Forex trading can be confusing at first because traders use many terms on a daily basis.
To help beginners build a strong foundation, this AURUM GROUP guide explains some of the most common words you’ll find on trading platforms and market analysis.
1. Currency pair
When trading forex, you trade one currency for another. This combination is called a currency pair.
Example: EUR/USD shows the value of the Euro compared to the US Dollar. When EUR/USD rises, it means the euro is becoming stronger than the dollar.
2. Bid and ask price
Each currency pair has two prices:
- Bid Price: The price at which you can sell.
- Offer Price: The price at which you can buy.
The ask is slightly higher than the bid price. This difference helps brokers offer trading services. It is important to understand this gap because it impacts the cost of each trade.
3. Spread
The spread is the difference between the bid and ask prices.
For example, if EUR/USD has a bid of 1.1000 and an ask of 1.1002, the spread is 2 pips.
Tighter spreads mean lower trading costs. Spreads can change depending on market activity, especially during major news events.
4. Pip
A pip (short for “percentage in points”) measures how much a currency pair moves. Most pairs are valued to four decimal places, with a pip being the last digit.
Example: If EUR/USD moves from 1.1000 to 1.1005, it has moved 5 pips.
Pips help traders calculate profit, loss and risk.
5. Batch size
A lot depends on the size of your trade. There are three common ticket types:
- Standard lot: 100,000 units
- Mini lot: 10,000 units
- Microlot: 1,000 units
The larger the ticket, the greater the effect of each pip move. AURUM GROUP users new to forex trading start with smaller lot sizes to manage risk more comfortably.
6. Leverage
Leverage allows traders to control a larger position with a smaller amount of money. It works like a temporary loan from a broker.
With leverage of 1:100, you can trade a $10,000 position with a $100 deposit.
Leverage can increase potential profits, but it can also increase losses. Before opening a position, it is important to understand how leverage works.
7. Margin
To open a leveraged trade, you will need to set aside a portion of your balance as margin. The margin serves as a guarantee when your trading is active.
If your account falls below a required margin level, the platform may issue a margin call and warn you to add more funds or close positions to avoid automatic closure.
8. Stop loss and take profit
These two tools help traders control their results:
- Stop Loss (SL): Automatically closes your trade if the price moves against you.
- Take Profit (TP): Automatically closes your trade when the price reaches your target.
Both are essential components of risk management. Today, many traders rely on SL and TP to maintain discipline in fast markets.
Learning Forex terms is an important first step in understanding how the market works. This complete AURUM GROUP guide provides a simple glossary for beginners who want to build confidence before doing real business. The more familiar you are with these terms, the easier it will be to read charts, manage risk, and follow market updates.
