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Trading for beginners
A picture of trading charts on a laptop

This year, my goals are to learn as many useful skills as I possibly can and I have fora long time been interested in the financial markets and trying to understand what is going on. So, I decided to finally do something about it and enrolled myself in a Forex course on Udemy which I have to say was worth the $12 I spent. Throughout the course, the tutor introduced me to terms, some I have heard before but never really understood and others that I have never heard of and throughout the course (still going), I created a list of terms and their meaning including:

Currency Pair

When trading currencies, you are not trading one currency alone, Instead you are trading one against another ie USD/AUD which means you either believe the base currency which in this case is the USD will either strengthen or weaken against the AUD which is referred to as the quote. So you go in and trade the USD against the AUD. Each pair belongs to a

Going Long Vs going short

When you are buying or selling a pair, you are either going long or short. Going short means you believe the base currency will do poorly against the quote currency and so you go short. For example, the USD/AUD, you will sell the USD because you think the AUD will strengthen against the USD, basically meaning the AUD will be worth more. Going long is the opposite, meaning you would buy the USD because you think the AUD will weaken against the USD and therefore the USD will be worth more.

Pip

A pip (percentage in point) is how you measure changes in the pair. so for example. Consider the USD/AUD is at 1.3301 if the price goes up to 1.3302, the value went up by 1 Pip, and if it goes 1.3301, it went down by 1 Pip.

Lot

In the FX world, trading is done via what is called lot sizes. You buy or sell a lot which represents real value. The standard lot size is 100,000 units although you will find some traders using 10,000 or even 1000 although that is less likely as not may brokers offer micro (1000) lots.

Technical Analysis

When you are looking at the charts and the price movements, you are in technical analysis mode. That means you are looking at the price changes of a pair using a range of charts and indicators. The other side of analysis is called:

Fundamental Analysis

Which basically means, you are looking at everything else that may affect the markets. These include inflation, interest rates, employment figures, natural disasters, changes in government, and much more.

These are a few terms I have been writing down as I listened to the lectures but there are more, heaps more so if you are starting out in the financial markets it is best to familiarise yourself with what all these mean.

Most trading brokers like IG have education sections, so check them out to build your own list or if you want to take an actual online trading course, check out Udemy, they have heaps of courses on not just forex but also stocks, cryptocurrencies etc.

Are there other terms you can think of? Let me know in the comments below.

Thank You.