Forex trading is a specialized activity. It’s difficult to make any money in this area unless you’re familiar and well-equipped with the various Forex words and lingo that the people in this industry use.
Whether you are a retail trader, institutional trader, broker or currency analyst, the terms that you’ll use to describe the Forex trading market will be the same. In this article, I will introduce to you two terms (or words) that are normally used in the currency trading market.
Term #1 - Pip
This term refers to the smallest incremental movement in market prices. A ‘pip’ is also sometimes referred to as a ‘point’. Traders use the term ‘pip’ as in, “Wow, the market jumped up 200 pips last night!” This means that the market had moved up by 200 incremental points.
Because most currency pairs are traded to the nearest 0.0001 decimal place, most beginner traders would assume that one pip equals 0.0001. While this is often the case, it is not always true. Take the USD/JPY currency pair for example. This pair trades to the nearest 0.01 decimal place. For the USD/JPY pair then, one pip equals 0.01.
Term #2 - Bull & Bear Market
These are rather vague terms that are taken to mean a rising and falling market respectively. In a bull market, most traders are looking to buy, and in a bear market, they are looking to sell. There is no specific definition as to what constitutes a bull or bear market, and people tend to use these terms rather loosely when describing a rising or falling market.
Similarly, the terms ‘bullish’ and ‘bearish’ describe market participants who are expecting prices to move up and move down respectively.
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Harold Hsu is the owner of ForexSystemProfits.com where he provides premium Forex trading tips and resources.
