Course: Forex Trading
Lesson Insights
Knowing the basic definitions of Forex is crucial for any trader, as it allows them to better understand how the market operates, the types of trades that can be made and the potential risks involved.
A currency pair is a set of two currencies, such as the EUR/USD, that are traded in Forex. The spread is the difference between the bid price and ask price of a currency pair and represents the cost of a trade. The pip is the smallest price change that a currency pair can make and is used to measure profits and losses. A lot refers to the standard unit size of a Forex trade. Drawdown refers to the decrease in value of an investment, typically expressed as a percentage of the original investment.
By understanding these definitions, traders can more effectively manage their trades, determine their potential risks and make informed investment decisions. This lesson describes basic definitions such as currency pair, spread, pip, lot, and drawdown. It is not recommended to trade forex without knowing what those definitions mean.
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