Forex trading is a promising business today. Though there are risks associated in this business, this trading also ensures good amount of money in comparatively less time. The person who wants to invest into this trading should understand this business conceptually. For this one should be aware of the terminologies associated with this field.

‘Forex’ is an acronym for the Foreign exchange or foreign currency market. This market is similar to what is called as Stock market. The only difference is that the Forex market deals with different international currencies. The market is normalised so that one can trade is the preset currency pairs. When the currency pairs move, the difference is calculated in pips. There are too many factors which affect the Forex trading market. As like the stock market, this Forex trading market also reacts to any vulnerable and delicate situation in the nation. There can be a socioeconomic impact observed.

Let us imagine one scenario. A person is situated in US. The traders situated outside US are not willing to take dollars as according to them, the dollar is reducing. Due to this, more amount of US dollars are needed to be given for same amount of that investor’s money. This can be called as a trail to anticipate the fall in future.

The cases of gold, silver or other precious metals are different. The prices of these are always high. The foreign investors generally prefer to buy these metals than the dollar. The dollar may sink anytime. One has to be very careful in this Forex trading market.
One has to understand the symbols given to the foreign currency pairs. Let us see few examples. A symbol for Pound swiss franc pair could be gbpchf. And the symbol eurgbp is for Euro British pound pair.

As said earlier, the move in any of these pairs can be measured in pips. It is a relative term. One has to see the lot size to calculate the profits earned in the trade. Once a lot size is known, one can simply calculate it with the pips to get the total loss or gains. It is obvious that when the trading lot is bigger, the potential of profit or loss also increases.  With the help of the pips one can compare the trades with the competitors. This is because pips make the things absolute. One need not get bothered about the lot size. For example, when it is said that the move is 50 pips, it is regardless of how much size of lot is traded. This makes the comparison quiet comfortable and easier.

This is applied universally. Thus pips is accepted all across the world. So when a person says “50 pips”, a person from any corner of the world who is dealing in Forex trading market shall understand what is meant by that.

1. Cambodia 3 Diff Unc Paper Note Banknote Currency Lot | myfapturboforex.com says:

   December 14, 2009 at 2:33 am

   [...] Forex terminologies « Trade Real Currency [...]