Basics of the Trading – Terminology

trading terminology

In this section, we shall look at the basic aspects of trading terminology and we shall start by running through the basic terminology that is utilized on a daily basis during the trading process. The terms are mentioned in alphabetical order.

Bear – If someone has a negative view of a particular currency and believes that its price willl decrease, they are said to be bearish about that currency.

Bull - If someone has a positive view of a particular currency and believes that its, price will increase, they are said to be bullish about that currency.

Cable - The commonly used term to refer to GBPUSD.

Limit – A limit is placed on a trade so as to exit it after a speculator has gained the expected number of pips.

Long – Trading a currency under the assumption that its price will rise.

Pip – Means price interest point and refers to the smallest digit in any pricing, so if GBPUSD rose from 1.9443 to 1.9450, it rose 7 pips.

Risk Management - Currency trading is a risky business and as a consequence the trader has to adopt strategies to defend his earnings should events go against his method in the trading process. This is called risk management.

Short – Trading a currency under the assumption that its price will fall.

Spread – The range between the buying and selling price on a pair. The spread is what the trading company aims to earn on a trade.

Stop – A stop is what you place on a trade to make sure that if you are losing, you don´t lose too much. You always place a stop on a trade.

Before trading having a strong grasp of this trading terminology is important.