Forex Basic Definitions For Canadian Traders

Forex trading can be overwhelming for beginners. Here's a quick breakdown of the basic definitions and new forex trading FX.

What is Forex?

Forex refers to foreign exchange market, the largest financial market in the world. Different currencies in the world are bought, sold and marketed with the hope that fluctuations in exchange rates will be fruitful for buyers and sellers.

Persons or organizations recognized by the Commission US Commodities future trading (CFTC) to trade in futures and receive money from clients to their business, called the Futures Commission Merchants (FCM). GCF of similar dealers.

Currency trading platform used by buyers and sellers is called the electronic communications network (ECN). Stock market as REC, REC currency to exchange, buy and bid in real time around the world.

Exchange rate

The exchange rate is determined by the value of one currency against another. An exchange will normally be represented by the ISO currency codes written as currency pairs. Take a look at this example:

EUR / USD 1.3400

EUR and USD are the currency codes, which means one million euro and the dollar means the U.S. dollar. Together they are the currency pair. The first listed currency pair is called the base currency, but this term can also refer to your account, the money exchanged in the second currency is called the counter currency. The exchange rate is an example of 1.3400. This means that 1 euro is worth $ 1.34.

There are many ISO codes for currencies, but here are some of the most commonly traded:

AUD - Australian Dollar

CAD - Canadian Dollar

CHF - Swiss Franc

EUR - Euro

GBP - Pound Sterling

JPY - Japanese Yen

NZD - New Zealand Dollars United States

USD - U.S. Dollars

Some currency pairs are also commonly traded than others. Many Forex brokers and dealers to use the jargon of these pairs, the following:

AUD / USD - "Aussie"

EUR / USD - "Euro"

GBP / USD - "Cable" or "Sterling"

NZD / USD - "Kiwi"

USD / CAD - "Dollar Canada"

USD / CHF - "Swissy"

USD / JPY - "Dollar Yen"

Pip value

A pip is the increment of the most common currencies. It is the smallest difference in value in the price of a currency pair and is usually in the last decimal. Pip positive or negative is how you calculate your gain or loss. For example, if your EUR / USD 1.3400 is the EUR / USD 1.3401 as prices rose a peep.

Value of the PIP can be fixed or variable depending on the base currency of your account or currency pair you are trading. Value of the pip EUR / USD will still be $ 10 for standard lots and $ 1 for mini-lots. To calculate the pip value of the currency you buy, divide a pip of the exchange rate and multiply it by the lot size. Pip value conversion of the value of your currency is just as easy, simply multiply the pip value of your currency.

Very

The standard size per transaction is designated as the party. Typically, the lot size is 100 000 units of base currency. A mini lot is only 10,000 units, and some Forex brokers even allow you to negotiate micro lots of 1,000 units throughout a unit. To have a mini or micro account requires less investment than a regular account.

Spill

The difference between the quoted buy and sell the quote is known to spread. Look at this example:

EUR / USD 1.3401/01

The difference in our spread is one pip. For forex traders to break even, they must move their position in the direction of trade. They should move up to the sum of the spread.

Leverage

Borrow funds to take advantage of your account is what is known as leverage. By increasing leverage, traders can win or lose more money. To calculate the leverage ratio, divide your total open positions by your account equity. If you have $ 1,000 in your account and open a $ 100,000 position, you get 100 times or 100:1.

The deposit required to open or maintain a higher position is called margin. In the example above, you have a margin of 1%.

Sample

Nobody likes to lose, but if you do not, amount of equity lost in a series of operations is called a withdrawal. Drawdown is the peak-through measurement is usually expressed as a percentage. If you start to lose $ 10,000 and $ 2.500 for a day and the next $ 2,500, then your account would be $ 5,000 and would have left 50% of the withdrawal. It is not what you want to trade the FX transaction.