Forex trade terms are essential for making informed trading decisions. Traders can better navigate the market by familiarising themselves with leverage, spread, margin, pips, etc. Risk management strategies like stopping loss orders in heading for their help in minimising losses. Whether a beginner or an experience created, continuous learning and practice are crucial for success in the fast-moving forex market mt4 for ios multiple. Continue reading to learn the details about these trade terms.
How do economic indicators affect forex?
Monitoring economic indicators allows traders to anticipate currency movements. The following are the key economic indicators that influence the currency prices:
- Higher interest rates attract investors while strengthening the currency.
- Strong economic growth or GDP growth leads to a stronger currency.
- High inflation rates can weaken the currency value.
Market Volatility
Volatility measures how much price fluctuates in a given period.
- High volatility means more significant price swings and tremendous profit potential but higher risk.
- Lower volatility means smaller price movements are safer but lower profit opportunities.
Liquidity
Liquidity refers to how easily a currency pair can sell or buy:
- High liquidity means significant pairs like EUR/USD with tight spread and fast trade execution. Such a market is generally the most stable and less prone to large price swings.
- Low liquidity refers to exotic players with a broader spread and lower execution.
Hedging
Hedging involves taking positions to minimise risk. For example:
- If a trader buys EUR/USD and GBP/ USD, they may head against unexpected currency movement.
- While hedging can lower risk
Margin calls
Margin call refers to the condition in which a trader’s account balance declines compared to the required margin level. Ignoring margin calls can result in automatic position liquidation by the broker. To prevent this:
- Monitor trades regularly
- Used stop-loss orders
- Avoid excessive leverage
How do stop-loss and take-orders work?
Both stop-loss and take-orders are essential tools for managing risks in volatile markets. In a stop-loss order, a trade will automatically be closed if the price moves against the traders to prevent excessive losses. While in a take-profit order, trade will be closed once a set profit level is reached.
Bull Vs. Bear
Identifying market trends is crucial for traders as it helps them to make better entry and exit decisions. A strong trend in currency pairs increasing gradually is known as a bull market. A downward Trend, where the prices decline consistently, is called a market.
Lot Size For Determining Trade Value
Trades are measured in lots, which represent the trade size. Traders can choose the lord size based on risk tolerance and account balance. A lot is categorized in three classes:
- Standard lot for measuring 100000 units
- Mini lot for measuring 10000 units
- Micro lot for measuring 1000 unit
Long Vs. Short Positions
A trader’s loss or profit depends on the price move in their predicted direction.
- Buying a currency pair, expecting its value to rise.
- Selling a currency pair, expecting its value to fall.