Whether you’re a seasoned pro or just getting started in the forex market, you’ll find a lot of jargon when trading currencies. Understanding how to trade the financial markets is an essential skill for anyone who wants to get into this highly profitable but also very complex industry. Working your way through this glossary can help you understand the lingo and get you up to speed so that you can focus on trading rather than reading. It should also help you avoid making rookie mistakes that could leave you stranded without your livelihood. If you don’t know what a word or term means, it might be time to re-think your strategy and ask yourself if you really know what you’re doing. This breakdown of key forex trading terms will help guide you back into the good graces of your forex broker in Brazil — and ultimately, make trading more enjoyable.
Live Charting
Trading on a live exchange involves the use of technical analysis tools to follow the movements of currency pairs and determine their direction. Traders use a variety of indicators including moving averages, RSI, candlesticks, and others to help them spot trends and signals. Searching through financial data using a live chart allows you to see the past price movements of assets to help you spot potential trades. This is known as live charting. If you’d like to use a different trading platform, you can use the live charting features on that platform’s website.
Stop Loss and Target Price
A stop loss is a term you’ll often hear when trading currencies. Here’s a brief definition by an expert forex broker in Brazil: stop loss is a set price or amount you’d like to sell your assets at in order to protect yourself from a potential decline in the price of your investments. Target prices are the other important term you’ll often hear when trading currencies. These are the prices you want to see when buying and selling, or in other words, when taking the long or short position. You can use a stop loss and a target price to protect yourself from a violent market move. If a market dips below your stop loss, you can still sell at the magic number you set up and make money from the drop in price. If the market recovers higher than your target, you can simply buy back in at the previous price and make more profit from the movement of the market.
Leverage and Margin
Leverage is when you increase the amount of money you are trading with. Margin is when you put up money to buy an asset and then borrow money against it to make the trade more lucrative. Therefore, if you bought a stock that was worth $1,000 and loaned yourself $100 to buy it, you would have $900 in your possession and $100 borrowed. When you’re trading with borrowed money, you are actually taking a risk. You might lose some or all of your investment. On the other hand, if you used leverage to buy an asset that is worth $1,000, you would only have $100 in your possession, but you would have made $1,000 by borrowing that money and performing an action that requires a lot of risk taking.
Time Frames for Forex Trading
Forex time frames refer to the time frame within which prices are open for trading. For example, if you have a forex trading platform where you can trade 24 hours a day, 7 days a week, you might find that the markets are open for trading for much longer than that. These time frames also vary depending on the type of trade you are engaging in. For example, if you are interested in a short-term trading strategy, you might only need access to the markets for a few hours. However, if you want to short-circuit a trend or use a trading strategy that may work for months, you will likely need to keep your positions open for much longer periods of time.
