Below is a glossary of terms that are used in the online trading industry. Select the first letter of the word you are seeking from the list above to jump to the appropriate section of the glossary.
What are major currency pairs?
Foreign currencies are always traded in pairs – the value of one currency compared to a counterpart. Major currency pairs match up the U.S. dollar with each of the other six major currencies – the euro, Japanese yen, British pound, Swiss franc, Canadian dollar, Australian dollar. And New Zealand dollar. The following seven currency pairs are the most commonly traded, and the most active on global forex markets:
Of these pairs, the EUR/USD is by far the most commonly traded pair, reaching a full one-third of the global forex market.
How does one use major currency pairs?
Traders follow the various factors that affect currency prices, including economic announcements, geopolitical events, and even global weather, in order to determine which currencies they wish to buy or sell at any given time. The major currency pairs tend to be the most volatile, and therefore the most commonly traded upon. The Fortrade website offers all of the major pairs from which traders can choose.
In financial markets, margin refers to the required collateral an investor must deposit to hold a trading position in a security or financial instrument.
What is a Margin call?
If a trader or investor has an account that has fallen below the brokerage’s minimum margin requirement, then the brokerage can place a margin call on the account, in which case the investor would have to either deposit additional funds into his account, or sell off some of the shares he is holding for which he took a loan in order to invest to begin with. Barring that, the brokerage has the authority to sell some of the investor’s shares, even without his permission, to make up the difference.
For example, if a trader wishes to purchase 500 shares of a stock that costs $50 per share. If the trader does not have the $25,000 necessary to purchase those shares, he may put up half of the amount from his own equity, and borrow the other half from the brokerage. Most brokerages require a maintenance margin of 25%, which is to say that the equity value – the amount that the trader put up for the shares, must be at least 25% of the total value of the shares. If the stock proves to be a wise investment, and increases in value, the investor can earn a tidy sum, and repay his loan to the brokerage. However, imagine the value of the stock falls to $30 – the initial investment of $25,000 is now worth only $15,000. The amount loaned by the brokerage remains the same, but the equity invested by the trader is now worth only $2,500, which is below the maintenance margin of $3,750 (25% of the current $15,000 value).
Now, the brokerage can ( and likely will) make a margin call, requiring the trader to either deposit additional funds into the account, or sell off whatever percentage of the shares would be needed to bring the account to within the range of the maintenance margin.
How do margin calls affect forex traders?
Forex and CFD traders often invest on margin, or leverage, thus enabling them to see higher earnings on their initial investments. However, when their investments fall short of expectations, they need to be aware of the maintenance margins, and the potential consequences on their holdings.
What is market capitalization?
Market capitalization is the monetary amount that a publicly traded company is worth, as determined by the value of the company’s outstanding shares. The market capitalization is calculated by the value of one company share times the number of outstanding shares (shares held by stockholders). For example, a company that has 3 million outstanding shares that are valued at $45 per share, will have a market capitalization of $105 million dollars.
How does market capitalization affect forex traders?
|Company ranking||Market capitalization||Risk vs. Potential returns|
|Large capitalization companies||$10 billion or more||Lower risk, lower potential returns|
|Mid-capitalization companies||$2 billion – $10 billion||Moderate risk, moderate potential returns|
|Small capitalization companies||$300 million – $2 billion||Higher risk, higher potential returns|
An investment company or broker who maintains firm bid and ask prices in a given security or financial instrument by continuously standing ready to buy or sell that same security at its publicly-quoted price.
An order to buy or sell at the current market price.
The possibly that the value of a security of financial instrument will experience losses due to performance factors such as adverse price movements, national or global macroeconomic changes. Also called “systematic risk”.
The maximum amount of funds that can be allocated for a long or short position according to the specific trading requirements of a security or financial instrument a trader wishes to trade on.
What is MetaTrader 4?
MetaTrader 4 (MT4) is a popular forex trading platform used by many leading online brokers use the technology, including Fortrade.com. The MT4 can be downloaded for free and provides an effective tool for trading forex, futures markets and CFDs online, both from a PC as well as from tablets and smartphones. The platform offers trading signals and expert analytics, which enable users to develop effective trading strategies. The platform can be accessed from anywhere that there is an internet connection.
How does one use MetaTrader 4?
Once the MT4 has been downloaded and customized to the trader’s preferences, trading forex is with MT4 is fairly straightforward. Under the “Market Watch” column, choose the currency that you wish to trade (the Buy and Sell prices are clearly marked). A separate window will open enabling you to choose the volume that you wish you buy or sell. Fill out the details of the transaction that you wish to make, and click on either the buy or sell button. The MT4 will keep track of all executed transactions for you. When buying and selling, the MT4 also enables you to place Stop Loss and Take Profit orders. On Fortrade.com, the MT4 can be downloaded here.
Mini Contracts For Difference (CFDs) provide a lower lot size than their base indices. This allows traders to buy and sell popular index CFDs with less capital investment.
Fortrade offers “mini” CFDs on the following indices:
|Index||Symbol||Lot Size||Mini Contract||Symbol||Lot Size|
|CAC 40||CAC40||100||CAC 40 mini||CAC40-m||10|
|Germany 30||GER30||100||Germany 30 mini||GER30-m||10|
|FTSE 100||FTSE 100||100||FTSE 100 mini||FTSE 100-m||10|
|Dow 30||DJ30||100||Dow 30 mini||DJ30-m||10|
|NASDAQ 100||NASDAQ100||100||NASDAQ 100 mini||NASDAQ100-m||10|
|S&P 500||S&P500||100||S&P 500 mini||S&P500-m||10|
The minimum amount of funds that can be allocated for a long or short position according to the trading requirements of a certain security or financial instrument. May also vary according to a trader’s specific account balance.
What are minor currency pairs?
Foreign currencies are always traded in pairs – the value of one currency compared to a counterpart. Minor currency pairs, also known as cross currency pairs, are pairs that do not include the U.S. dollar, but do include at least one of the world’s other three major currencies. That is to say that the Japanese yen, British pound or the euro are at least one, if not both of the currencies included in the pair. Minor currency pairs are not to be confused with the seven major currency pairs, all of which include the U. S. dollar against one of the six other most liquid currencies in the world.
How does one use minor currency pairs?
Depending on how volatile and liquid a market a trader wishes to invest, he might find that the minor currency pairs are a safer investment than a major pair. As is the case with all other currency pairs, the rates can be influenced by several factors, including economic announcements, geopolitical events, and even global weather. The Fortrade website offers several minor pairs from which traders can choose.
A downloadable mobile application through which traders can access financial markets, open, edit and close online trading positions and receive live streaming of quotes, graphs and other technical indicators.
An indicator frequently used in technical analysis to identify and demonstrate the average value of a security or financial instrument’s price over a specific period of time. The MA is used to smooth out price data and to help confirm price trends and directions. Also referred to as a simple moving average or SMA. There are three main types of moving averages used in the field of forex trading: simple, weighted and exponential.
The official currency code for the Mexican peso.