Terminology study with ValidUS

 Welcome back to ValidUS blogs,  

In our last blog, we spoke about the basics of Forex. Today we'll go a little deeper with the technical terms used in Forex, which you should always keep in mind. Given below are a list of trading terms used to denote trading professionally. 


Trading terminologies

Going along - Placing a trade that is going to profit if the exchange rate rises, or in other words, it's simply means buy.

Going short - Sell, placing a trade which is going to profit.

Bulls - Buyers.

Bears - Sellers.

International markets impulse - Sharp move up or down with high trading volume.

Correction or a pullback - A slow move up down or sideways with low volume.

Consolidation  - A sideway move with low volume and no clear direction.

Uptrend - when the price is creating higher highs and higher lows.

Downtrend - is the reverse. When the price creates lower highs and lower lows, the breakout is a break of the current price structure. 

Margin requirement - the amount of money

Bankroll - the total amount of money you have in your trading.


How to trade with leverage, and what is Margin?


 If you trade in small quantities, for example, one year at a time, you would never make any profit. That's why in the forex market, currencies come in lots. Forex is commonly traded in specific amounts, called "Lots", or basically the number of currency units you will buy or sell. "A lot" is a unit measuring a transaction amount. When you place orders on your trading platforms, orders are placed in sizes, quality lots, so a thousand units form one microvolt at ten thousand units form. One milliwatt and hundred thousand units will form one standard volt.


So right now, you're probably thinking I don't have. That kind of money does that mean I shouldn't be trading. This is where leverage comes in. Forex brokers offer up to 500, even 2 000 to 1 leverage, some of them even more. That means that to open one standard load position, you need only to have about 300 dollars in your trading account. 

So let's take a look at this example. The exchange rate for the EU dollar is 1.3. You have your margin set at 0.2 %. You decide to buy one standard lot, so you are buying a hundred thousand euros which is equal to 130000 US dollars, as your current margin is set at 0.2 %. Your broker says site 260 dollars from your account. All this is considered to be a down payment. You will have to borrow the rest of the money to open a position. After you close your position, the cash is returned to you, along with your profit or your loss for the particular trade. So remember: high leverage means you're also susceptible to large losses, as well as large gains, so be cautious.


Difference between Leverage and Margin 

 The textbook interpretation of leverage is having the ability to control a large amount of money using known or very little of your own money and borrowing. The rest from your broker margin is the amount of money needed as a good trust deposit to open a position with your broker. Margin is expressed as a % of the total amount of the position. For example, A lot of forex brokers mention they require two one half or a quarter percent margins. Besides margin requirements, you will notice many other margin terms on your trading platform, such as margin requirement, account, balance, use, margin, usable margin, and margin call. Now, let's discuss the margin requirement. This is easy because we spoke about it. It is the amount of money. Your broker requires to open a position. It is expressed in percentages account balance. 

The account uses margin, or the only margin is the amount of money

 that your broker has secured up to keep your current positions open. While this capital still belongs to you, you can't touch it until your broker gives it back to you when you have manually closed your current positions or when a position is automatically closed by your broker's usable margin. This is the money in your account that is available to open new positions, or you can find it on your trading platforms.  


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