What is leverage in the Forex market?
In the Forex market, leverage is one of the main tools used by traders to increase the power of capital and enable them to open larger trades with a greater value compared to the real capital they own. Leverage works by enabling the trader to borrow capital from the broker, allowing him to open larger trades with a value greater than the actual capital he has.
What is margin in the Forex market?
In the Forex market, the term margin refers to the cash deposits that a trader must provide as collateral to open and maintain his open trades. Margin is calculated as a percentage of the total transaction value, and is used to cover any potential losses that the trader may incur.
What is the spread in the Forex market?
In the Forex market, the term spread refers to the difference between the buy price and the sell price of a currency pair. Spread is one of the main factors that a trader should take into consideration when choosing a Forex broker, as the spread affects the cost of trading and potential profits.
What is bull and bear in the Forex market?
In the Forex market, the term bull refers to traders who expect the price of a currency pair to rise. The bull believes that there is an opportunity to make profits when buying the currency pair and later selling it at a higher price.
In contrast, the term bear refers to traders who expect the price of a currency pair to decline. The bear believes that there is an opportunity to make profits when selling the currency pair and later buying it at a lower price.
What is a currency pair in the Forex market?
In the Forex market, currencies are always traded in pairs. A currency pair is represented by two different currencies separated by a dash (/), such as EUR/USD or GBP/JPY. The value of a currency pair is determined by the exchange rate of the two different currencies and the market direction is determined according to the price movement of the pair.
In short, leverage, margin, spread, bull, bear and currency pair are key terms in the Forex market. Understanding these basic concepts will help you understand and analyze the market and make informed investment decisions.
