FOREX: Basic language of the market

In this article we treat the most basic terms that must be known to be able to understand the FOREX language in general. This basic language is necessary so much to understand all the information related to FOREX as to understand the platforms on which the investor of FOREX operates.


PIP: He translates “Price interest point”. This is the minimal unit of measurement that represents a change in the value of a pair of currencies. On having seen the platform and the graphs, the numbers that there appear have 5 digits. The minimal thing that these numbers can change there is the number that corresponds to the last digit. Every number of these corresponds to a PIP or unit of measurement on the foreign exchange market FOREX. To illustrate, an example: Let's say that the pair of USD/EUR is quoted in 1.3000, if the quotation in a following moment this one in 1.3001, what means that it has increased in 0.0001, then will have changed exactly in a pip. Depending on the currency that talks each other this one will have a value, be a ten-thousandth part, or a hundredth, etc.


SPREAD: This is the term that represents the profit of the broker to which the small FOREX investor is inscribed. The spread is the quantity of pips that the broker takes for doing an order of sale or of buy in the platform of election of the user, represented in the difference between the price to which it sells to us the currency with the price to which he buys it to us.


STOP LOSS: This is an order that can be programmed in all the FOREX platforms. When you give an order of this Stop Loss placing an order that is activated when the operation leaves of our prognoses and is generating losses to us. The order is programmed to a certain quantity of pips in which we are losing money, when the pair of currencies comes to this point, this one order is activated automatically closing the operation. With this order the investor avoids to lose more necessary thing, losing only what is ready to lose when the things do not go out like him he was waiting. For example, 1.2000 is invested in the pair EUR/USD pips and one hopes that this value should increase, nevertheless, a few pips puts an order of Stop Loss further down, for example,-10 pips, this way, if the things do not go out as it was waited and the fluctuation of the pair comes to the quantity of 1.1990 pips, then the order is activated and you stop losing capital.


STOP ENTRY: This is the order opposite to the previous one, in the previous one, when the pair in which it is invested comes to certain limit, the operations are cancelled. In this one, it happens on the contrary, if the pair comes to certain pips quantity, the order is activated. This is very useful when the user sees that if the graph takes certain course the tendency will keep a few pips more, done that if it happens will generate his automatic profit. For example, this one is invested in the pair EUR/USD, the pair in 1.2000 pips and it is predicted that if this one comes to the quantity of 1.2010 the tendency will be supported. This way, when this one pair comes to this quantity, the order will be activated passing to the FOREX game.


BID: This is the value to which you buy or sell a pair in a certain moment in FOREX. In this one term is important to bear in mind that the price that there appears is the price that the Broker offers us, which one has a small profit with every operation, but it is not the real price of the market.


ASK: I boast in which we buy a currency, this is, the price to which the Broker offers it to us. In other terms it is defined as the price that is ready to receive the broker when it sells a currency in the FOREX platform.


BALANCE: It is the value that is had in an account in a certain moment. This one determines the real state of the account of FOREX.


POINT OF RESISTANCE: This is a point in the graph where the market hardly continará with a tendency to the rise. Instead of it the opposite one will tend to change tendency towards, this is, to lower the price. One notice that these points can only be evident when there is a graph of the market. This term is fundamental for the strategies based on the technical analysis of the market FOREX.


POINT OF SUPPORT: In a downward tendency, this is the point where the market hardly will continue with the same tendency and then it will tend to change the tendency towards raising the price. For example, there is a tendency in the pair USD/EUR towards the fall, which is in 1.2000 pips, but it takes several years without going down more 1.9980 pips. This way, if the market continues with the tendency the price casualty, the most probable thing is that when it comes to 1.9980pips the price begins to increase again. The same happens in an inverse way with the resistance points explained anterioremente.


TENDENCY: The tendency is an impulse that has a pair of currencies, be towards the rise or towards the fall, that it stays constant during a certain time period. This way, without a pair it presents a tendency to the rise, the fact is that in a certain moment it is in a price, for saying, of 1.2000 pips, but this price is increasing gradually, this way, it can spend for 1.2003 pips, then lower a little to 1.2002 pips, then be still to 1.2004 pips, etc. One Notice that in the tendency to the rise there are ups and downs, moments in which the price goes down, but these moments are only passengers, because the pair will always think about how to continue the direction of the tendency.


TECHNICAL ANALYSIS: It is a strategy of basic investment. This one consists of the analysis of the tendencies of the market FOREX that can be based on graphs, hardware of analysis of graphs, points of resistance and of support, Japanese sails, statistical calculations, etc.




FUNDAMENTAL ANALYSIS: It is a strategy of basic investment in FOREX. In her the investor analyzes the market bearing in mind the factors that influence him, as it it is the important news, the movements of the big masses of money, and, in general, all those causes fácticas that influence on the market so that it takes one or another tendency.

---