Get to Grips with Forex Trading Lingo

As technology continues to advance, more and more people are getting involved in forex trading. This is because it’s become more accessible to users as online tools have removed barriers that may have prevented people from trading previously.

The foreign exchange market is worth a staggering $6.6 trillion per day, and the number of new accounts has grown up to 300% in the last year along. This growth is driven by faster, cheaper, more readily available internet connections, and of course, smartphones. A market that was once for financial experts and professional traders is now open to the masses and they are well and truly grabbing the bull by the horns.

Beginner traders can typically use a range of online resources to understand forex trading. Some may even opt for a demo account so they can practice different strategies and experiments before going live. But before you start trying to understand what forex is and how forex trading works, you also need to get to grips with the terminology. Seasoned traders use lots of different terms to refer to certain things that happen while trading, if you want to be a trader, you need to start learning them!

Don’t fight the tape

The “tape” is where the real-time values of stocks or currencies are typically displayed on a trading floor. This phrase essentially means that you should follow the crowd and buy when others are buying and sell when others are selling. This is generally good advice, but there are cases when going against it can also work in a trader’s favor.

Catching a falling knife

If the value of a certain currency is falling, but you think it will drop further, it’s wise to wait until you reach what you think is the bottom before buying. Catching a falling knife refers to an attempt to try and buy a currency before it hits its lowest point. The trader then hopes it will rebound in value and they will make up any losses they incurred.

Babysitting

In trading forex, babysitting means you’ve invested in a currency that is decreasing in value. But, instead of selling it and cutting your losses, you keep hold of it in the hopes that it will increase. The babysitting approach aims to minimize losses or try to exit the trade without losing any money.

Crunching

“Crunching” refers to a stock that despite all projections or predictions, drops in price very quickly. It could also be applied to a foreign currency such as the dollar or euro. For example, you could say “wow look at the GBP, it’s crunching through that price level”, and people would know what you mean.

Melting

As the world would suggest, melting is not a positive thing for the forex market or a trader. If someone’s account has been melted that means they have lost a lot of money or trades in a short period of time. This term is used when the loss is so big that the trader is unable to carry on trading anymore.

Of course, this is just a selection of some of the terms used. Your best bet is to join online groups of traders, and of course, start trading. That way you will be able to understand their meaning from first-hand experience!