The Beginner Trader’s Cheat Sheet

By no means does reading this cheat sheet make you a good trader!

If you haven’t read our Forex Education section, go back and do some studying! In case you have indeed learnt everything there is to learn about forex trading, stay, go through this cheat sheet and keep it close at hand while you trade, so that you can quickly and easily find a definition you have forgotten.

  • Ask Price is the price at which you can buy a currency pair.
  • Base Currency is the basis for the buy or the sell and is the first listed currency in a currency pair.
  • Bid Price is the price at which you can sell a currency pair.
  • Contracts for Difference (CFDs) are derivative instruments that allow traders to speculate on the changing values of a given asset without taking ownership of that asset.
  • Equity is your trading balance plus or minus the profits or losses from any open positions.
  • Exotic Currency Pairs consist of one major currency paired with the currency of an emerging economy.
  • Forwards are private agreements where a buyer and a seller settle on a price for a given asset but defer delivery until an agreed-upon date.
  • Free Margin = equity – used margin
  • Free Margin is the funds available to open new leveraged positions.
  • Futures are financial contracts that allow buyers and sellers to agree upon a price for an asset to be exchanged at a predetermined future date.
  • Going Long means buying.
  • Going Short means selling.
  • Leverage enables traders to control positions that exceed the value of their initial investment.
  • Major Currencies are the most commonly traded currencies. They include the U.S. dollar (USD), the euro (EUR), the Japanese yen (JPY), the British pound (GBP), the Swiss franc (CHF), the Canadian dollar (CAD) and the New Zealand dollar (NZD).
  • Major Currency Pairs are the most frequently traded and the most liquid. They involve the U.S. dollar (USD) paired with each of the other major currencies. The major currency pairs are EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, and NZD/USD.
  • Margin is the percentage of your account balance that is secured every time you open a leveraged position.
  • Margin in base currency = trade size in units / leverage
  • Margin in quote currency = trade size in units / leverage X exchange rate
  • Margin Level is the ratio of equity to used margin.
  • Margin Call is a notification that the amount of money in your account can no longer cover your possible loss.
  • Micro Lot = 1,000 units
  • Mini Lot = 10,000 units
  • Minor Currency Pairs, or Cross-Currency Pairs, or Crosses, are currency pairs that do not contain the U.S. dollar (USD). They include pairs between the major currencies.
  • Options are financial instruments that secure the right, but not the obligation, to buy or sell a given asset at a certain price on the predetermined expiration date of the option.
  • Pip is the fourth decimal place of the quote currency in a pair. In the case of the Japanese yen (JPY), it is the second decimal place.
  • Pip Value in the base currency = pip in decimal places X trade size / market price
  • Pip Value in the quote currency = pip in decimal places X trade size
  • Quote Currency, or Term Currency, is the second currency in a currency pair.
  • Spread is the pip difference between the bid and the ask prices.
  • Standard Lot = 100,000 units
  • Tick is the actual move that a price makes, irrespective of the number of pips that each move is worth.
Did you know?

U.S. President Richard Nixon is credited with enabling a free-floating currency system after ending the Bretton Woods Accord.

Word of the day
"Risk Aversion" - The reluctance or unwillingness to take what are considered to be risky positions.
Pro Tip

It’s usually better to avoid trading when market activity is low.