The Forex market shares its own set of terms and jargon. So, before you go any deeper into Forex learning to trade the FX market, you must comprehend some of the basic Forex terminologies you will encounter on your Fx trading journey...

Currency

Any type of money in general circulation in a country is called currency. What is the definition of foreign exchange? Foreign exchange, in essence, is money denominated in another country's currency or, a collection of countries like euro. To put it simply, an exchange rate is the rate at which the market converts one currency into another.

Currency Pair

When currencies traded on the forex market have a quotation and pricing structure (for example, the valuation of a currency) determined by comparing it to another firm, this is referred to as a currency pair. The currency listed first (the reference) is the base currency in currency trading, and the currency listed second (the connection) is the quote currency.

The currency pair shows how much the quote currency will be required to buy one unit of the base currency. Each forex trade involves the simultaneous purchase of one currency and the sale of another, but the pair should be viewed as a singular instrument that is bought or sold

Currency Majors

Currency pairs are classified as major pairs, cross pairs, and exotic pairs in general. Major pairings are currency pairs in which the US dollar serves as either the base or the counter-currency and one of the other seven major currencies (CAD, EUR, GBP, CAD, CHF, JPY, AUD, NZD).

If you're new to trading, focus on the big pairs because they often have cheap transaction fees and adequate liquidity to prevent significant slippage. Major currency pairings include EUR/USD, GBP/USD, and USD/CHF.

Exotics and Cross Pairs

Cross pairs, on the other hand, encompass any pair of major currencies other than the US dollar. Cross pairs, as opposed to major pairs, have more significant transaction costs and during periods of pair liquidity, traders may experience slippage. Cross pairs tend to be more volatile than major pairs. EUR/GBP, EUR/CHF, and AUD/NZD are

Finally, exotic pairs include currencies that are not among the top ten most traded, such as the, Turkish lira, Mexican Peso or Czech Koruna. Because certain currencies may be exceedingly volatile, they should only be traded by professionals

Bid/Ask Price

In forex, each currency pair has two prices:

• Bid price
• Ask price

The bid price is what at which buyers are willing to purchase, whereas the ask price indicates the price at which sellers are willing to sell.

Spread

When you enter into a trade, you must pay transaction costs for that trade and it is conventionally called as spread. While most brokers no longer charge commissions and fees for placing trades, the bid/ask spread remains the primary cost to Forex traders daily.

Pip

Pips represent a minimal change in price movement. Simply said, this is the standard unit for determining how much the value of an exchange rate has changed. The pip initially represented the minimum change in how the Forex price changes.

Support

Support is a hypothetical price level or price region that supports or holds prices and indicates that there are more currency buyers than sellers. Support is sometimes referred to as a "price floor" because traders anticipate that the price will change direction and begin to increase based on prior performance.

Resistance

Resistance is a hypothetical price level or price region that is consolidating, lowering new high prices, and indicating that there are more forex sellers than buyers. Resistance is sometimes called a "price roof" because traders anticipate that the price will change direction and begin to decline based on prior performance.

Leverage

Leverage is the ratio of the size of the trader's capital to the size of the broker's credit. In other terms, leverage is borrowed capital used to increase the potential returns. The Forex leverage size frequently exceeds the invested capital several times over.