With forex trading you can always make a good amount of money without having to put too much of your personal finances into an initial investment. Predicting the correct direction the market will take can also be an exciting rush, one that you will not find anywhere else. Before you get started, however, it is highly recommended for you to understand the basics and proceed at your own pace, as your personal level of comfort will determine how well you engage the market.
Understanding the basic terminology that surrounds forex trading is one of the important parts of understanding the system. The type of currency that you are spending, or that you are getting rid of, is called the base currency. The currency that you will be purchasing is known as the quote currency. In this system of trading, you will sell one type of currency and purchase another. The available exchange rate will typically tell you how much you need to spend to purchase a base currency. A number such as GBP/USD=1.25 means that you will be spending 1.25 USD to purchase every 1 British pound.
When you take a long position, it means that you want to purchase the base currency and sell your quote currency. In the mentioned example, you will want to sell the US dollar for British pounds. When you take a short position, it means that you want to buy the quote currency and sell the base currency. This means the opposite, selling the British pound and buying the US dollar. The bid price is understood as the price that your broker will be willing to buy the base currency for the quote currency. The ask price, which is also known as the offer price, is the price that your broker will sell your base currency in exchange for the quote currency.
The terminology involved with trading is only the first basic part of getting started. As you learn more about how currencies interact with each other, you will want to look into various resources, such as graphs and news feeds to make the best decision. Learning how to do the right research is an absolute must when it comes to trading Forex.