On Wanting To Dabble In the Forex Game

Mr. Smith is interested in possibly looking into buying and selling foreign currencies as a sideline. To start with, he just wants to try things out in a small way on paper to see if he could make a profit before really playing for money.

Mr. Smith does not relish the thought of studying all types of forex jargon and complicated expressions. Consequently, he has to know at least something to get him started. Here are some words which people like Mr Smith may wish to be conversant with.

When looking at a forex quote, there are always two currencies involved. These are the Base currency and the Quote currency. When looking at a forex quote of say CAD/USD, the second currency is base currency. Therefore in this case, the Canadian Dollar would be worth (depending on the rate), X American Dollars.

The Bid price is the price when you are buying (going Long)a currency pair, and the Ask price when you are selling a currency pair (going Short). The difference between the bidding price and the asking price is called the Spread.

Often you hear the mention of the Non Farm Payroll Report. This is a report by the Bureau of Labour Statistics in which can be found the position of monthly gained or lost jobs in the USA, but excluding the farm jobs. Furthermore, it gives the unemployment percentage rate position as well as the average hourly earnings. Employment changes are included.

The initial sum of money invested is called the Principal Value. In case you are not sure what GDP stands for, it is The Gross Domestic Product and it refers to the extent of the income of the nation and its production and manufacturing within its borders. The middleman acting between the retail trade and the commercial institutions is called the Broker and the fee he charges his clients for dealing for them is called Commision.

Often you hear the word Cabel. It is used when referring to the GBP/USD currency pair. It goes back to the days in the 1800s when the dollar/pound sterling exchange rate was done by using a transatlantic cable.

Resistance and Support are often mentioned. Take two lines, one at the top of the other. At the top line the resistance and the bottom line the support. If the price goes over the top line level then that level is automatically the new support level. Naturally if the price goes beyond the support level, then the opposite is the case.

A Bull market denotes an increase in price and a Bear market is the opposite. This expression is being used constantly and is really quite easy to understand for almost everyone who speaks fluent English. Although frequently mentioned, there are a number of people who do not completely know the meaning of Bank Rate. It is the rate which the Central Bank of the country will lend money to the domestic banks there. Another expression is the Rally and this refers to the time when prices climb higher.

SWIFT is the short for Society for Worldwide International Telecommunication and is used for sending money from one country to another, the money is being sent within the United Kingdom then it is usually sent via CHAPS which stands for Clearing House Automated System.

Good luck to those who will be like Mr Smith and dabble a little in the Forex game, but later when and if they get a taste for it, they must study in earnest and learn a whole lot more of course.

By Paul Dubsky