Option trade terminology
The Forex market comes with its very own set of terms and jargon. Cross rate The currency exchange rate between two currencies, both of which are not the official currencies of option country in which the exchange rate quote is given in. This phrase is also sometimes used to refer to currency quotes which terminology not involve the U. For example, if an exchange rate between the British pound and the Japanese yen was quoted in an American newspaper, this would be considered a cross rate in this context, because neither the pound or the yen is the standard currency of the U. However, if the exchange rate between the pound and the U. Exchange Rate The trade of one terminology expressed in terms of another. Pip The smallest increment of price movement a currency can make. Also called point or points. Leverage Leverage is the ability to gear your account into a position greater than your total account margin. Increasing your leverage magnifies both gains and losses. To calculate the leverage used, divide the total value of your open positions by the total margin balance in your account. Margin The deposit required to open or maintain a position. Used margin is that amount which is being used to maintain an open position, whereas free margin is the amount available to open terminology positions. This allows a trader to leverage his account by trade to times or a leverage ratio of Most brokers will automatically close a trade when the margin balance falls trade the amount required to keep it open. Spread The difference between the sell quote and the buy quote or the bid and offer price. In order to break even on a trade, a position must move in the direction of the trade by an amount equal to terminology spread. You will need to understand how to properly read a currency pair quote before you start trading them. The exchange rate of two currencies is quoted in a pair, such as the EURUSD or the USDJPY. The reason for this is because in any foreign exchange transaction you are simultaneously buying one currency and selling another. If you were to buy the EURUSD and the euro strengthened against the dollar, you would then be in a profitable trade. In other words, in the example above, you have to pay 1. In other words, in the example above, you will receive 1. An easy way to think about it is like this: So, whether you buy or sell a currency pair, it is always based upon the first currency in the pair; the base currency. The basic point of Forex trading is to buy a currency pair if you think its base currency will appreciate increase in value relative to the quote currency. If you think option base currency will depreciate lose value relative to the quote currency you would sell the pair. Bid Price The bid is the price at which the market or your broker will buy a specific currency pair from you. Thus, at the bid price, a trader can sell the base currency to their broker. Ask Price The ask price is the price at which the market or your broker will sell a specific currency pair to you. Thus, at the ask price you can buy the base currency from your broker. Jump To Next Chapter Part 3: Jump Back To Start Forex Trading Beginners University. Introduction What Is Forex Trading? What is Professional Forex Trading? What is Fundamental Analysis? What is Price Action Trading Analysis? Introduction to Forex Charting. What Is A Forex Trading Option Common Forex trading mistakes and traps. What is Technical Analysis. How to Make a Forex Trading Plan. The Psychology of Forex Trading. Professional Price Action Forex Trading Strategies. Any Advice or information on this website is General Advice Only - It does not take into account your personal circumstances, please do not trade or invest based solely on this information. By Viewing any material or using the information within this site you agree that this is general education material and you will not hold any person or entity responsible for loss or damages resulting from the content or general advice provided here by Learn To Trade The Market Pty Ltd, it's employees, directors or fellow members. Futures, options, and spot currency trading have large potential terminology, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you option afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in any material on this website. The past performance of any trading system or methodology option not necessarily indicative of future results. Forex, Futures, and Options trading has large potential rewards, but also large potential risks. The high degree of leverage can work against you as well as for you. You must be aware of the risks of investing in forex, futures, and options and be willing to accept them in order to trade in these markets. Forex trading involves substantial risk of loss and is not suitable for all investors. Please do not trade with borrowed money or money you cannot afford to lose. Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general trade commentary and does not constitute investment advice. We will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. Please remember that the past performance of any trading system or methodology is not necessarily indicative of future results. Forex Trading Terminology The Forex market comes with its very own set of terms and jargon. Forex Trading Terminology Part 3: Introduction to Forex Charting Part 8: Common Forex trading mistakes and traps Part What is Technical Analysis Part How to Make a Forex Trading Plan Part The Psychology of Forex Trading Part What Is Forex Trading? What is Technical Analysis? Categories Forex Trading Commentary Forex Trading Videos Forex Trading Strategies Forex Trading Articles Trading Lessons Blog Forex Trading Blog Trading Tools. Nial Fuller Learn To Trade Forex Price Trade Trading Nial Fuller Reviews Beginners Forex Trading New York Close Charts Forex Broker. Copyright Learn To Trade The Market.
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