Over-the-counter (OTC) forex trading includes exchanging one currency for another at an agreed-upon price. In one of the biggest and most liquid financial markets, traders may speculate on currency pair prices. To trade Forex using platforms like Sadex Group, you must comprehend basic terminologies and principles. Every trader using Sadex Group or another Forex trading platform should know the following glossary of essential terminology.
● Lot Size
Forex trading lots are standardized quantities of the base currency in a currency pair. Standard lots are 100,000 base currency units, mini lots 10,000, and micro lots 1,000. Trade volume and profit depend on lot size.
● Fourth margin
Sadex Group and other brokers need margin to start and maintain trading positions. As a proportion of the whole position size. Leverage allows traders to hold greater holdings than their margin needs, but there are drawbacks.
● Spread
A currency pair’s spread is the difference between its bid and ask prices. Brokers like Sadex Group profit from transaction costs. Traders desire lower spreads, particularly for high-frequency tactics.
● Base and Quote Currency
Base and quote currencies are used in currency pairs. The EUR/USD pair uses EUR as the base currency and USD as the quotation currency. The exchange rate shows how much quote currency buys one base currency.
● Long/Short Positions
Long positions acquire currency pairs with the anticipation of a rise. Short positions sell a currency pair in hopes of a decline. Both rising and declining markets benefit traders.
● Stop Loss/Take Profit
Stop loss orders immediately close trades if the market goes against the trader. Take profit orders and close trades at a certain price level to profit when the market turns in the trader’s favor.
● Margin Call
A margin call happens when a trader’s account balance drops below the necessary margin owing to open position losses. A margin call from the broker may require traders to deposit more money to retain their holdings. Failure to do so may close deals automatically.
● Technical and Fundamental Analysis
Technical analysis uses historical data and chart patterns to anticipate price moves. However, fundamental analysis investigates economic, political, and social issues that affect currency prices. Traders employ both analyses to make judgments.
● Risk-Reward
The risk-reward ratio compares transaction profit and loss. A good risk-reward ratio means the gain outweighs the danger. Traders use this ratio to evaluate trade setups.
● Demo Account
Brokers like Sadex Group provide demo accounts for traders to test their tactics and learn the platform without risking real money. Beginners may obtain significant experience before trading on the actual market using it.
● Volatility
Volatility measures a trading price series’ fluctuation over time. Price variations provide trading possibilities amid high volatility. It also increases loss risk. Currency pair volatility should be considered by traders.
Anyone trading Forex using Sadex Group or another platform must comprehend these fundamental phrases. Knowing these phrases helps you make judgments, manage risks, and navigate the Forex market. Forex trading requires constant study and practice, like any financial effort. Sadex Group’s educational materials and tools will help you learn and master Forex trading to make smart and lucrative deals.