Forex 101: Defining Terms and Platform Familiarization

Now that we have a Forex Broker/Platform to start our adventure, let us familiarize ourselves with the platform of choice, although, the concept should be similar to other trading platforms. Why get through this? Just imagine yourself going to war with an advanced artillery without learning where is the “fire” button. It’s just plain stupidity! Obviously, you’ll end up dead!

If you missed out the first of this series, check it out here.

Now that we’re on the same perspective, let’s check etoro’s platform.

  1. Currency Pairs - These are the currencies being exchanged. Imagine the currency pairs as people playing tug-o-war, pulling each other and proving who is the strongest currency.
  2. Buy & Sell Rates - These are the applicable rates when you do a trade. The difference between the buy and sell rates is called spread. Spread is the revenue source Forex brokers in lieu of commissions.Imagine a sari-sari store owner buying biscuits at wholesale stores. He will be buying items amounting to a total of P1,000. When he sells the same items in retail at his store, he’ll be selling this at P1,500. The difference between the wholesale price and retail price is called profit margin, in normal business sense, or SPREAD, in Forex terms.It should be noted that there are two possible trades an investor can open. Of course, one of the position is the BUY position, wherein the trader targets to sell at rates higher than what he bought. This is also known as “Long” position.The  other one is the “Short” position, or Short Selling. This strategy is not very known in the Philippines Stock Market setting due to it’s risky nature, and basically because it is prohibited. The idea of Short Selling is to sell a currency pair (although you haven’t bought anything yet), and buy the same when the price is lower. So for a trader holding a short position, the lower the rate, the better.
  3. Sentiment - This represents the general feel of etoro traders about specific currency pairs. This data will tell you that a percentage of etoro’s trader are buying or selling a particular currency pair, which might signal a trader what to do next.
  4.  This comprise of several elements, namely:Amount - this field represents the amount invested by a trader.Units - this represents the number of currency pair units a trader has bought or sold.

    Open – this represents the rate the currency pair was bought or sold.

    Current – this is the latest exchange rate of the currency pairs

    Stop Loss – this is the rate where a losing position will automatically close. This protects the trader from greater risk exposure.

    Take Profit - this is the rate wherein winning trade will automatically close. This secures the investors by realizing the gain from the trade.

    Spread – as described above, this is the difference between the buying and selling rates.

Now that your are familiarized with what you see in the platform, you’re ready to start your first trades. On the succeeding articles, I’ll share with you the considerations in making a trade.

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  • rockyvargas

    I’m relatively a newbie here. I just have one question regarding the etoro forex trader. How is profit settlement undertaken? Do you nominate a settlement account, let’s say a FCDU savings account. Pardon my ignorance. Thanks in advance.

    • Nick Raquel

      Hey Rocky! Funds could be withdrawn from etoro to your paypal account. If you don’t have a paypal account, register here http://paypal.com – it would be more convenient. Then, from your paypal account, you can transfer your funds to your local bank.

  • http://www.facebook.com/jean.chaneustacio Jean Holly Chan-Eustacio

    i’m excited to learn Forex Trading… thanks for this!

  • Kero_mavid

    Thank you for the comprehensive post. My cousin started dabbling with Forex and will show this to him =)