Forex Basics (4). Basic Forex Definitions

Forex Basics (4). Basic Forex Definitions
Forex Basics (4). Basic Forex Definitions


Basic Forex Definitions

Before entering into forex trading, a trader should be familiar with the following terms:


Base currency

It is known as the pricing currency. The first currency is called the base currency, while the second currency is called the base currency. When setting rates for currency pairs, The currency pair shows you how much of the quote currency you need to pay against the base currency.

Example: If you are trading EUR/USD, and the price is at 3500.1, this means that you get one euro against 35.1 US dollars. Therefore, the base currency is always equal to one unit in trading. The dominant base currencies on the foreign exchange market, according to the frequency of use, are The euro, the pound sterling, and the US dollar.


Pricing currency

The quote currency is the currency mentioned second in the currency pair. In the case of direct pricing, the pricing currency is foreign


Major and minor currencies

The number of major currencies in the forex market is 7, and they are the most widely traded. These seven aunts make up the majority.

The global trading volume on currencies. Also, the major currencies are what provide the market with liquidity.


The list below includes the seven major currencies: Majors

1. US Dollar (USD)

2. European Euro (EUR)

3. Pound sterling (GBP)

4. Japanese Yen (JPY)

5. Swiss franc (CHF)

6. Canadian dollar (CAD)

7. Australian dollar (AUD)

Any other currency is referred to as a secondary currency.


Currencies not traded in the exchange markets

In general, they are not commonly traded currencies in the foreign exchange market. Uncirculated currencies are usually sourced in developing countries, such as Asia, the Pacific, the Middle East, and Africa. It's hard to trade these currencies, as they do not have the same degree of liquidity and activity available for the major currencies in the forex market.


The Point

The smallest unit of change within which a currency pair can move. In the forex world, we trade currencies in very small units, Parts of a cent or a euro, etc. All currency pairs consist of 5 significant numbers. And the world falls For most pairs, the decimal point is immediately after the first digit, followed by 4 decimal places, for example, in the EUR/EUR pair One US dollar is equivalent to 3377.1. In this example, the point of the smallest change is in the fourth digit after the sign. decimal point, equal to one point: 0001.0. Therefore, if the quote currency in any pair is the US dollar, Then one point is equal to 1/100 of a cent. The only exception here is in the USD/JPY pair Japanese, so one point is 01.0 US dollars.

Numeric example: 

You buy EUR/USD, and its quote comes with five digits, four of which are real. Behind the decimal point, that is, the price: is 3530.1, and you sell later at 3542.1. This is the difference. On the point system, it is +12 points, or 0012.

However, in the case of USD/JPY, the point in this pair occurs after two digits. Twenty only. Therefore, if you buy the USD/JPY pair at 51.110, and then it goes down to 31.110 and at that point you sold, the difference here will be -20 pips or 20 pips loss. What determines your profit/loss accounts is the difference in trading points.


Offer price

Forex quotes are shown in two prices, which are “supply” and “demand”. The bid price represents the price at which a manufacturer would prepare The market buys a currency pair, which is the price at which the trader (seller) can sell the base currency to the market maker. The bid price is shown to the left of the currency pair quote. For example, the EUR/USD rate is 14/3811.1, and the bid price is 3811.1. This means that the trader can sell 1 EUR for 3811.1 dollars.


Asking price

Forex quotes are shown in two prices, which are “supply” and “demand”. Asking price, which is the price at which a manufacturer sells Market Currency pair, i.e. the price that a trader (buyer) buys for the base currency from the market maker. The ask price exists On the right side of the pricing. For example, in the EUR/USD rate, 3811.1 14 The order is 3814.1. This means that the trader can buy 1 euro at 3814.1 dollars. The asking price is also known Offer price.


Spread = transaction cost.


The difference between the bid and ask price in a currency pair is known as “Spread Dealing.” There are two prices for each pair. currency. 

