eToro – Forex Trading Forum

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If you are a forex novice or have even been learning about forex for a few months, eToro’s forex glossary is a very useful tool.

The technical language used in currency trading can be intimidating at first. If you refer to the glossary each time that you come across new forex terminology you will expanding your forex education and increasing your understanding of forex concepts.

Here’s a quick quiz. Define the following forex terms - then check your answers by visiting this link : http://www.etoro.com/learn/forex-glossary.aspx

Forex
Ask Price
Bid Price
Counter Currency
Day Trader
Leverage
Pip
Spread
Stop Loss
Lot
Base Currency
Cable
Risk Capital
Take Profit
Short Position
Technical Analysis
Cross Rate
Margin
Fundamental Analysis
Loonie

Don’t worry if you don’t get them all - or any - of them right. By doing the quiz and by checking your answers you have done something right.

Let me know how you did - I shall do the test myself later and report back.

Julie

http://who-gives-a-forex.blogspot.com/

[Tropezienne]

My Test :

1. Forex - contraction of ‘foreign exchange’ and referencing the foreign exchange market.
2. Ask Price - the amount that you pay for a currency
3. Bid Price - the amount for which you sell a currency.
4. Counter Currency - the second currency of a pair eg: ‘EUR’ in ’USD/EUR’
5. Day Trader - a trader who does not leave trades open overnight.
6. Leverage - only got a vague idea of what this is …..
7. Pip - the minimum measure of the value of a currency?
8. Spread - the cost, paid to the broker, of making a trade and which varies depending on the currency pairs being traded.
9. Stop Loss - a risk management tool which sets the maximum amount that you are prepared to lose should a trade go against you;
10. Lot - an open position …. I think … not sure ….
11. Base Currency - the first currency of a pair eg: ‘USD’ in ‘USD/EUR’
12. Cable - no idea.
13. Risk Capital - the proportion of your total capital that you are prepared to risk …?
14. Take Profit - a risk management tool which sets the maximum profit on an open position. The position closes as soon as the Take Profit is reached - although the price might go higher, this tool ensures that you profit before th trend goes down again.
15. Short Position - a SELL trade.
16. Technical Analysis - use of graphs to plan trades.
17. Cross Rate - don’t know.
18. Margin - dunno ……..
19. Fundamental Analysis - use of economic trends in various countries ….
20. Loonie - a nick name of a currency, not sure - I’ll guess NZD

I sense that my answers are poor and that results will be the proof of that ! I’ll mark myslef in a few days - hopefully some more of you will have the courage to put your knowledge on the line here …..

Julie

http://who-gives-a-forex.blogspot.com/

[Tropezienne]

The Correct Definitions as given in eToro's Forex glossary :

Forex : Forex, or FX, stands for Foreign Exchange. Forex is the simultaneous buying of one currency and selling of another. Since you purchase money with money, there are two transactions (buying and selling) happening at the same time.

Ask Price : The ask price (right quote display) is the price at which traders can buy the base currency. If you think that the EUR value will increase then you can choose to buy it for USD at the price displayed in the ask quote.

Bid Price : The bid price (left quote display) is the price at which traders can sell the base currency. If you think that the EUR value will decrease then you can choose to sell it for USD at the price displayed in the bid quote.

Counter Currency : The counter currency is the second currency in any currency pair. Its value is determined against the base currency’s value. For example, in the following currency pair EUR/USD, the counter currency is USD.

I'll give myself 3.5 out of possible 4 for this first lot of definitions - my answers were OK, but could have been more detailed.

[Tropezienne]

The Correct Definitions as given in eToro's Forex glossary :

Day Trader : The practice of opening and closing positions within the same trading day, so that at the end of the day the trader has no open positions.

Leverage : Leverage is a loan from your broker, which enables you to trade with a small amount of capital. It can increase your potential profit, but it can also increase your risk

Pip : a Pip is the smallest price increment in the last digit in the rate – usually the fourth digit after the decimal point (apart from the USD/JPY).

Spread : The spread is the difference between the bid price and the ask price.

Stop Loss : A trade order which automatically closes an open position at a specific price in order to prevent losses in case the market moves against your position.

Ooops ! I'll give myself a generous 1.5 out of a possible 5 here ...

[Tropezienne]

The Correct Definitions as given in eToro's Forex glossary :

Lot : The standard unit of trading. One standard lot equals 100,000 units of the base currency, a mini lot equals 10,000 units, and a micro lot equals 1,000 units. eToro’s standard trade volume is the mini lot.

Base Currency : The base currency is the first currency listed in any currency pair. Its value is determined against the counter currency’s value. For example, if the rate of the EUR/USD pair is 1.3525, then the EUR is the base currency and it is worth 1.3525 USD.

Cable : Also known as Sterling. Dealer slang for the GPB/USD currency pair

Risk Capital : The amount of money that a trader can afford to risk, the potential loss of which would not affect their lifestyle.

Take Profit : A trade order which automatically closes an open position at a specific price realizing a specific amount of profit. Use this order to realize your gains.

I give myself 2 out of a possible 5 for my answers to this lot.

[Tropezienne]

The Correct Definitions as given in eToro's Forex glossary :

Short Position : Going short means opening a position in which the trader sells currency in hopes that this currency’s value will decrease (sell high, buy low).

Technical Analysis : This type of analysis focuses on chart patterns of currency movements. It assumes that a currency’s future movements can be predicted by looking at past behavior.

Cross Rate : A price quote consisting of any currency quoted against a currency that is not the USD. The quote is made up of the individual exchange rates of the two currencies against the USD.

Margin : The minimal cash deposit that you have to put up for the transaction. Trading forex on margin increases your buying power, but it can also increase your losses.

Fundamental Analysis : This type of analysis focuses on the macroeconomic factors that influence the value of a country’s currency. Traders open positions based on how they think changes in these factors are bound to affect different economies.

Loonie : Dealer slang for the USD/CAD currency pair.

For this final lots of forex words I give myself a very miserable 0.5.

I scored a pitiful 7.5 out of 20.

This confirms my NEWBIE status - got a lot of work to do !