What are the basic must-know terminolgy in forex?

<p id="isPasted">Before you start trading forex, it’s important to familiarise yourself with the basic forex terminology. There is plenty to learn, but below is a quick look at some of the most common terms used by traders. Please see our&nbsp;Glossary&nbsp;for further terminology</p><p><strong>Currency p</strong><strong>air ?</strong> forex is traded in currency pairs: one currency is bought, and the other is sold. Together they make up the exchange rate.</p><p><strong>Exchange rate ?</strong> the rate at which one country’s currency can be exchanged for another currency</p><p><strong>Base currency ?</strong> the currency that comes first in the currency pair (e.g. in GBPUSD the GBP is the base currency)</p><p><strong>Quote currency ? </strong>the second currency quoted in a currency pair (e.g. in GBPUSD the quote currency is USD)</p><p><strong>Long position (buy) ? </strong>a long position refers to the purchase of an asset, with the expectation that its market value is set to rise</p><p><strong>Short position (sell) ?</strong> A short position refers to the sale of an asset, with the expectation that its market value is set to fall</p><p><strong>Bid price ? </strong>the market price for the sale of an asset</p><p><strong>Ask price ?</strong> the market price for purchasing an asset</p><p><strong>Spread ?</strong> the difference between the “bid” and “ask” prices (the selling price and the purchase price).</p><p><strong>Appreciation ? </strong>an increase in the value of an exchange rate</p><p><strong>Depreciation/devaluation ?</strong> a decrease in the value of an exchange rate</p><p><strong>Gapping ? </strong>An opening price significantly above or below the previous day’s close with no trading activity in between. This means that a limit or stop order could be filled at a price different from the desired order price.&nbsp;</p><p><strong>Pips ?</strong> a pip stands for “percentage in point”, and is the smallest price movement any exchange rate can make. It measures the amount of change in the exchange rate for a currency pair in the forex market. A pip is the fourth and final number after the decimal point (except for Japanese yen-based currency pairs, which are displayed to only two decimal points). Pips are how market profits and losses are quantified</p><p><strong>Lot ? </strong>forex is traded in lots. A standard lot is equivalent to 100,000 units of the base currency. This is $100,000 if you were trading in US dollars. A mini lot has 10,000 and a micro lot has 1,000 units.</p><p><strong>Leverage ? </strong>Leverage is a way for an investor to increase their trading power and manage a greater position on the market with a nominal investment. An online broker may offer leveraged trading for up to 30 times the value of a trader’s initial investment.</p><p><strong>Margin ?</strong> the minimum deposit needed to maintain an open position (e.g. with an open position of $150,000 and leverage of 30, the required margin is $5,000).</p><p><strong>Risk management ?</strong> involves the use of strategies to help control or reduce financial risk. An example is a stop-loss order which is used to potentially&nbsp;minimise losses on a trade.</p><p><strong>Stop loss ?</strong> a stop loss order is a risk management tool allowing a position to be closed, once it reaches a specific pre-set price. This can protect against further losses on an open position if prices continue in an unfavorable direction for the investor.&nbsp;Please note, that placing a normal stop loss order does not guarantee you will be filled at that particular market price due to slippage.</p><p><strong>Take profit ? </strong>a take profit order is a risk management tool allowing a position to be closed automatically, once it reaches a specific pre-set profit goal. This can protect against profits being lost in an unanticipated reversal of price direction before the investor can close the position.</p><p><strong>Profit/Loss ?</strong> the proceeds of a trade, which are from realized (closed) trade positions.</p>

<p id="isPasted">To trade Forex without feeling like you're reading a foreign language, you need to master these "Big 6" categories.</p><p><strong>1. The Price Mechanics</strong></p><ul><li>Base &amp; Quote Currency: In EUR/USD, the first currency (EUR) is the Base (the one you are buying/selling) and the second (USD) is the Quote (the price of the base). Investopedia's Currency Pair Guide.</li><li>Pip: "Price Interest Point." The 4th decimal place (0.0001) in most pairs. It’s the standard unit for measuring profit and loss.</li><li>Spread: The difference between the Bid (sell price) and the Ask (buy price). This is effectively the "transaction fee" paid to the broker.</li></ul><p><strong>2. Trade Execution</strong></p><ul><li>Long vs. Short: Going Long means you buy expecting the price to rise. Going Short means you sell expecting the price to fall.</li><li>Lot Size: The volume of your trade. Standard (100k units), Mini (10k), and Micro (1k).</li><li>Leverage: Using borrowed capital from a broker to trade larger positions. A 1:100 leverage means $1 can control $100 in the market.</li></ul><p><strong>3. Risk Management</strong></p><ul><li>Stop-Loss (SL): An automatic order to close a losing trade at a specific price to prevent further loss.</li><li>Take-Profit (TP): An automatic order to close a winning trade once it hits your target.</li><li>Margin &amp; Margin Call: Margin is the "deposit" required to keep a trade open. A Margin Call happens when your account balance drops too low to support your open trades.</li></ul><p><strong>4. Market Analysis</strong></p><ul><li>Bullish vs. Bearish: Bulls expect the market to go up; Bears expect it to go down.</li><li>Support &amp; Resistance: Support is the "floor" where price usually bounces up; Resistance is the "ceiling" where price usually hits and drops.</li><li>Fundamental vs. Technical: Fundamental analysis looks at news and interest rates; Technical analysis looks at charts and patterns.</li></ul><p><strong>5. Order Types</strong></p><ul><li>Market Order: Buy or sell immediately at the best available current price.</li><li>Limit Order: Buy below the current price or sell above it (waiting for price to reach you).</li><li>Stop Order: Buy above current price or sell below it (usually to catch a breakout).</li></ul><p><strong>6. The "Daily" Terminology</strong></p><ul><li>Swap (Rollover): Interest paid or earned for holding a position overnight.</li><li>Drawdown: The difference between your highest account balance and your current balance during a losing streak.</li><li>Volatility: How fast and far a currency's price moves. High volatility = big moves, high risk.</li></ul><p><strong>Pro-Tip:</strong> Check the BabyPips Forex Glossary for a deep dive into over 200+ specialized terms.</p>