The spread is what the market maker wants to buy from the trader, and what the market maker needs to sell a pair of the trader's spreads represents the profit the market maker earns. In general, the lower the spread, the better it is Forex. The controversial feature of the difference between the bid and ask price (spread) is that it is the same as the transaction price. Necessary to end the buying and selling process. The full turn (meaning the process of buying or selling, or offsetting the process of Selling (or buying) of the same size of the same currency pair.

Most forex brokers do not charge a commission, but they make money based on the difference between the bid price. and demand. The difference between the bid and ask price is known as “Spread Dealing” at the present time. In normal market conditions, the difference between the bid and ask price should not be more than 3 points (0003.0.)

Example: In the case of the EUR/USD pair, with a rate of 15/3812.1, the transaction cost here is 3 pips.


And now forex brokerage firms offer modern electronic communication networks (ECNs). easily get the best spread between supply and demand but at the same time companies that supply you with that technology charge a commission on your use of the ECN, as the system for executing your trades. Inquire about the cost of the systems for executing trades from The brokerage company (the broker) that you deal with, these systems are supposed to offer you the best overall transaction cost (the cost of It is the difference between supply and demand, plus commission.


Cross Currencies (Hybrid)

Cross or cross currencies are currency pairs that do not include the US dollar as one of the two currencies of the trading pair. Here, one foreign currency is exchanged for another, without the need to convert currencies into US dollars first. Traditionally, before converting an amount of money from one currency to another, the trader is required to convert the money he has into dollars. US dollars, and then convert it to the currency he desires. Thus, the cross-currency helps traders to create to help individuals convert additional steps. For example, they cross EUR/CHF, their money directly, without resorting to the US dollar.


Cross exchange rate

The cross rate is the rate of exchange between two currencies, both of which are not the official currency of the country in which the rate is set. Exchange. For example: If the exchange rate between the British pound and the Japanese yen is mentioned in a newspaper In the US, this is considered a cross-price, as the British pound, and the Japanese yen, is the official currency of the United States. but If the exchange rate between the British pound and the US dollar is mentioned in the same newspaper, that is not the price crossed. Conditions are not met, as the US dollar is the official currency of the United States.


Margin

Margin is the money needed to open or maintain a position. Banks or brokerage firms need insurance, to ensure that The trader is able to pay in the event of a loss.


