8 Key Forex Definitions

If you have just started your journey in the world of Forex trading, it will be helpful to define a few terms that you'll need to know before you start trading. Whether you call it Forex or Fx, you are talking about the Foreign Exchange market. This is where the trading of currencies, one against the other, is done. To get an idea of just how big the action is, add all the stock exchanges in the world together and the Foreign Exchange dwarfs them all!

When you consider that speculators, hedge funds, large corporations, and even governments, and countless private investors take part in currency trading, it's hardly surprising that this market is so strong and that the estimated daily average turnover of the foreign exchange market is over 3 trillion US Dollars!

Here are some definitions you'll want to know before you begin trading the Forex market.
1. Spot Trade: This is the purchase or a sale of a foreign currency or commodity for immediate delivery. Spot trades are settled "on the spot", as opposed to a set date in the future. Futures transactions that expire in the next month are also called spot trades. The transaction has to be settled within two business days.

2. Bid: This refers to the price at which the buyer is required to buy the currency.
It can be compared to a public auction, where someone puts up their hand to say
they are willing to purchase the thing auctioned at that price.

3. Limit Order: This is when you give instructions to either buy or sell a currency at a predetermined exchange rate.

4. Inter Bank Rates: This is the bid and exchange rates that are transacted when International banks buy and sell between themselves.

5. Spread: This is the difference between the bid and asking price of a currency.

6. Stop Loss: This is when an order is given to purchase or sell a currency at a price level set by the client on a particular trade. If the price level is reached, it will close out the particular position at the stated price.

7. Transaction Date: This is the date on which a foreign exchange trade is being done.

8. Settlement Date: This is the exchange date that foreign exchange contracts are settled.

Article Source: http://EzineArticles.com/?expert=Eric_N._Jacobson
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