Every market and industry have their own vocabulary and the foreign exchange market really is no different. Below are some popular terms that will make you sound like a professional in just about no time:
- Base currency: first currency cited in a pair
- Authorised dealer: institution approved to work in the foreign exchange market
- High/Low: daily traded price
- Spot price: current market value
At first glance, forex trading may seem like an ad-hoc arrangement, especially compared to those structured exchanges such as the NYSE. While bewildering, forex trading actually works exceedingly well. Why? Participants in FX must compete and cooperate with each other. This self-regulation drives effective control over the market. But not to worry, as reputable U.S. FX dealers become a member of the National Futures Association (NFA) which means they agree to binding arbitration in the event of a dispute.