People new to Forex may be frightened away by unknown and sometimes weird sounding terms and words. Before start trading you must be familiarly acquainted with particular terms. Some of the following terms may be unknown to you.




MAJORS AND MINORS



Majors or major currencies are the most popular and most frequently traded ones. They include USD, EUR, GBP, JPY, CHF, NZD, CAD, and AUD). All other currencies are called minor currencies or minors. It is considered that minor currencies are for professional traders only. These pairs are referred to as the most liquid and attractive.



BASE AND QUOTE CURRENCIES



The first currency in any pair is called base currency. It shows the value of base currency against second currency. In Forex trading, the USD is generally considered to be base currency for quotes what means that quotes are expressed as a 1 USD unit per the other currency in the pair. Euro, British pound, New Zealand and Australian dollarsare the exceptions to this rule. Second currency is referred to as quote currency in any currency pair. It is also called pip currency and all unrealized profits or losses are expressed in it.



BID/ASK PRICES



Bid price is the price of the market to buy a certain currency pair on Forex. This price is considered to be the price for selling the base currency. It is indicated on the left of the quotation.



Ask price is the price of the market to sell a certain currency pair on Forex. This price is considered to be the price for buying the base currency. It is indicated on the right of the quotation.



SPREAD



Spread is the difference between buying (bid) and selling (ask) prices.



MARGIN



While opening margin accounts on Forex, you make a minimum deposit of money. The amount of this deposit if different in different broker companies and can be from $100 to $100,000.Every time you execute a trade, a percentage of balance on your account in the margin account is laid aside being initial margin requirement of a new trade and it is based upon underlying currency pair, the actual price, and quantity of lots traded. The size of a lot always refers to the base currency.



LEVERAGE



The ratio of the capital necessary for a transaction to the required deposit (margin) is called leverage. Leverage is used to control huge dollar amounts of securities with relatively small capital amounts. Leverage varies considerably with different brokers from 2:1 to 400:1.



MARGIN CALL



Margin call occurs on your trading terminal when broker notifies you about the fall of margin deposits below the required level after an open position moved against you. Margin trading can be a profitable investment strategy and it is vitally important to take time for understanding the risks. Be sure to fully understand the process of the margin account operation, and obligatory read the margin agreement provided by your broker. In case of unclear points in the agreement do always ask questions.