Basic Terminology Every Forex Trader Should Now

The first time I heard that the market is "bullish", I thought that we were in Spain, with the running of the bulls. I also thought that straddling the market, meant something totally inappropriate to the business world.

Forex Terminology is something that can truly through any novice right out off the bus. That is why I thought I should probably begin with terminology first. I will try and explain the most basic terms, just to give you a boost in the right direction. Trust me when I say that Forex is made easy by knowing these basic terms

Bullish / Bull Market.
This means that there are increases in the market, i.e. the market is moving upwards. If the dollar increases towards the yen, then this would be a bull market.

Bearish / Bear Market.
This means that there are decreases in the market, i.e. the market is moving downwards. If the dollar decreases towards the yen, then this would be a bear market.

Spread.
This is what normally is charged by your broker to enter you into a market. The standerd nowadays seem to be a 3-5 pip spread. This is also a fixed cost so you will not be charged anything extra to enter a certain market. Remember that, for you to make a profit, or break even, you need to make at least the spread asked by your broker.

Pip.
A pip is the amount at which a price of a currency can increase. A 1.2500 to 1.2501 move, is one pip! Make sure that you know where to look to determine the amount of pips you made or lost in a trade as some currencies pip is the 4th decimal point (0.0001) and some is the 2nd decimal point (0.01).

Lots.
When you trade forex you trade in lots. Lots are standard at $100 000.00, though there are mini lots which are $10 000.00.

Leverage.
Leverage is what enables you, as a small investor, to trade such huge volumes on the forex market. Say for instance that your broker gives you leverage of 100:1, what this means is that for every $1000 you have you can trade $100,000, which is 1 standard lot. So if you had $5,000 then you could trade 5 lots. This amount will vary from broker to broker and is normally shown as a ratio.

Margin-call.
This is what happens when you are in a non-profitable trade and you do not have enough security left in your margin account at your broker. When you reach this point, your broker will close some or all open positions, to you from going into a negative account balance.

There are more terms that I will discuss further along the line, and I will go into much more depth into some, but this should get you started on the right road.