FOREX BASIC TERMINOLOGY


To get a better understanding of how the forex market works it is essential to know some FX terminologies. Have fun learning with our forex glossary.
Margin
The required equity that an investor must deposit to collateralize a position
Margin Deposit
The margin deposit is not a down payment on a purchase of equity, as many perceive margins to be in the stock markets. Rather, the margin is a performance bond, or good faith deposit, to ensure against trading losses. The margin requirement allows traders to hold a position much larger than the account value, which allow for this high leverage. In the event that funds in the account fall below margin requirements, brokerage firms will automatically close all open positions.
Margin call
A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the client. If the equity balance in your account falls below the margin requirement, a margin call will be generated. In the event that an account exceeds its maximum allowable leverage, ALL open positions are liquidated immediately, regardless of the size or the nature of positions held within the account.
Market Maker
A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.
Market Risk
Exposure to changes in market prices.
Mark-to-Market
Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.
Maturity
The date for settlement or expiry of a financial instrument.
Micro Lot
A micro-lot is the equivalent to a contract for 1,000 units of the base currency in a forex trade. The base currency is the first currency in a pair or the currency that the investors buys or sells. Trading in micro-lots enables traders to trade in small increments.

PACKED WITH THE KNOWLEDGE OF THE BASIC TERMS, YOU ARE ONE STEP AHEAD IN MAKING YOUR TRADING JOURNEY A PROSPEROUS ONE.