Basics of the Trading - Terminology
In this section, we shall look at the basic aspects of trading 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.