FXPesa defines 5 interesting terms used in Forex trading

It is such an interesting field that movies and episodes on TV shows have been made based on the nature of the investment method.

Some top ranking movies from Hollywood have actually used a play on the terms that are unique to forex in their titles.

Courtesy of FXPesa, we are going to break down the most interesting of these terms. First off, are you a bull or a bear?

Bulls and Bears in Forex

Bulls and bears are terms used to refer to traders as well as markets in the forex exchange platforms.

When you hear bull, you should think of raising prices while bears are the opposite, lowering prices.

A bull trader will buy to resell in future at a higher price while a bear trader sells assets to buy them cheaper in future.

When it comes to a bullish market, market conditions such as GDP and prices are rising while unemployment is declining but a market is said to be bearish when the conditions are the direct opposite.

Candlesticks, going long and going short

The major part of Forex trading is about being able to notice and track trends which helps when deciding on whether to buy or sell and candlesticks are one such tool.

A simple definition from FXPesa breaks it down as: “a type of price chart that displays the high, low, open and closing prices of a security for a specific period.”

The large block, which resembles a candlestick indicates the range between the opening and closing prices. The thin line or wick shows the highest and lowest price reached within that trading period.

An example of a candlestick chart An example of a candlestick chart Pulse Live Kenya

Currencies are always traded in pairs - a base currency and a quote currency - so when you’re buying you are acquiring the base currency using the current price of the quote currency. Selling is acquiring the quote currency by trading the base currency.

Going long simply means buying while going short means selling.

Traders go long with hope that the base currency will rise in value and allow them to sell it back at a higher price. When going short the expectation is for the base currency to fall in value then buy it back at a lower price.