In the second part of this two-part series, we continue to look at common terms that often confuse those who are just getting started in forex trading.
This is the difference between how much traders pay for a currency pair and how much the seller receives. For example, if the bid price is 1.4005 and the ask price is 1.4009, then the spread is 0.0004 – or 4 pips. Since forex brokers do not charge commissions, the spread is one way that they make money.
Loonie
This is a nickname for the Canadian dollar, which has a picture of a loon on the one dollar coin. For those that are not familiar with lumens, these are iconic water birds found in Canada and throughout North America, with a booming, haunting cry that has come to symbolize the Canadian wilderness. The common loon is the one portrayed on the Canadian one dollar coin – this is the official bird of Ontario, the most populous Canadian province. The Canadian two dollar coin is called a toonie, although this is a made-up name and not a bird.Long and short
These describe two different positions in the forex market – and in other financial and equity markets as well. When a trader has a long position, they have bought a currency pair because they believe its value will rise. With a short position, the trader has sold the currency pair in the belief that its value is likely to drop.Pip
A pip is a small measure of currency pair movement and is equivalent to 1/100 of a basis point. For example, a movement of one cent in a US-denominated currency pair is a move of one basis point, or 100 pips. In fact, a pip is the smallest amount that any currency exchange rate can move.
Spread
This is the difference between how much traders pay for a currency pair and how much the seller receives. For example, if the bid price is 1.4005 and the ask price is 1.4009, then the spread is 0.0004 – or 4 pips. Since forex brokers do not charge commissions, the spread is one way that they make money.Stop loss
A stop loss is a secondary order placed with a primary trade in order to limit risk. For example, a trader could buy a currency pair at 1.4271 with the expectation that it is going to rise. However, they can limit risk by placing a sell order at a level below the price at which they purchased – for example at 1.4250. This limits how much they can lose, since the sell order will execute once the price drops to this level. Similar approaches are available to limit risk when a trader enters a short position.Trend
This is when a currency pair tends to move in a particular direction for an extended period of time – either upward or downward. Following trends is a very popular forex trading strategy, and often involves significant technical analysis to determine when a trend may be underway and when it may be coming to a conclusion.
Editors’ Picks
EUR/USD meets initial support around 1.1800
EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.
GBP/USD bounces off lows, retargets 1.3550
After bottoming out just below the 1.3500 yardstick, GBP/USD now gathers some fresh bids and advances to the 1.3530-1.3540 band in the latter part of Tuesday’s session. Cable’s recovery comes as the Greenback surrenders part of its advance, although it keeps the bullish bias well in place for the day.
USD/JPY is looking for direction around 153.00 with key US data in focus
USD/JPY reversal from 153.70 has been contained above 152.70 on Tuesday. Major currencies are trading within narrow ranges amid thin trading volumes. Investors await the release of the US GDP and PCE Inflation figures to make decisions.
Editors’ Picks
AUD/USD extends the bounce, focus back to 0.7100
AUD/USD adds to Monday’s optimism and approaches the key 0.7100 barrier ahead of the opening bell in Asia. The pair’s positive performance comes as investors keep assessing the hawkish tilt from the RBA Minutes and despite humble gains in the Greenback. Next in Oz will be the Westpac Leading Index and the Wage Price Index.
EUR/USD meets initial support around 1.1800
EUR/USD remains on the back foot, although it has managed to reverse the initial strong pullback toward the 1.1800 region and regain some balance, hovering around the 1.1850 zone as the NA session draws to a close on Tuesday. Moving forward, market participants will now shift their attention to the release of the FOMC Minutes and US hard data on Wednesday.
Gold remains offered below $5,000
Gold stays on the defensive on Tuesday, receding to the sub-$5,000 region per troy ounce on the back of the persistent move higher in the Greenback. The precious metal’s decline is also underpinned by the modest uptick in US Treasury yields across the spectrum.
Ethereum Price Forecast: BitMine extends ETH buying streak, says long-term outlook remains positive
Ethereum (ETH) treasury firm BitMine Immersion continued its weekly purchase of the top altcoin last week after acquiring 45,759 ETH.
UK jobs market weakens, bolstering rate cut hopes
In the UK, the latest jobs report made for difficult reading. Nonetheless, this represents yet another reminder for the Bank of England that they need to act swiftly given the collapse in inflation expected over the coming months.
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