To better understand the financial market Forex you need to know the meaning of some common terms: trader, broker, Spread, Bid, leverage, Ask, lot, margin call, margin, rollover rates, indicators, risk management and technical analysis.
Trader – It is the finance professional (merchant or negotiator) who buys and sells in the financial market, making daily transactions, with margins of loss and results.
Broker – a word derived from French, means small trader. It may be a natural or legal person, as well as a group of people working mediating in negotiations between the buyer and the seller, by receiving commission.
Spread – is known as the difference between the two rates the price of supply and purchase
Bid – is the price the buyer is willing to pay in the financial market.
Leverage – is an application that achieves a large exposure to a financial market by applying only one relatively small portion of the capital.
Ask – is the price the dealer is willing to sell the base currency for the counter currency.
Lot – is the amount of a given currency pair unit that is operating . A lot = 100,000, a mini batch = 10.000 , a micro batch = 1.000 .
Margin – is a safety value that brokers charge their clients, often this value varies depending on the leverage that was used.
Margin call – is when the dealer negotiates with very high leverage and little money available to cover the margin. Feared by investors.
Rollover rate – is interest rate that is charged or credited to the investor’s account at the end of the trading day . The rollover rate to be deducted or added to the account, you need to negotiate a currency pair in one day and get rid of it the other day.
Indicators – are tools that traders use to facilitate their performance in the Forex market . Used by technical analysts .
Common technical indicators the market:
– Moving Average
– Relative Strength Index.
Risk Management – is the ability to use different financial analysis of trading strategies to reduce exposure to risk.
Technical Analysis – Forex traders have the graphics as analysis features, appearance standards or even indicators to make their decisions.