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Every discipline has its own lingo, and the craft of Forex trading is no different. Once you understand a few basic terms, you will be able to understand trading guides and speak with other traders like a seasoned professional. If you do not take the time to learn these simple terms, Forex lingo can be confusing.
Ask Price and Bid Price
An ask price is the lowest amount of money that a trader will accept to sell his currency. A bid price is the highest price that a trader is willing to pay in order to buy that currency. The bid price might be driven up over the ask price because of competition from other traders. Alternatively, if bid prices fall below the ask price, no trade might be made until the currency appreciates or the seller adjusts his ask price.
Appreciation vs. Depreciation
Appreciation simply refers to an increase in value of a specific currency. Likewise, depreciation refers to a decline in value. The value of one currency might be stated in terms of a certain amount of another currency. For example, you might read that Euros appreciated .03 against the U.S. dollar.
Typically, you purchase one currency with another currency. For example, you might purchase Japanese yen with U.S. dollars. You will usually see this currency pair expressed as JPY/USD.
|Sheri Ann Richerson|