In the world of Forex Trading Malaysia, understanding and familiarizing yourself with key terminology is crucial to navigating the dynamic currency market. As a Malaysian trader, having a solid grasp of these concepts will enable you to make informed decisions and communicate effectively within the trading community. In this article presented by FXCM Markets Forex, we will explore essential forex trading terminology to help you navigate the intricacies of the market with confidence.
Short for “percentage in point,” a pip is the lowest unit of measurement used in forex trading. With the exception of Japanese Yen pairs, where it represents the second decimal place, it represents the fourth decimal place in the majority of currency pairs. Pips are a unit of measurement used to assess price changes and determine gains or losses.
The standardised size of a forex trade is referred to as a lot. Standard (100,000 units), mini (10,000 units), and micro (1,000 units) are the three primary sorts of lots. Each pip’s value and the degree of risk involved in a trade are determined by the lot size.
Spread: The spread is the distinction between a currency pair’s bid (selling price) and asking (buying price) prices. It is frequently expressed in pips and symbolises the cost of trading. FXCM Markets’ tight spreads can aid Malaysian traders in lowering trading expenses.
Margin: The capital needed to initiate and maintain a foreign exchange position is known as margin. It serves as collateral to protect against possible losses and represents a percentage of the overall trade size. Trading on margin increases profits and losses while allowing traders to take control of larger holdings with a smaller initial outlay.
Leverage is a tool that allows traders to manage larger positions by using a smaller percentage of the overall value. It is stated as a ratio, such 1:100 or 1:50. Leverage can increase possible earnings, but it can also increase potential losses.
Stop-Loss Order: A stop-loss order is a risk management tool that allows traders to set a predetermined exit price for a trade. It helps protect against excessive losses by automatically closing the position if the market moves against the trader’s expectations.