There are terms that every trader must learn before trying to master the market. There are some who fail to heed this tip and end up not doing well. Learn these and the possibilities are endless.
What is the spread?
The spread is the difference between the purchase and sales price, also known as bid and ask. Investors must at least have overcome the spread over the course of the market to enter the profit zone. The lower the spread, the sooner they can achieve this.
With Forex, the spread is mostly variable/flexible in hot market times. For example, in the case of marked interest rate decisions, the spread will increase for a moment, while quiet market conditions will often see a very small spread.
What is rollover/swap?
Rollover, also called swap, is the interest rate that arises when a person holds Forex & CFDs overnight. This is the cost of financing the trading instruments since you trade FX & CFDs on margin, which means that they are much lower than the market. Since you use only the margin for the position opening, the rollover effect automatically occurs.
What is the order volume?
Order volume refers to the order size; in the case of Forex, it is usually referred to as lots and, in the case of CFDs, it is called a contract.
- FX lots equals 100,000 traded units of the base currency
- 0.10 FX lots, also known as a mini-lot, corresponds to 10,000 units of the basic currency
- 0.01 FX lots, otherwise called micro-lots, correspond to 1,000 traded units of the basic currency
What is spot market?
Spot market refers to the markets that deals with the current price of financial instruments. Prices are settled on the spot at the current prices as opposed to forward prices. Watch this video from Markus Heitkoetter to learn more.
What is long and short?
The big advantage with Forex & CFDs is the possibility to profit from rising and falling shares. If you go from rising prices, put a long order in and, if you go from falling prices, put a short order in. Sometimes, it is called buy and sell.