Basic Terms Used in Forex Trade

Basic Terms Used in Forex Trade




These are shared terminologies that define forex trade. The explanations have been simplified to make as much sense as possible to the non specialist forex investor in addition as lay men.

Foreign Exchange Trade

This is a large market where the business of exchanging currencies at a profit is carried out. There is no meeting place and it is consequently not a market in the traditional sense. Most of the deals are negotiated by a network consisting of individual investors, brokerage firms in addition as forex trade companies.

“Interbank”

This refers to a network consisting of investment edges, insurance and re-insurance companies and big corporations. This network serves to manage the risks that arise as a consequence of fluctuating exchange rates.

identify Market

This is the market where one can buy and sell currencies of different countries at the prevailing exchange rate.

Exchange Rate

The exchange rate of one money is measured in terms of that of another country. This brings to the focus the issue of money pairs. money pairs consequence from the pairing of currencies for the purpose of calculating the exchange rate and by extension, easing the calculation of profits to be realized by forex traders. When one money has been sold, it goes without saying that another one has been bought.

Market Maker

This is a pricing specialist who traces the progress of a single money pair. It indicates the readiness of the market to accept the prevailing buying and selling prices. He takes the opposite view such that it becomes had for a subjective to be taken. The market maker, however, has the authority of off-setting the imbalances that exist in the trade in addition as manage them. This ensures stability in the whole of the forex trade. The commission that the market maker earns arises from the difference between the offer value and the bid value. A market maker provides a place for bankers to place their bids. Since these bids are often conflicting in most situations, each party to the transaction feels forced to push for the most reasonable deal.

Dealing Desk

This is the platform for dealing with issues to do with pricing of shares in addition as easing a smooth exchange of both money pairs and information relating to forex exchange. Sometimes a broker may choose to forego the need for the dealing desk. The role of these people is left in the hands of the liquidity providers who are sourced from outside the forex market.

Sell Quote and the Buy Quote

Sell quote is the price at which money is sold. It is the price which is displayed as the bid and it is shown on the left of the transaction board. The buy quote is shown on the right. This is the buying price of the money.

Margin

This is the place that one needs in order to function and continue a position or an account in the forex trade. A fee margin method the complete amount which is obtainable for any willing investor to set afloat new locaiongs.




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