As a trader, the terms in forex trading are very important to support your activities. Forex is an investment product. Forex is an investment that trades one currency for another. In general, there are two types of forex transactions, namely “spot” transactions and “non-spot” transactions.
Spot means buying and selling of foreign currencies takes place on the spot. For example, making transactions at money changers or banks for buying and selling between US Dollars and Rupiah.
Meanwhile, non-spot transactions are transactions for buying and selling currency contracts only. So, the handover of goods does not happen immediately, only the contract. Before investing, apart from choosing the best forex broker, you also need to know the investment terms first.
Terms in Forex Trading: Lot, Mini Contract and Standard or Regular Contract
Lot is a unit used in foreign exchange investing. Then, how big is 1 lot? If in stock 1 lot = 100 shares. While on Forex, 1 lot = 10,000 of the currency concerned. For example 1 Lot USD / IDR = US $ 10,000. The size of 1 lot = 10,000 is called a mini contract.
It is called a mini contract because previously 1 lot = 100,000 of the currency concerned. 1 lot = 100,000 is also called a standard or regular contract. However, over time many investors have become increasingly interested in trading. Therefore, a mini contract is made in which 1 lot is only 10,000 of the currency concerned.
Margin and Leverage
The next terms in forex trading are the margin and leverage. Margin can be said to be a guarantee in trading. For example, the margin is a down payment or down payment for a home purchase. If you pay a down payment of IDR 20 million for a house worth IDR 100 million, then you will get a sale and purchase agreement.
Even though you just held the contract, legally you are already the legal owner of the house. You can sell the contract that you already hold to someone else at full price or even more. If you understand this, then of course you will also understand Forex.
What is meant by leverage in trading? That is the ratio used to determine how much margin is required in conducting transactions and it will be multiplied by the contract size. For example, leverage 1: 200 on mini contracts.
Therefore, the required margin is (1/200) x 10,000 = 50 in units of money traded. Another example, leverage 1: 200 on standard or regular contracts. So, the required margin is (1/200) x 100,000 = 500. Why is it multiplied by 100,000? Because the contract used is a standard or regular contract.
Buy and Sell
The important terms in forex trading are buy and sell. Buy is a position to "buy" in trading. Usually, buy is done if the price is expected to increase. In essence, buy when it's cheap and sell when it's expensive. So, the profit obtained is the difference between the selling price and the purchase price. Sell is a position to "sell" in trading.
The opposite of buy, sell if the price is expected to fall. When the price falls, you can close the sell position with the lower buy. In simple terms, you sell first for a high price, then you buy it back when the price is low. So, the difference is in your advantage. If you want to know how to increase your profits, you can learn through the Didimax forex broker platform.
In trading, you need to be careful not only because of the ambition to make a profit but rather how you can take advantage of the situation in the market. These terms in forex trading are basic terms that you need to know so that you can make predictions easily.
