want to constantly monitor the market to catch the desired price.

A Buy Stop is a type of pending order in Forex trading that allows you to buy a currency pair when the price reaches a specified level above the current market price. This order is used when you expect the price to continue rising after it breaks through a certain level. For example, if the current price of EUR/USD is 1.2000 and you believe that the price will rise further if it breaks above 1.2050, you can place a Buy Stop order at 1.2050. This order will be triggered and executed when the price reaches or exceeds 1.2050. A Buy Stop order is often used to enter the market in a trending direction, allowing traders to capitalize on upward momentum once a certain resistance level is broken.

A Sell Stop is a type of pending order in Forex trading that allows you to sell a currency pair when the price reaches a specified level below the current market price. This order is used when you expect the price to continue falling after breaking through a certain level. For example, if the current price of EUR/USD is 1.2000 and you anticipate that the price will continue to decline if it drops to 1.1950, you can place a Sell Stop order at 1.1950. This order will be triggered and executed when the price reaches or falls below 1.1950.A Sell Stop order is particularly useful for entering the market during a downtrend, allowing traders to capitalize on further price declines after breaking through a support level.

A **broker** is a financial intermediary that provides you with access to financial markets, enabling you to trade within them. In the Forex market, brokers act as intermediaries between retail traders and the Forex market. They offer trading platforms through which you can buy and sell currency pairs, commodities, stocks, and other financial instruments. Brokers make money through the spread, which is the difference between the bid price and the ask price, or through commissions charged on each trade.
Choosing the right broker is crucial, as factors such as fund security, order execution speed, customer support, and access to trading tools can significantly impact your trading success.

In Forex, balance refers to the total amount of money in your trading account, including all deposits, withdrawals, and the results of closed trades. In other words, your account balance reflects the amount of money you have before opening any new trades or after all trades have been closed. For example, if you deposit $1,000 into your trading account and then make a trade that earns you a $200 profit, your account balance will be $1,200 after closing the trade. It’s important to note that the balance does not include the profits or losses of open trades; it only considers closed trades.

In Forex, **equity** refers to the current value of your trading account, which includes your account balance plus or minus the profit or loss from any open trades. In other words, equity represents the actual amount of money you would have in your account if all open trades were closed at that moment. The formula for equity is:
Equity=Balance +Profit or Loss of Open Trades
For example, if your account balance is $1,000 and you have an open trade with a $200 profit, your equity would be $1,200. Conversely, if you have an open trade with a $100 loss, your equity would be $900. Equity is crucial in risk management and trading decisions, as it shows how much of your capital is currently at risk and how much is available for withdrawal or for opening new trades

In Forex, **Margin Level** is one of the key metrics in risk management, indicating the ratio of equity to used margin in your trading account. This metric is expressed as a percentage and helps you assess your current risk exposure and your ability to open new trades.

The formula for Margin Level is:

: Margin Level=(Used Margin /Equity)×100

For example, if your equity is $1,000 and your used margin is $200, your margin level would be 500%.

Margin level shows you how much of your margin is being used and how much is available. If the margin level drops to a low level (e.g., below 100%), your broker might issue a **Margin Call**, meaning you need to either deposit more money into your account or close some open trades to improve your margin level

A high margin level means you are in a strong position and can open more trades, while a low margin level indicates the risk of approaching a margin call and the potential for automatic closure of open trades