Before you invest in forex, it's a good idea to first identify the terms in forex. Investment is one of the financial steps that a person can take to get a profit (return) in the future.
There are several types of investments that can be made, ranging from saving, deposits, mutual funds, stock markets, crypto assets to buy other assets that have the potential to have added value in the future.
In addition to the types of investments that have been mentioned, there are other ways that you can do to get profits, namely buying and selling activities in the financial market or commonly called trading.
To trade, you can take advantage of stock market instruments, crypto assets, and foreign exchange (forex). All types of activity in the financial markets are basically good.
You need to understand your own personal risk profile and the financial goals you want to achieve in the future before engaging in these activities because it’s the most important thing to do.
Of the several financial instruments that have been mentioned, it turns out that there are still many people who do not know about forex and the terms in forex.
Forex is an activity of foreign currency exchange which occur globally. The volume of its transactions is greater than stock trading.
This is because many people have to carry out various transaction needs, such as debt payments, exports, imports, and travel abroad. In addition to these needs, forex is also a traded asset.Forex trading, as this activity is called, has high volatility due to rapid price fluctuations. Thus, this instrument has a high rate of return for profits and a high risk of loss as well.
Terms in Forex to Learn
Before trading, it's a good idea to know the basic terms used in forex transactions, such as some of the terms described below:
1. Type of transaction
To trade, you must understand the various types of forex transactions. There are several types of transactions provided, including spot forex, forward transactions, swap transactions, options transactions, and futures transactions.
2. Leverage
Leverage is one of terms in forex which is a loan facility provided by a broker or broker to a trader. Its function is to increase the purchasing power or the trader's capital in a certain proportion. The amount of leverage starts from 1:20, 1:50, 1:100, 1:1,000, and so on.
3. Margin
To do leverage, traders usually have to provide a certain amount of money as collateral for transactions.
An easy example, if you want to use the 1:100 leverage facility, you are required to have a margin of 1 percent. In other words, you as a trader must provide capital of at least 1 percent of the value of the funds you want to trade.
4. Lot and pip
Some people are familiar with ‘lot’ term from the stock market. Despite having the same name, lots in the stock market and terms in forex have different transaction volumes.
One standard lot in forex represents 100,000 contract sizes. You will also find 1 mini lot or 0.1 standard lot representing 10,000 contract sizes.
Pip is the smallest unit of price change in this business. Generally, pips are calculated from the four digits after the comma. For example, if the EUR/USD currency pair you are investing in falls from 1.1645 to 1.1635, there is a 10 pips decrease.
You can also learn more about forex as well as choose the best forex broker to trade with. This way, your transaction will be safe and you don’t need to worry.
Choose a broker that is legal and has obtained permission from the Commodity Futures Trading Regulatory Agency (CoFTRA) and has a separate customer fund account such as Didimax Forex broker.
Those are some terms that you must know if you want to start trading forex. Learning the strategies must be started with learning the terms in forex.
