Basic Forex Terminology.
Forex the Greatest Game in Town.

Basic Forex Terminology.

Foreign Exchange, Forex, FX, or Currency Exchange Market:
These are the terms used to describe the trading of world currencies.
A currency trade is the simultaneous buying of one currency and selling of another one.
The currency combination used in the Trade is called a Pair.

OTC or Over The Counter market:
Forex trading is not centralized on an exchange like in the NYSE or the NASDAQ. There is no central market. Transactions are conducted between two counterparts over the phone or an electronic network. Thus the OTC.

Spot Market:
The Forex Trades are called "Spot" simply because the Trade is settled instantaneously. If you trade via the internet, your order is carried out as soon as you click it.

Two Way Market
Or two sided market, this is a market in which market makers or specialists are required to give both a firm Bid and a firm Ask for each security or pair of currencies, for which they make a market.
In other words, those making the market must be willing to both buy and sell, at the prices they quote.
The theory is that this helps to enhance liquidity and market efficiency.

Broker:
An individual or a firm that brings together buyers and sellers regarding an asset for a commission, without taking a position in the asset to be exchanged

F.C.M.
This is an acronym for Futures Commission Merchant. Brokers are F.C.M.'s.

Account
The Financial Value a Trader holds with a Broker. Like an account we open with a Bank for future Transactions handled through the Bank.

Portfolio
The Value of the group of Lots of currency pairs a trader holds, financed from his leveraged account with the Broker.

Par
This is the contemporaneous value of starting balance, collected interest and closed trades of a Portfolio.

Equity
This is the starting balance, collected interest, closed trades and open trades of a Portfolio.

Draw Down
This is when a trade looses money, which is out of the account permanently.

Unrealized Loss
This is a temporary loss that could be recovered if the Market changes direction.

Over Trading
This is trading too many Lots for the current account size.

Leverage
The use of various financial instruments or borrowed capital, such as Margin, to increase the potential return of an investment.
Leverage helps both the investor and the broker to invest or operate.
It however comes with greater risk.
If an investor uses leverage to make an investment and the investment moves against the investor, his loss is obviously leveraged as well to a much bigger loss than it would have been without the leverage.
The leverage magnifies not only the gains but also the losses.
Most companies use debt to finance their operations. By doing so they increase their leverage because they can invest in business operations without increasing their equity.
Leverage in the Forex can be 1:100, 1:200. Even 1:400 for heavy traders.

In our page "Basic Forex Terminology" we did refer only to the Terms relating to our Investing Strategy.

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The Basic Forex Terminology in our Site was gathered from various articles and the help of the FreeDictionary and Wikipedia..

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