- Currencies are traded in currency pairs - for example EUR/USD. In this case, EUR is the base currency and USD is thequote or counter currency.
- When you buy the EUR/USD currency pair, you are simultaneously buying euros and selling an equivalent amount in US dollars. When selling EUR/USD, you are selling euros and buying USD.
- Exchange rates for currency pairs are displayed with both a bid price (what you receive when selling) and an ask price (what you pay when buying).
- The difference between the bid price and the ask price is known as the spread.
- "Pip" stands for "price interest point" and is equal to 0.01 for exchange rates expressed to two decimal places. For rates expressed to four decimal places, one pip is equal to 0.0001.
- Some brokers offer an additional digit of precision for certain exchange rates. This extra digit is commonly referred to as a "fractional pip".
- Buy = to take a long position. Sell = to take a short position.
- To close a position, you need to buy or sell an equal amount of the open order, thereby reducing the open position to zero.
- Unrealized gains / losses are the profits or losses that would result if an open position were closed at the current exchange rate. Once the position is closed, gains and losses are said to be realized.
- An end-of-day rollover - or rollover swap, is used by most forex brokers to close out an open position at the end of the business day. A new position is automatically created for the next business day and the net interest (interest earned minus interest paid) is calculated for the open position at the time of the rollover.
Thursday, June 11, 2015
Forex Training Summary and Quiz
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