In the forex market, as in any financial market, there is its own set of trade agreements and related jargon. If you are new to currency trading, mechanics and terminology usually require some adjustments. But after waking up, most currency trading agreements are fairly simple.
Act at the same time
The biggest mental hurdle faced by newcomers to currency trading, especially traders accustomed to other markets, revolves around the undeniable fact that every currency exchange is a simultaneous purchase and sale. For example, in a stock trading game, if you buy 100 shares from Google, you have 100 shares and you want to see their price burn. If you want to leave this position, just sell what you bought before. Easy not?
Playing with currencies, buying one currency requires the sale of another currency at the same time. It could be currency exchange. Simply put, if you want the dollar to grow, now ask: “Higher against what?”
The solution is another currency. In relative terms, if the dollar strengthens against another currency, this other currency will fall against the dollar. To think about the available market conditions: after buying the stock you sell for cash, when you sell the stock, you buy for cash …
Currencies come from pairs
To simplify the task, forex markets belong to forex pairs, each of which combines different currencies that are traded or “traded” against each other.
In addition, in the Forex markets, most currency pairs are given aliases or acronyms that refer to the pair, not necessarily all the currencies involved.
Major currency pairs
All major currency pairs are pegged to the US dollar, on the one hand, in the transaction. The denominations of major currencies are expressed using the codes of the International Organization for Standardization (ISO) for each currency.
Major cross-currency pairs
While most forex thrives within dollar pairs, cross-currency pairs act as an alternative choice – always trading the US dollar. Currency pair, or for short, cross or cross – is a currency pair that does not add the U.S. dollar. Cross-courses are based on the respective pairs of US dollars, but are listed independently.
Crossovers allow traders to target trades more accurately on specific individual currencies to keep track of news or event sales.
For example, your analysis may indicate that the Japanese yen has the worst prospects of all major currencies, based on interest rates or even economic prospects. To take advantage of this, you want to sell JPY, but against what other currency? You’re targeting the US dollar, you might be buying USD/JPY (buy USD/sell JPY); however, you conclude that the outlook for the US dollar will not be better than for JPY. Further research on your part may indicate another currency with better prospects (e.g. high or rising interest rates or signs of economic recovery), the Australian dollar (AUD). In this example, you could think of buying a cross AUD/JPY (buy AUD/sell JPY) to express your opinion that AUD offers the best forecast for major currencies, while JPY offers the worst.
In fact, the most actively traded crosses point to three major currencies other than the US dollar (namely, the euro, the Japanese yen and the pound sterling), and are also known as crosses with the euro, crosses with the yen and crosses with the British pound.
Along with supply shortages
Forex markets use the same terms to express their market positioning as many other financial markets. But since forex trading involves simultaneous buying and selling, it is useful to clearly understand the conditions, especially if you are new to the financial market.
No, we’re not talking about throwing ourselves into a football pass. A long position or just a long position refers to a market position in which you have such an effect. In FX, this means that you have such a currency pair. If you are tall, you are looking for higher prices to sell at a higher price than what you bought.
This short position or just a shorter position refers to a position in an industry in which you have sold a security that you never had. In the securities market, selling a short position requires borrowing shares (and paying commissions for brokerage services) to help you sell them. In Forex markets this means that you have sold a currency pair, which means that you have sold the currency of the camp and bought the counter currency. Thus, you always trade, only in reverse order, as described in the terms of the quote of the currency pair. If you have sold a currency pair, it is called short or short. This also means that the price of the pair should fall to help you redeem it with a profit. Selling at different prices helps to reduce and shorten you.
When you trade forex, short shorts are as fashionable as long shorts.
“Sell expensive and buy cheap” is a standard forex strategy.
Currency pairs reflect the relative values of the two currencies and never reflect the absolute value of a single share or product. As currencies can fall or rise relative to each other, with medium- and long-term trends and minute-by-minute fluctuations, the value of currency pairs declines as often as at any time. To see the benefits of these steps, forex traders regularly use short positions to take advantage of falling currency prices. Traders in other markets may feel uncomfortable with short sales, but this is just something you need to understand.
The absence of a position outside it is called a square or flat. If you have an empty position and want to close it, it’s called square building. If you’re small, you’re going to have to buy a square. If you are tall, you need to smooth the target. The only real moment when you are not exposed to market or financial risk is when you are right.