Forex Beginners Familiarize Yourself with
Terminology at the Start
Beginning anything new is always a daunting task that requires perseverance, patience, and a general feel for the initial steps that are necessary. For a beginner that wishes to learn something about the complex world of foreign exchange trading, the task seems all but impossible at first glance.
There is plenty of information available and a plethora of websites begging for your attention, but where do you start? Like most any investment medium, the keys for eventual success in forex trading reside in preparation, knowledge, experience, and the ability to control one's emotions.
Preparation is your primary objective at this point. It involves reading as much as you can about the topic of forex trading in order to familiarize yourself with the terminology, issues, and principles at the outset so that when you enroll in a free forex course or seek the advice of a professional, the educational material presented will be absorbed since your mind will already be receptive to the information presented.
In order to get you started, here are a few specifics about forex jargon and the market in general:
- Currency Pair: The first principle to get your hands around is that currencies are traded in "pairs". An active market of buyers and sellers, the forex market, assesses the relative strengths and weaknesses of each country's respective economy in order to determine an appropriate exchange rate. In some cases, government officials "peg" of fix the value of the currency versus others in an effort to stabilize their export and import trade.
- Currency Code: The International Organization for Standardization (ISO) sets a three-letter code or symbol for every recognized global currency. For example, "EUR/USD" refers to the Euro and U.S. Dollar currency pair.
- Major Currencies: The major currency pairs consist of the U.S. Dollar and each of seven other currencies. The codes, names and symbols of these eight major currencies are listed below:
- AUD - Australian Dollar ( or "Aussie")
- CAD - Canadian Dollar (or "Loonie")
- EUR - Euro (or "€")
- JPY - Japanese Yen (or "¥")
- GBP - British Pound (or "Sterling" or "£")
- CHF - Swiss Franc (or "Swissie" or "S₣")
- NZD - New Zealand Dollar (or "Kiwi")
- USD - U.S. Dollar (or "Greenback" or "$US")
- Forex Broker: Your online forex broker is your access point to the forex market. This firm has contracted with one or multiple banks in order to trade currencies on the open market. He will usually provide trading software for you to use with his system to execute Buy/Sell orders on your behalf. Your agreement will spell out key rules and limitations for your relationship. It is very important to understand every term and paragraph in this agreement before you begin to risk real money in the market.
- Demo Account: Most all brokers will provide one of these accounts for free. You will be able to practice with "virtual" cash and real time quotes to gain invaluable experience and confidence before risking real capital.
- Real Time Quotes: A forex broker will provide quotes to you for buying and selling a specific currency pair. Since the market changes constantly, these quotes will also change. An example of a quote for "EUR/USD" might be "1.2655/1.2658". The first figure is the "bid" price, and the second figure is the "offer" or "ask" price. The former is for selling, the latter is for buying, and the difference is the "spread", the way the broker is compensated.
-Article by Forextraders.com-