Essential Terminologies That Every Trader Should Know

Essential Terminologies That Every Trader Should Know

The Forex industry has gained a high reputation in the business world because of its potentiality. One can quickly earn a handsome amount of profits from the market. At the same time, one can also lose all his capital by making a few wrong mistakes. The later incident occurs mostly because of having insufficient knowledge about the industry. Since there are many beginners on this platform, we are here to help them by introducing a few basic terminologies, which can surely help them to make progress.

Basic terminologies in the Forex market

When an individual enters the industry, the entire platform seems like a labyrinth to them. These guys don’t even understand what is happening. Acquiring knowledge about a few basic terms can help them.

·         Types of the market and trend

This is the first thing that you need to know as a newbie. There are three general types of trend patterns in the industry. They are –

  1. Uptrend or upward movement or bullish movement: It happens when the price of the bought currency increases. The upward movement is considered great for the sellers because if the price increases more, he can make more profits.
  2. Downtrend or downward movement or bearish movement: Bearish flow happens when the price of a purchased currency starts falling. This is good scenery for the buyers. A lower price means that he can buy the currency with less price.  Those who are involved in future trading, must be careful about the extended movement. And they should pick their broker very carefully to minimize the loss. Visit the address  and slowly develop your skill as a currency trader in Singapore.
  3. Sideways direction or ranging market: In this chart type, there are no significant trends. The market moves sideways, and the investors can hardly make any profits from it. Sometimes this pattern fluctuates a few pips.

·         Resistance and support level

After the graph pattern, these two are regarded as the most important terms for the traders in the United Kingdom.

  1. Resistance: Resistance level is the point at which the price of a coin ends its upward journey and starts moving down. In other words, a resistance level is the highest value of a trend. It is considered an ideal level to sell the financial instrument or an ideal exit point.
  2. Support level: It is the spot at which the downward trend ends its journey and starts going up. In other words, a support level is a bottom or the lowest value of a bearish market. It is considered an excellent point to buy a financial instrument or to enter trading.

·         Risk management techniques

Risk management techniques are crucial because of their capability to reduce the possible troubles in the Forex business. One can easily lose all his investment by not adopting money management techniques. Some of the best money management tips are –

  1. The risk to reward ratio: The risk to reward ratio is determined before placing the order. It indicates the possibility of that deal. For example, if the ratio is 1:2, then it indicates that the investor may earn $20 or may lose $10. The net value of the risk: reward ratio should be less than 1. Experts always recommend the juniors to check the risk: reward ratio before trading.
  2. Stop-loss and take-profit limit: Stop-loss and take-profit limits are an automated system. It is a predetermined value. When the graph exceeds the predetermined stop-loss limit, the trade is closed. When it crosses the take-profit limit, the trade is also closed. These limits are set to minimize the losses during a failure.
  3. Trade or volume or lot or position size: This determines the amount of profit or loss a trader want to take based on per pip movement. Professionals always advise beginners to take less size.

These are the basic terminologies in the Forex business world. Before entering the market, we are requesting you to know about these terms. Remember that these are the simplest form, so it is better to know about each of them in brief.

 

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