Stock Trading Terms Guide For Beginners

Forex trading is a fast-paced foreign exchange marketplace, commonly known as FX or forex. From basic concepts like leverage and currency pairs to advanced stock trading terms such as arbitrage and automated trading, each term holds significant value.

Grasping these definitions can give traders, whether beginners or experienced, a competitive edge. The guide below simplifies essential forex terms, offering clear insights to help traders make informed decisions and confidently explore opportunities within the forex market. 

Balance

The balance represents the total funds available after settling all transactions in a trading account. Open positions do not include unrealized losses or profits. 

Bear

The term bear refers to a trader anticipating that the market or a particular currency will decline. Bearish traders take short positions, aiming to profit from the expected decreases. 

Bid Price

The bid price is the lowest price a trader can offer to sell a currency pair. It is always lower than the asking price. The spread, the difference between the bid and ask prices, represents the broker’s margin profit. 

Bull

Traders are categorized as  Bulls based on their market Outlook.  Bulls anticipate a rise in currency prices. Moreover, bull is used widely in the financial market to describe trading strategies and sentiment.

Buy & Sell Order

• A buy limit order is an instruction to purchase the currency pair at a price lower than the current market rate.
• A buy-stop order is placed to buy at a higher price and debate for upward movement. 

Cable

The term cable is a slang used for British pound sterling. It originated between the UK and the USA in the 19th century and was used to transmit exchange rates. 

Volatility 

High volatility presents opportunities for Greater prophets but also comes with increased risks. Understanding market volatility helps traders to develop effective strategies. 

Hedging 

Hedging is one of the vital stock trading terms that, many miles, is the potential loss of opening a position opposite to an existing one. This approach protects investments during uncertain market conditions. 

Stop Loss & Take Profit Orders

• A stop-loss order is placed to limit potential losses by automatically closing a trade when the prices reach a specific level.
• A take-profit order secures profit by closing the trade when the Desire target is achieved.

Major, Minor, & Exotic Pairs

The following are the three categories of forex trading:

Major Pairs: It includes major character currencies, including USD, EUR/USD, or USD/JPY.

Minor Pairs: Do not include USD but other significant currencies regarding AUD/CAD or EUR/GBP. 

Exotic Pairs: Inverse a primary currency from emerging smaller economies such as USD/TRY.