Forex Trading Terms

Forex trading terms can often seem complicated to the uninitiated. In this section, we’ll be taking a look at some of the most basic Forex trading terms.

• Bid Price - The price at which a buyer is willing to purchase a currency. Always expressed as a 5 digit number.
• Ask Price - The price at which a seller is willing to sell a currency. Always expressed as a 5 digit number.
• Spread - The difference between the bid price and ask price.
• Margin - Collateral for a position. This comes into play when the market moves in a downward direction and the forex trader requires additional funds. This is done by requesting a “margin call.”
• Long Position - The trader buys a currency at a certain price, expecting to sell it later at a higher price.
• Short Position - The trader sells a currency with the expectation of buying it back later at a lower price.
• Spot - A two-day delivery transaction which indicates a direct exchange of currencies.
• Forward - In this style of exchange, money does not change hands until an agreed-upon date in the future.
• Future - Currency which matures at a future date and usually carries a three-month contract.
• Swap - The swap is the most common type of forward transaction. In these cases, two parties agree to swap currencies and then swap them again at a future date.