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Forex Trading Glossary (2)
Source: | Author:finance-102 | Date2022-12-16 | 150 Views | Share:
Forex Trading Glossary -- Margin, Margin Call, Market Order, Range, Rate, Short, Trend

Margin: Margin is the amount of money required to open a leveraged position in the forex market. It represents the difference between the full value of the position and the funds that are being borrowed from the broker. Margin acts as a deposit that helps to assure the broker that the trader will be able to meet their financial obligations, even if the trade does not go as expected. The amount of margin required can vary depending on the trader's account balance and the level of leverage being used. Leverage refers to the use of borrowed funds to increase the potential return on an investment, and is often used in conjunction with margin in the forex market.

 

Margin Call: A margin call is a demand for additional funds to be deposited in a margin account to meet the minimum margin requirement. This occurs when the value of the assets in the margin account falls below the required level, and is intended to protect the broker or lender from potential losses. If a margin call is not met, the broker or lender may sell some or all of the assets in the account to cover the shortfall. Margin calls can be triggered by market movements, changes in the value of the assets being held in the margin account, or a change in the margin requirements set by the broker or lender. It's important for investors to carefully manage their margin accounts and be prepared to meet margin calls in a timely manner, as failure to do so can result in significant financial losses.


Market Order: A market order is a type of trading order that is placed to be executed at the current market price. While this type of order guarantees the execution of the trade, it does not guarantee the price at which the trade will be completed. When using a market order, the trader is seeking to enter the market as quickly as possible, but they may be at risk of getting a worse price than they had hoped for if market conditions are unfavorable. It is generally not recommended for traders to use market orders to open new positions, as there is a higher risk of executing the trade at a disadvantageous price.


Range: A range is a period during which the price of an asset oscillates within a predetermined high and low range. This occurs when the price action moves between these two levels, often for an extended period, and is typically seen in a particular time frame.


Rate: The rate is the current price of an asset, as shown on a chart or trading platform. It can also refer to the price of one currency in terms of another when dealing with foreign exchange.


Short: Shorting, or going short, is the opposite of going long and involves taking a position in the market with the expectation that the price of an asset will decrease. When a trader takes a short position, they sell the asset, hoping to buy it back at a lower price in the future. In the context of foreign exchange trading, going short means selling the base currency and buying the quote currency. When shorting in financial markets, a trader borrows an asset from their broker with the expectation that its price will decline. They then sell the asset immediately and buy it back at a lower price later to repay the debt and profit from the difference in price.


Trend: A trend refers to the overall direction of the price of an asset, either upwards or downwards. In an uptrend, the price of the asset is consistently moving higher, with higher highs and higher lows. Conversely, in a downtrend, the price is consistently moving lower, with lower lows and lower highs.