Learn common terms of the forex market

ForexLearn common terms of the forex market

Forex is a global decentralized market for currency trading. The vast profitable opportunities in this market have attracted many investors from all over the world, and this has made Forex known as a large and highly liquid market.

Learning Forex, the concepts and principles of this great market is very important and will continue throughout your trading career.

Understanding the principles of currency exchange, market analysis, trading strategies, risk management and various tools and platforms are among the topics that every trader needs to carry out his trades.

There are various educational resources that financial enthusiasts can easily access for free Forex training.

Working in the forex market requires a lot of knowledge and skills that require training along with practical experience, that is why continuous training is an integral part of working in the forex market.

Familiarity with the concepts and possibilities of this activity can facilitate the process of trading activity and as a result make the process of earning profit smooth for the trader. In this way, training can be considered as an essential part of trading activities in Forex.

In this article we will cover:

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Common terms in forex

Before starting trading activity in forex, it is necessary to familiarize yourself with some common concepts and terms of the market.

In the following, we mention some of the basic concepts necessary to start working in forex.

Currency pairs

Forex transactions include the simultaneous purchase and sale of two currencies.

Each currency pair is represented by a three-letter code such as EUR/USD (Euro/US Dollar) or GBP/JPY (British Pound/Japanese Yen). The first currency in the currency pair is the base and the second currency is the quote.

Forex Participants

Various participants including banks, financial institutions, corporations, governments and individual traders participate in the Forex market.

As an individual trader, you can access the forex market through online platforms provided by brokers.

Market working hours

Forex market works 24 hours a day and five days a week. It starts with the Asian session, then Europe, and after that it is the turn of the American trading market.

The market can experience extreme price fluctuations under the influence of economic events, news releases and geopolitical factors.

Fundamental analysis

Fundamental analysis involves the study of economic indicators, such as GDP, inflation rate, interest rate and employment data to assess the economic health of a country and make informed decisions.

Economic calendars provide information about upcoming events that may affect currency prices.

Technical analysis

Technical analysis involves analyzing price charts, patterns and indicators to identify trends and trading opportunities. Traders use tools such as moving averages, support and resistance levels, and oscillators to analyze historical price data and predict future price movements.

Risk Management

Risk management is very important in forex trading. Traders use techniques such as stop loss to limit potential losses and profit limits to guarantee profits.

It is important to determine your risk tolerance and develop a risk management strategy that suits your trading style.

Education and Resources

There are many educational resources to learn about forex trading. These collections include online courses, webinars, forums, books, and video tutorials.

It’s important to choose credible sources and continually expand your knowledge and skills.

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Control your emotions

Forex trading can be emotionally challenging, especially during periods of market volatility.

Controlling emotions like fear and greed is very important to make rational trading decisions. Establishing discipline and sticking to a trading plan can help manage emotions.

Basic steps to enter the forex market

Before entering the trading activity, collect relevant and specific information for this market. In the following, we will mention the things that you should be aware of for trading activities.

Basic Forex Concepts

Start by understanding the basic concepts in Forex trading, such as currency pairs, bid/ask prices, pips, leverage and margin. Familiarize yourself with the general terms and structure of the market.

Trading Goals and Risk Tolerance

Determine your trading goals and objectives.

Are you looking for long-term investments or short-term trades? Assess your risk tolerance and decide how much capital you want to risk in the forex market.

Training and learning

Take the time to train and learn Forex. Read books, take online courses, watch tutorials and follow reputable forex websites.

Learn about technical and fundamental analysis, trading strategies and risk management.

Choosing a reliable broker

Do your research and choose a reputable forex broker that fits your needs. Consider factors such as regulations, trading platforms, customer support, account types, deposits and fees. Look for brokers with a good history and positive reviews.

Opening an account

After choosing a broker, proceed to open a trading account. Choose the type of account that suits your trading goals and deposit the required funds.

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Demo account

Most brokers offer demo accounts that allow the user to improve their experience in the real market without risk.

The trader can use this opportunity to familiarize himself with the trading platform, test strategies and gain confidence before trading with real money.

Write a trading plan

Create a trading plan that outlines your trading approach, including trading style, time frames, risk management strategies, and entry/exit criteria.

A trading plan helps you stay disciplined and make consistent decisions.

Market Analysis

Learn technical and fundamental analysis to evaluate currency pairs and identify potential trading opportunities.

Use charting tools, indicators, economic calendars and news sources to gather information and make informed trading decisions.

Risk Management

Implement proper risk management techniques to protect your capital. Consider setting a stop loss to limit potential losses and size your position based on your risk tolerance and account balance.

Avoid risking a significant portion of your capital on one trade.

Start trading and evaluate the performance

After you have prepared and practiced enough, you can start trading with real money.

Monitor your trades, review your performance regularly and modify your strategies if necessary. To improve your skills, review the strengths and weaknesses of your past winning and losing trades.

Working in the forex market is a high-risk operation. If the activity in the forex market is started without prior knowledge and training, this risk will be multiplied.

Education and learning in the forex market is a continuous thing and it will always be with they during the operational life of the trader in the forex market.

For this reason, it is necessary to obtain a suitable background of this activity before starting trading activities in the forex market.

In this article, we talked about common concepts and terms in trading activity and pointed out measures that every trader needs to pay attention to before starting the trading process.


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