Currency abbreviations


US dollar                              USD

euro                                      EUR

sterling                                 GBP

Japanese Yen                        JPY

Swiss franc                          CHF

Canadian dollar                   CAD

Australian dollar                  AUD

New Zealand dollar             NZD

Afghani Afghani                  AFN

Lake Albany                        ALL

Algerian dinar                     DZD

Angolan kwanza                 AOA

Argentine peso                    ARS

Armenian dram                   AMD

Aruba Florence                   AWG

Australian dollar                 AUD

New Azerbaijani manat      AZN

Bahamian dollar                 BSD  

Bahraini dinar                    BHD

Bangladeshi taka                BDT

Barbadian dollar                BBD 

Belarusian ruble                BYR

Belize Dollar                     BZD

Bermudian dollar              BMD

Bhutanese Ngultrum         BTN  

Bolivian Boliviano            BOB 

Bosnian Mark                    BAM       

Botswana polyuria             BWP             

Brazilian Lira                    BRL    

Brunei Dollar                    BND              

Bulgarian lev                    BGN         

Burundian franc                BIF

West African Franc           XOF

Central African Franc        XAF

pf group franc                        XPF

Cambodian Riyal                      KHP

Canadian Dollar CAD                CAD

Cape Verde Islands Escudo CVE        CVE              

Cayman Islands Dollar KYD           KYD

Chilean Peso CLP                         CLP

Chinese Yuan/CNY  Renminbi         CNY            

Colombian Peso                         COP

Comorian Franc                         KMF

Congolese franc                         CDF

Costa Rican Colon                     CRC

Croatian Kuna                            HRK

Cuban Convertible Peso             CUC

Cuban Peso                                 CUP

Czech Corona                             CZK

Danish Krone                             DKK

Djiboutian franc                          DJF

Peso Dominican Republic          DOP

East Caribbean Dollar                XCD

Egyptian Pound                          EGP

Salvadoran colon                        SVC 

Ethiopian Birr                             ETB

euro                                             EUR

Falkland Islands Pound (Malvinas)     FKP

Fiji dollar                                    FJD

Gambian Dalasi                          GMD

Irrigation Georgian                     GEL

Ghanaian new sir                        GHS

Gibraltar Pound                          GIP

Quetzal Gualtimali                     GTQ

Guinean franc                             GNF             

Guyanese dollar                          GYD

Haitian Gourde                           HTG

Honduran Lamp                          HNL

Hong Kong Dollar                      HKD

Hungarian forint                         HUF

Icelandic krona                            ISK

Indian Rupee                               INR 

Indonesian rupiah                       IDR

Iranian riyals                               IRR

Iraqi Dinar                                  IQD

Israeli Shekel                              ILS

Jamaican Dollar                          JMD

Japanese Yen                              JPY

Jordanian Dinar                          JOD

Kazakhstani tenge                      KZT

Kenyan shilling                          KES

Kuwaiti dinar                             KWD

Kyrgyzstani som                        KGS 

Cape Alloy                                 LAK

LL                                              LBP

Lotte Lesotho                            LSL

Liberian dollar                          LRD

Libyan dinar                             LYD

Lithuanian Litas                       LTL

Macanese Pataca                      MOP

Macedonian Dinar                    MKD

Malagasy ariary                        MGA

Malawian Kwacha                   MWK

Malaysian Ringgit                   MYR

Maldivian Rufiyaa                   MVR

Mauritanian ouguiya                MRO

Mauritian rupee                        MUR

Mexican Peso                           MXN

Moldovan Leu                          MDL

Mongolian Tugrik                    MNT

Moroccan dirham                     MAD

New Mozambican Metical       MZN

Myanmar Kyat                         MMK

Dutch Antillean Guilder           ANG

Namibian dollar                       NAD

Nepalese rupee                         NPR

New Zealand dollar                  NZD

Cordoba Oro Nicaragua            NIO

Nigerian Naira                           NGN

North Korean Won                    KPW

Norwegian krone                       NOK

Omani Rial                                OMR

Pakistani Rupee                         PKR

Panamanian Balboa                   PAB

Kina Papua New Guinea           PGK

Paraguayan Guarani                  PYG 

New Peruvian Sol                     PEN

Philippine Peso                         PHP

zloty                                          PLN  

Qatari riyal                                QAR

New Romanian leu                   RON

Rwandan Franc                         RWF

Tala Samui                                WST

Dobra Sao Tome and Principe  STD

Saudi Riyals                             SAR      

Serbian Dinar                           RSD

Seychellois rupee                     SCR

Leone Sierra Leonean              SLL

Singapore dollar                       SGD

Solomon Islands dollar            SBD

Somali Shilling                        SOS

South African Rand                 ZAR

South Korean Won                  KRW

Sri Lankan Rupee                   LKR

Saint Helena pound                 SHP

Sudanese pound                      SDG

Surinamese dollar                   SRD

Swazi Lilangeni                      SZL

Swedish Krona                       SEK

Syrian pound                          SYP

New Taiwan dollar                TWD

Tanzanian Shilling                 TZS

Thai Baht                               THB

Tongan Banga                        TOP 

Trinidad and Tobago dollar    TTD

Tunisian Dinar                        TND

New Turkish Lira                    TRY 

Turkmenistan Manat               TMT

Ugandan Shilling                    UGX

Ukrainian hryvnia                   UAH

Uruguayan Peso                      UYU

UAE Dirham                          AED

Vatu Vanuatu                          VUV

Venezuelan Bolivar                VEF

Vietnamese Dong                  VND

Yemeni riyals                         YER     

Zambian Kwacha                  ZMV

Zimbabwe dollar                  ZWL

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