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Forex Market Fundamentals
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Lot
A standard unit of measurement in Forex trading, representing a fixed amount of a currency.
Currency Pair
Consists of two currencies traded against each other, where the value of one is relative to the other.
Pip
Stands for 'percentage in point' and is the smallest increment of trade in Forex.
Margin
The amount of capital required to open and maintain a leveraged position in the Forex market.
Exchange Rate
The price of one currency expressed in terms of another currency.
Bid Price
The price at which the market (or your broker) is willing to buy a specific currency pair from you.
Spread
The difference between the bid and the ask price of a currency pair in Forex.
Leverage
The use of borrowed capital, such as margin, to increase the potential return of an investment.
Ask Price
The price at which the market (or your broker) is willing to sell a specific currency pair to you.
Volatility
Refers to the frequency and severity with which the market price of a currency pair moves.
Fundamental Analysis
A method of evaluating currencies by analyzing economic data and political conditions to predict currency movements.
Technical Analysis
The study of past market data, primarily through the use of charts, for forecasting future price trends in the Forex market.
Economic Indicator
Statistics that indicate the current state of economic activity and foresee future economic change.
Interest Rate Differential
The difference in interest rates between two countries whose currencies are being compared in a Forex pair.
Carry Trade
A strategy in which an investor borrows money at a low interest rate to invest in an asset that is likely to provide a higher return.
Liquidity
The ability of a currency pair to be bought or sold at stable prices, based on the volume of trading activity.
Over-The-Counter (OTC)
A decentralized market where trading is done directly between two parties without the supervision of an exchange.
Bear Market
A market condition characterized by declining prices and a pessimistic sentiment about the financial future.
Scalping
A trading strategy that involves making dozens or hundreds of trades per day to 'scalp' a small profit from each trade.
Bull Market
A market condition characterized by rising prices and a general optimism about the financial future.
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