Terminology to Remember in Foreign Exchange Transactions

When you learn a new skill, you need to learn relevant jargon, especially when you want to win the heart of your lover.

As a beginner in foreign exchange trading, you must learn some specific professional terms before making your first trade.

There are some terms that you may already know, but it doesn't hurt to review them again.

What is your leverage? "The man clearly misunderstood the woman's meaning, so he still needs to learn moreforeign exchangeProfessional terminology!

Primary and Secondary Currencies

Foreign exchange transactionsThe eight most commonly used trading currencies (USD, EUR, JPY, GBP, CHF, CAD, NZD, and AUD), also known as major currencies, are the most liquid and commonly used. All other currencies are referred to as secondary currencies.

Base currency

The benchmark currency is the first currency in any currency pair. The currency quotation shows the value of the base currency when measured against the second currency. For example, if the US dollar/The Swiss franc rate is equal to1.6350So, the value of one dollar1.6350Swiss Franc.

In the foreign exchange market, the US dollar is usually considered the "benchmark" currency in quotes, that is, in the quotes of currency pairs, the currency quoted in one US dollar is exchanged with other currencies. The main exceptions to this rule are the pound sterling, euro, Australian dollar, and New Zealand dollar.

Quotation Currency

The quotation currency is the second currency in any currency pair. It is usually called a spread currency, and any unrealized profits or losses are reflected in that currency.

spot

The minimum monetary unit of any currency pair at point. Almost all currency pairs contain5Valid digits, and after the first digit, there are digits after the decimal point, such as euros/USD quotation1.2538. In this case, a point is the fourth decimal place, i.e0.0001. Therefore, if in any currency pair using the US dollar as the quoted currency, nothing is equal to1Cent1/100。

0.1spot

Buying price

The buying price is the price at which the market intends to purchase a certain currency. At this price level, traders are able to sell the benchmark currency. It is displayed on the left side of the currency pair quote.

In pounds sterling/For example, if the pound is/The quotation in US dollars is1.8812/15So the buying price is1.8812. This means that you sell1The price of pounds is1.8812USD.

Selling price

The selling price is the price at which the market intends to sell a specific currency pair. At this price, you can buy the base currency. It is displayed on the right side of the currency pair quote.

For example, the euro/The quotation in US dollars is1.2812/15The selling price is1.2815This means that you purchase1Euro needs to pay1.2815USD.

Buy/Selling spread

The spread is the interest rate difference between the buying price and the selling price. In dealer quotes, the number before the decimal point is usually omitted. For example, in US dollars/The exchange rate of Japanese yen may be118.30/118.34However, verbal quotations may omit the first three digits and say“30/34”In this example, the US dollar/The difference in yen is4Points.

Quotation equation

The format for using exchange rates in the foreign exchange market is as follows:

Base currency/Quotation Currency=Buying price/Selling price

transaction cost

buy/The significant feature of the selling price difference is that it is also the transaction cost required for a complete trading process. Complete trading refers to the implementation of buying(Or sell)When a certain currency is paired, it is sold through hedging(Or buy)The complete trading process of the same currency pair of the same size is called complete trading. For example, the euro/The exchange rate for the US dollar is1.2812/15So the transaction cost is3Points.

The formula for calculating transaction costs is: transaction costs(Spread )=Selling price-Buying price

Cross currency pair

Cross currency pairs refer to currency pairs that do not include the US dollar. An investor conducting a cross currency pair transaction is actually equivalent to conducting two US dollar related transactions. For example, initially buying euros/GBP, which is equivalent to buying euros/USD and sell GBP/USD. Cross currency transactions typically have higher costs.

bond

When you open an account with a foreign exchange broker, you must deposit the minimum funds required by the broker. The minimum funds are only for different traders, but100USD, up to100,000USD.

Every time you make a new transaction, a portion of the funds in your margin account will be used as the initial margin for your transaction. The size of the initial margin depends on the currency pair you are trading in, the current exchange rate, and the number of trading hands. The size of the trading hand always refers to the size of the base currency trading hand.

For example, if you open a200A mini account with multiple leverage, or the margin requirement for this account, is0.5%. Mini accounts trade with mini hands. A mini hand is equal to10,000USD. If you plan to trade a mini deal, you don't need to provide the full amount10,000In US dollars, all you need is50USD is sufficient(10,000dollar*0.5%=50dollar)。

lever

Leverage is a ratio between the capital required for foreign exchange transactions and the required margin. With leverage, foreign exchange investors can utilize relatively small amounts of capital for large-scale foreign exchange transactions. The leverage ratio of foreign exchange margin trading varies depending on different brokers, ranging from2:1reach500:1Unequal.

Now that you have mastered the basic terminology of foreign exchange trading, why not show her different transaction orders?