Do you know what these Forex terms mean?

Fsp Invest Team, 31 May. 2013

Tags: forex, trading forex, forex jargon, what is a pip, what is a margin, what is a fake out in trading, what does ‘catching a falling knife’ mean

You’ve probably heard trading jargon like, “pips”, “margin”, “catching a falling knife” and “fake-outs” The media and magazines use them time and time again. But do you know what they mean? Read on to discover what these trading terms mean so you can improve your Forex trading success.

Contrary to the belief that forex terms are too complex to understand, Forex expert Timon Rossolimos says that “these terms are actually very easy to understand and essential to successful Forex trading.”
Here’s what ‘complicated’ Forex terminology means…
Here’s how Rossolimos explains the following Forex terms in Forex Fundamentals
#1: “Pip”
“The pip in Forex is the smallest possible movement with the measure of change in a currency pair in the Forex market,” says Rossolimos.
Pip stands for “percentage in point” and represents one 100th of a percent or 0.0001, which is the smallest fluctuation in currencies. This means, if the EUR/USD bid is quoted as 1.3200 and it moves up to 1.3204 it has moved up 4 pips.
#2: “Fake-out”
This is a technical terms used to refer to a situation that didn’t go your way.
“The term describes a situation when you enter into a trade based on the anticipation of a future price movement and the damn thing never develops, instead moving in the opposite direction,” explains Rossolimos. You’ll often get a fake-out when a price breaks out of pattern and then retreats back into it.
#3: “Catching a falling knife”
Catching a falling knife’ is when you try to predict where a currency pair will stop falling, but it keeps cutting through prices like a hot knife through butter. Often prices fall further and faster than anyone can predict and that’s when a trader’s portfolio takes a nose dive.
So when you see a price making quick, dominant down movements, the alarm bells should be telling you to steer away from this market. “This will save you from your trade going unbearably wrong just by leaving the falling knives to fall alone,” cautions Rossolimos.
#4: “Margin”
A margin is the initial amount of money you need to have in your broker account to secure your open position. Each broker has different requirements of the amount of margin to keep your positions open.
“You need to know what margin is to know how much money you’ll be putting into the trade,” says Rossolimos. You can work out your profit percentage depending on what your trading levels will be.
Understanding these Forex trading terms is essential to your trading success.

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