# A beginner’s guide – the trading terms everyone needs to know Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2018-06-08 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Forex Trading Basics: Must-Know Jargon Terms Meta Description: Discover essential trading jargon like Ask Price, Bid Price, and more to kickstart your forex trading journey with confidence. Read on now! URL: https://financedigest.com/a-beginners-guide-the-trading-terms-everyone-needs-to-knowhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd080618-7-1736842644753-compressed.jpg) **Ben Sparham**, Senior Trader Mentor at Learn to Trade The foreign exchange market sees over $5trillion dollars traded within it every single day. Trading by individuals in this market is also growing in popularity, and we are seeing more and more people getting involved and starting to look at how they might trade themselves from the comfort of their own home. > Trading can be a complex concept, so before you start to trade the forex market, it is important to start with the basics and understand the trading jargon. To help you follow the financial markets with ease, we have pulled together some of the most common trading terminologies that you [need to know](https://www.financedigest.com/ukraine-and-russia-what-you-need-to-know-right-now-3.html "Ukraine and Russia: What you need to know right now") when getting started: **Ask** price: This is the [price at which the market](https://www.financedigest.com/markets-pricing-some-geopolitics-but-risk-premia-can-grow-further-goldman.html "Markets pricing some geopolitics, but risk premia can grow further -Goldman") (or your broker) will sell a specific currency pair to you. This is the [price you can buy](https://www.financedigest.com/rising-oil-prices-buy-iran-time-in-nuclear-talks-officials-say.html "Rising oil prices buy Iran time in nuclear talks, officials say") the base currency from your broker. **Base Currency**: The first currency that is quoted in a currency pair and always has the value of 1. This is always [followed by a second currency in the pair which is called the quote currency and is the amount needed to exchange into 1 unit](https://www.financedigest.com/most-of-bps-whiting-refinery-units-shut-following-fire-sources.html "Most of BP’s Whiting refinery units shut following fire -sources") of the base currency. For example, the Euro is considered the base currency and USD is the quote currency for the EUR/USD pairing. **Bid price:** The bid is the price at which the market (or your broker) will buy a specific currency pair from you. This means that at the bid price, a trader will sell the base currency to their broker. **Candlestick:** One of many visual representations of how an asset (in this case a currency pairing) [value has moved over a set amount of time](https://www.financedigest.com/in-line-transit-time-ultrasonic-flow-meters-sales-are-set-to-be-valued-at-us-337-5-mn-in-2021.html "In-Line Transit Time Ultrasonic Flow Meters sales are set to be valued at US$ 337.5 Mn in 2021"). It is used to denote whether its value has increased or decreased, by how much it has varied over the period (its high and low), and its open and close (the value it started and finished at) over the period of time. **Exchange rate:** This is simply the value of one currency expressed against the other. For example, if EUR/USD is 1.3200, this means that 1 Euro is worth 1.3200 USD. [Forex Broker: A licensed firm that provides traders with access to a trading](https://www.financedigest.com/how-to-trade-forex-and-succeed-as-an-individual.html "How to Trade Forex and Succeed as an Individual") platform on which you buy and sell currencies **Leverage:** This is the ratio of the transactions [size compared to the actual investment](https://www.financedigest.com/railway-bearing-market-size-2021-key-manufacturers-industry-share-investment-opportunities-future-trends-market-impact-revenue-demand-and-analysis-by-forecast-2030.html "Railway Bearing Market Size 2021 Key Manufacturers, Industry Share, Investment Opportunities, Future Trends, Market Impact, Revenue, Demand and Analysis by Forecast 2030") used for margin. Using leverage allows a client to trade without putting up the full amount. For example, if a trader has £1,000 of equity in an account, you can have leverage of £100,000. In this instance they will have leveraged their [account by 100 times](https://www.financedigest.com/now-is-the-time-for-banks-to-introduce-intelligent-account-analysis.html "Now Is the Time for Banks to Introduce Intelligent Account Analysis"), or 100:1, meaning they could make or lose up to 100 times more on each trade. **Margin:** This is the monetary deposit required to open or [maintain a position](https://www.financedigest.com/how-to-maintain-positive-psychology-while-trading.html "How to Maintain Positive Psychology while Trading") (an open trade). A margin can either be called _free_ or _used_. A _used_ margin is the amount in use to maintain an open position, whereas a _free_ margin is the amount available to open new positions. Most brokers will automatically close a trade where a margin balance [falls below the amount required to keep it open](https://www.financedigest.com/dollar-dips-as-job-openings-fall-fed-meeting-in-focus.html "Dollar dips as job openings fall, Fed meeting in focus"), this is called a ‘margin call’. The amount required to maintain an [open position is dependent on the broker and can be 50% of the original margin required to open the trade](https://www.financedigest.com/uaes-adnoc-to-open-swiss-trading-office-next-year.html "UAE’s ADNOC to open Swiss trading office next year"). So for example, if your account has a balance of £1000, and 50% is your broker’s margin requirement, you can have up to £500 margin use at any one time. If it goes over this limit, the broker will usually contact you to advise you to either add more to the account or close the position. **Pip:** A pip is the smallest increment of price movement a currency can make. It is essentially a measurement of a very small percentage change. A pip is always a standardised size and represents the smallest amount that a currency can change. E.g. for GBP/USD 1.34001, the 0.0001 is one pip. **Spread:** The spread is the difference between the [market’s current](https://www.financedigest.com/pharmaceutical-contract-packaging-market-current-impact-to-make-big-changes-2020.html "Pharmaceutical Contract Packaging Market Current Impact to Make Big Changes 2020") price, the buy price and sell price. To break even on a trade, your position must move in the direction of the trade by an amount equal to the spread. When [trading forex](https://www.financedigest.com/how-ai-will-change-forex-trading-forever.html "How AI will change Forex Trading forever"), the spread will be determined by the wider market. **Stop loss:** An instruction you predetermine to the brokerage to automatically buy (close the trade) when the currency value moves down to a specific price, or to sell when the currency value moves up to a specific price. **Finally, when [trading forex you will always be referring to currency](https://www.financedigest.com/forex-trading-how-to-trade-currencies-for-profit.html "Forex Trading: How to Trade Currencies for Profit") pairs so it’s worth getting your head around the following most popular forex pair nicknames:** - USD (U.S. Dollar) – Greenback or Buck - GBP ( [British Pound](https://www.financedigest.com/instant-view-british-pound-up-as-govt-makes-u-turn-on-tax-cut-plan.html "Instant View: British pound up as govt makes U-turn on tax cut plan")) – Sterling - GBP/USD (British Pound / U.S. Dollar pair) – Cable - EUR (Euro) – Single currency or Fiber - USD/ CHF (U.S. Dollar / [Swiss Franc](https://www.financedigest.com/kiwi-hit-by-new-virus-case-souring-risk-sentiment-supports-yen-swiss-franc.html "Kiwi hit by new virus case; souring risk sentiment supports yen, Swiss franc") pair) – Swissy - USD/ CAD (U.S. Dollar / Canadian Dollar pair) – Loonie - AUD/USD (Australian Dollar / U.S. Dollar pair) – Aussie - NZD (New Zealand Dollar) – Kiwi - USD/RUB (U.S. [Dollar / Russian](https://www.financedigest.com/russian-rouble-opens-flat-sticks-to-60-mark-against-u-s-dollar.html "Russian rouble opens flat, sticks to 60-mark against U.S. dollar") Rubble pair) – Barnie - EUR/RUB (Euro / Russian Rubble) – Betty - GBP/JPY (British Pound / Japanese Yen pair) – Guppy or Gopher - EUR/JPY (Euro / Japanese Yen pair) – Euppy (pronounced Yuppy) - USD/JPY (U.S. [Dollar / Japanese Yen](https://www.financedigest.com/dollar-hits-20-yr-high-as-yen-tumbles-on-dovish-bank-of-japan.html "Dollar hits 20-yr high as yen tumbles on dovish Bank of Japan") pair) – Ninja These are some of the fundamental and basic terms everyone needs to know before they start their [forex trading](https://www.financedigest.com/why-cryptocurrency-trading-will-surpass-forex-trading-in-2023.html "Why Cryptocurrency trading will surpass Forex Trading in 2023") journey. Once you have familiarised yourself with this trading jargon, you can begin to focus on the different trading strategies and [trends in order to make a success of trading the forex market](https://www.financedigest.com/amino-acids-market-trends-size-share-growth-forecast-report-2025.html "Amino Acids Market Trends, Size, Share, Growth Forecast Report 2025"). Above all else, it is also worth remembering that when trading, your capital is at risk. You can get help on reading the market, opportunities and risks from Learn to Trade. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---