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Understanding basic forex terminology

  • #1
  • First Post: May 19, 2014 4:38am May 19, 2014 4:38am

  1. The type of currency you are spending, or getting rid of, is the base currency. The currency that you are purchasing is called quote currency. In forex trading, you sell 1 type of currency to purchase another type.
  2. The exchange rate tells you how much you have to spend in quote currency to purchase base currency.
  3. A long position means that you want to buy the base currency and sell the quote currency.
  4. A short position means that you want to buy quote currency and sell base currency. In other words, you would spend sell British pounds and purchase U.S. dollars.
  5. The bid price is the price at which your broker is willing to buy base currency in exchange for quote currency. The bid is the best price at which you are willing to sell your quote currency on the market.
  6. The ask price, or the offer price, is the price at which your broker will sell base currency in exchange for quote currency. The ask price is the best available price at which you are willing to buy from the market.
  7. A spread is the difference between the bid price and the ask price.

  • #2
  • Jun 6, 2014 4:13pm Jun 6, 2014 4:13pm
The first point is incorrect. Base currency is the first currency in a pair e.g. GBP in GBP/USD. It has nothing to do with which currency you are spending, or getting rid of.
  • #3
  • Jun 6, 2014 5:44pm Jun 6, 2014 5:44pm
Quoting blesssing23
The type of currency you are spending, or getting rid of, is the base currency. The currency that you are purchasing is called quote currency. In forex trading, you sell 1 type of currency to purchase another type. The exchange rate tells you how much you have to spend in quote currency to purchase base currency. A long position means that you want to buy the base currency and sell the quote currency. A short position means that you want to buy quote currency and sell base currency. In other words, you would spend sell British pounds and purchase...
Very good article
  • #4
  • Dec 23, 2020 1:31pm Dec 23, 2020 1:31pm
If you want to become a good forex trader, you have to learn all the basics of forex perfectly and properly.
  • #5
  • Dec 24, 2020 1:06pm Dec 24, 2020 1:06pm
To become a good and profitable trader, you need to understand all the basics of forex perfectly and properly.
  • #6
  • Dec 25, 2020 3:25am Dec 25, 2020 3:25am
Quoting CoraLombard
To become a good and profitable trader, you need to understand all the basics of forex perfectly and properly.
I agree. Know the market well. Trade wisely and carefully because it is a risky market.
  • #7
  • Oct 31, 2021 5:56am Oct 31, 2021 5:56am
You need to have a good understanding of the basics to become a good trader. I would recommend doing studies online maybe via babypips or Youtube to learn more.
  • #8
  • Dec 7, 2021 5:25am Dec 7, 2021 5:25am
Nice post but I think the first point is slightly confusing.
In forex trading we exchange one currency for another. The first currency in the pair is base currency and the second currency is quote currency.
For instance, EUR/USD
Here; EUR is a base currency and USD is a quote currency which means in order to buy EUR, I’ve to sell USD to my broker. In this way I’m not getting rid of base currency, instead I’m buying it.
However, when I want to sell EUR, I will get USD in exchange. At that moment I’ll be getting rid of base currency.
  • #9
  • Dec 8, 2021 4:30am Dec 8, 2021 4:30am
It would be cool to consolidate all the main postulates in the title post. Or create a new topic with basic statements.
  • #10
  • Dec 31, 2021 3:40am Dec 31, 2021 3:40am
Looks like you were confused when you wrote this post. Base currency is the first currency of the currency pair quotation. You buy the base currency and sell the quote currency.
  • #11
  • Jan 18, 2022 5:05am Jan 18, 2022 5:05am
Basic Forex terminology is important for getting started with trading. The more you understand, the better you'll be able to use forex concepts to your advantage when trading.
  • #12
  • Last Post: Feb 10, 2022 12:26am Feb 10, 2022 12:26am
Quoting louiseking
Looks like you were confused when you wrote this post. Base currency is the first currency of the currency pair quotation. You buy the base currency and sell the quote currency.
sometimes in demo account it is more appropriate to trade exotic pair besides base currency, its really supportive to increase trading performance very rapidly.
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