If you are interested in learning about Forex trading there are many different terms that you will hear from day-to-day. Many of them may sound utterly confusing but are quite simple. Many people remember these terms by means of mnemonic association, which works wonders.
Here are a few Forex trading terms to get you started:
Aggregate Demand
This is the total sum of services and goods that the economy of any stipulated country demands. It’s given at an overall price and within a stipulated time period. The aggregate demand in Forex trading is represented by something called the aggregate demand curve. This curve describes the affiliation between cost and quantity.
Asset Allocation
This term speaks for itself in the world of Forex trading currency. Everyone builds up a portfolio which needs to be periodically rebalanced to maintain the long-term design for allocating assets based on expected returns.
Cable
This is a pretty common term used in Forex trading in reference to the exchange rates between the Pound Sterling and the U.S Dollar. Major currencies are often quoted against the Sterling and the U.S Dollar. This term originated in the 1800s when the Pound Sterling and U.S Dollar rates were exchanged via cable.
Trade Deficit
The trade deficit measures a country’s negative balance when imports exceed exports. The deficit indicates the amount of domestic currency that is leaving the country due to imports, compared to the amount coming in from exports. This hugely impacts Forex trading is one of the reasons why brokers keep their eyes firmly on the news of countries they are investing in.
Margin Call
This refers to the instances where the money you invested into a trading pair decreases in value past the minimum margin. You will then be required to put more money into the trade or sell off some of your acquired assets to stay in the game.
Risk Capital
In the Forex trading market, and any money market, risk capital refers to budget you have used in high-reward, high-risk trading investments. People with money can use risk capital in high-risk instances and either see spectacular returns or total loss, but either way it does not affect their lifestyles or personal investments as this is money they put aside for that purpose.
Forex trading has so many terms that one needs a glossary and definition of each term to fully understand the terms and their meanings. Once you’re in the Forex trading game it becomes second nature, but it’s still like learning a whole new language.
[author] [author_image timthumb=’on’][/author_image] [author_info]Vida Denning is a freelance writer who writes on every kind of article topic. She is interested in everything from CFD trading, to fashion, health and travel.[/author_info] [/author]
