Forex Basics & Terminology

Forex Basics & Terminology

An Introduction for New Traders in The Traders Network Forex Group

Welcome to the Forex Group! Whether you're brand new to trading or brushing up on fundamentals, this guide will give you a solid understanding of how the foreign exchange (Forex or FX) market works and help you feel confident using common trading terms.

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🌍 What Is Forex?

Forex is short for foreign exchange. It is the global marketplace for trading one currency for another.
The Forex market is the largest and most liquid financial market in the world, with a daily volume of over $7 trillion.

Traders participate in the Forex market to speculate on changes in exchange rates between currency pairs like EUR/USD, GBP/JPY, or AUD/CAD.

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🕒 Market Hours

The Forex market is open 24 hours a day, 5 days a week, and operates through four major sessions:

• Sydney

• Tokyo (Asian Session)

• London (European Session)

• New York (U.S. Session)

These sessions overlap, creating different levels of market volatility.

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💱 What Is a Currency Pair?

Forex is traded in pairs—you’re buying one currency and selling another simultaneously.

Example:
EUR/USD = Euro vs. U.S. Dollar
If you buy this pair, you’re buying euros and selling U.S. dollars.

Major Pair Categories:

• Major Pairs – Always include the USD (e.g., EUR/USD, USD/JPY)

• Cross Pairs – No USD (e.g., EUR/GBP, AUD/JPY)

• Exotic Pairs – Major currency vs. emerging market currency (e.g., USD/TRY)

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💡 Common Forex Terminology

Here are key terms you'll see often:

✅ Pip (Point in Percentage)

The smallest price movement in a currency pair.

• Typically 0.0001 for most pairs (e.g., EUR/USD)

• 0.01 for JPY pairs (e.g., USD/JPY)

✅ Lot Size

The volume of your trade.

• Standard Lot = 100,000 units

• Mini Lot = 10,000 units

• Micro Lot = 1,000 units

✅ Leverage

Allows you to control a larger position with a smaller amount of capital.
E.g., 1:100 leverage means you can control $100,000 with just $1,000.

✅ Spread

The difference between the bid price (sell) and ask price (buy). This is how brokers typically earn their fee.

✅ Bid/Ask Price

• Bid: Price you can sell a currency pair at

• Ask: Price you can buy it at

✅ Long vs. Short

• Long: You’re buying the pair (expecting the base currency to rise)

• Short: You’re selling the pair (expecting the base currency to fall)

✅ Stop Loss (SL)

An order to automatically close your trade to prevent further loss.

✅ Take Profit (TP)

An order to close your trade automatically once your desired profit is reached.

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📈 Example Trade Breakdown

Pair: EUR/USD
Trade: Long (Buy) at 1.1000
Lot Size: 0.10 (Mini lot)
SL: 1.0950 (50 pip risk)
TP: 1.1100 (100 pip reward)
Risk: $50 | Reward: $100 | Risk-to-Reward: 1:2

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💬 Final Tip

Familiarity with terminology is key to communicating clearly, learning faster, and executing trades confidently. Save this guide, and refer to it as you participate in the Forex Group discussions and coursework.

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🔗 Next Recommended Resource:
[📂 Trade Plan Template] – Download to start building your strategy with the terms you've learned.

Have questions? Ask in the Forex Group Forum or tag a mentor!