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Basic knowleage of forex

Base currency

The base currency refers to the first currency in the currency pair and the currency that is fixed at the time the currency pair is determined. In terms of daily trading volume in the foreign exchange market, the US dollar (USD) and the euro (EUR) are the most important benchmark currencies. The British Pound (GBP), also known as Sterling, is the third-ranked benchmark currency. US dollar-based currency pairs include USD/JPY, USD/CHF and USD/CAD; EUR-denominated currency pairs include EUR/USD, EUR/JPY, EUR/GBP and EUR/CHF . The pound is the base currency for the GBP/USD and GBP/JPY currency pairs. The Australian dollar (AUD) is the base currency of the AUD/USD pair.


Refers to the difference between the spot price and the futures price.

base point

Refers to one percent of one percentage point.

Bid-ask spread

Refers to the difference between the bid price and the bid price (bid), also known as the two-way quote.

Central bank

Refers to a country's major monetary authority, controlled by the central government, responsible for issuing currency, formulating monetary policy, interest rate policy, exchange rate policy, and managing and supervising the private banking sector. The Federal Reserve is the central bank of the United States. Other central banks include the European Central Bank, the Bank of England and the Bank of Japan.


Refers to the process of converting an asset or liability denominated in one currency into an asset or liability denominated in another currency.

Cross exchange rate

Refers to the exchange rate between the two currencies. The cross exchange rate is not necessarily the standard exchange rate in the currency pair country. For example, in the United States, the GBP/CHF quote is a cross exchange rate, while in the UK or Switzerland, it is the exchange rate of the main currency pair.


Refers to the trading unit issued by the national government or the central bank, using the monetary value as the unit of measure for the transaction.

Currency (exchange rate) risk

Refers to the risk of loss due to adverse exchange rate changes.


Refers to the currency value of a country falling relative to the currencies of other countries. When a country's currency depreciates, the cost of importing goods will rise, but the cost of exports will fall, which will increase the competitiveness of exports.


Refers to the decline in the value of the account from the highest to the lowest, expressed as a percentage or amount. For example, if the value of a trader’s account increases from $10,000 to $20,000, then falls to $15,000 and then increases to $25,000, the trader’s maximum decline is $5,000 (ie, the account falls from $20,000 to $15,000). Even if the trader’s account has not lost position since the position was opened.


Refers to the currency of the European Monetary Union (EMU), which is used to replace the European Currency Unit (ECU). The countries currently participating in the European Monetary Union are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia and Spain.


A strategy to reduce investment risk by diluting the risk of a major portfolio by investing in alternative investment vehicles, thereby reducing the volatility of the portfolio.

Hedge Fund

Refers to an unregulated private investment fund suitable for wealthy investors (with a minimum investment of US$1,000,000), mainly engaged in short-term, high-risk speculative investments in bonds, currencies, stock options and derivatives.


Refers to the ratio of borrowings used by investors or businesses. For investors, leverage refers to buying money with margin to increase the rate of return without having to increase the amount of investment. The amount is expressed in multiples and the nominal amount of the transaction is greater than the margin required by the exchange. For example, if the nominal amount of the transaction is $100,000 and the required margin is $2,000, the trader can take 50 times leverage ($100,000/$2,000). The risk of investing with leverage is extremely high because you may lose all your investment.


Refers to the ability of the market to accept large transactions. Liquidity varies by market volume and activity, and represents the efficiency and cost-effectiveness of trading positions and executing orders. The stronger the market liquidity, the more frequent the quotation and the smaller the bid-ask spread.


Refers to buying a specific currency and looking for another currency, expecting the currency to be appreciated to appreciate, while the other currency depreciating.


Refers to the funds that the customer must deposit as a guarantee to cover the potential losses arising from adverse price movements.

Recovery of deposit

Refers to the broker or dealer requesting additional funds or other guarantees to increase the amount of the margin and provide the necessary performance guarantee for the position that is not favorable to the client.

Market maker

Refers to the dealer who provides the price and is prepared to buy and sell the currency at such trading price. Some members of the foreign exchange dealers registered with the Commodity Futures Trading Commission belong to the market maker.

Point (fluctuation point)

Refers to a statement used in the currency market to describe the lowest increase in exchange rates. According to the market environment, it is a basic point under normal circumstances. For example, EUR/USD, British Pound/USD, USD/CHF currency pair is 0.0001, and in USD/JPY currency pair is 0.01.



Premium water (position cost)

Refers to the cost or benefit of extending an open position from one delivery date to the next, based on the short-term spread of the two currencies in the currency pair.


Refers to an increase in the foreign exchange value of a currency pegged to other currencies or gold.

Revaluation rate

Refers to the exchange rate of any time period or currency used to revalue a position or book value. The revaluation of the exchange rate is also the market exchange rate used by the trader to determine the profit and loss each day.


Refers to the extension of the transaction to the next delivery date, the cost of which is calculated by the spread of the two currencies. Also known as overnight swaps, specifically the spread between the next business day and the business day after it.


It means that you do not actually own a certain currency and sell it. Those who hold short positions tend to expect the price to fall, and then buy back the profit at a lower price.


Refers to the difference between the purchase price of a currency and the price of a bid (bid) to measure the liquidity of the market. The smaller the spread, the more often the liquidity is indicated.

Spot price

Refers to the current market price. Spot transactions are usually delivered within two business days.


Forex swap refers to the inclusion of both spot and forward transactions, or two forward transactions with different maturities in a single transaction.

Price increase

A new quote for the same currency is higher than the previous quote.

Pending order

An order for executing a trade when the currency pair reaches a predetermined price.

Entry limit order

Refers to an order that requires an open position to sell currency when the market rises, or to buy money when the market declines. The customer believes that the market will reverse at the price set by the order.

a. Buy limit order: An order to buy currency at a price lower than the current market price. b. Sell Limit Order: An order to sell the currency at a price higher than the current market price.

Entry stop loss order

Refers to an order that requires an open position to sell currency when the market declines, or to buy money when the market rises. The customer believes that after the price hits the order price, it will continue to move in the direction of the previous momentum.

a. Buy Stop Order: An order to buy currency at a price higher than the current market price. b. Sell Stop Order: An order to sell the currency at a price lower than the current market price.

Limit order

A limit order is an order that is linked to a specific position and is designed to lock in the profit of that position. A limit order under the buy position indicates a sell, and a limit order under the sell position indicates a buy. The limited price list is always valid until the customer closes the position or cancels the limit order.

Market order

An order that immediately buys or sells currency at the current currency price.

Choose one

Refers to an order that links a stop loss order to a limit order at the same time as a specific position. The stop loss order is used to prevent additional losses on the position, while the limit order creates profit for the position. Execute any order, the position will be closed, and the other order will be cancelled automatically.

Stop loss order

An order that is tied to a specific position and used to close a stop loss. When the price displayed by the GTS hits the stop price, a stop loss order is executed. Execution price strike price, if you encounter a quick market, execute the order at the price shown below. A stop loss order under the buy position indicates that it is sold at that location. A stop loss order under the sell position indicates purchase at that location. All stop orders are always valid until the customer closes or cancels the stop loss order.

Risk warning:All foreign exchange, precious metals are accompanied with great risk, therefore is not suitable for all investors. Please be sure to fully understand the risks at your own can bear within the scope of the investment. More risk for details, please refer to the risk of WSG statement and deposit policy.