Forget the Hollywood movies and the cool characters played by famous actors. Forget their cool, memorable taglines and their classic scenes! Let’s talk about real life now. Let’s talk about the real traders and more importantly the taglines, words, phrases they use! These phrases will help you navigate the markets and read the news with more ease.
After all, just as Gordon Gekko, from Wall Street said “the most valuable commodity is information”
➡️ Vive la resistance!
How many times have you seen articles mentioning resistance levels of an asset? Do you understand the notion of resistance? It all goes back to an asset’s chart. You see, every day there are numerous fluctuations regarding an asset, yet there is a clear trendline: up, down or sideways.
Resistance is focused on the upward direction of an asset and analysts’ (as well as physics’) notion that everything that goes up will eventually come down. The highest price an asset reaches before the price direction reverses is called resistance. In other words, it’s the ceiling the price hits on its way up.
Why “resistance”? It’s because that specific level is the highest price investors are willing to buy the asset for. Higher than that, they will start resisting, resulting, of course, to a selling trendline or sideways pattern. Makes sense?
➡️ Investors support this message
The opposite of Resistance, which is the lowest price traders and investors are willing to sell is called support. Alternatively, they are called Top and Bottom, top for the highest price the asset can reach and bottom for the lowest one.
“Number one rule of Wall Street: Nobody and I don’t care if you’re Warren Buffet or if you’re Jimmy Buffet, nobody knows if a stock is gonna go up or down or in bleep circles.” The Wolf of Wall Street
➡️ Keep the wolves at bay
Forget the Wolf! There are two animals far more important in the markets: Bulls and Bears. And although Wolf’s right about no one knowing which way a stock is going, the other two animals can certainly help with the direction. If a stock price is “feeling” Bullish it means that there is a buying trend. And if it’s bearish, investors are in a selling mood. As such, Bulls are the traders that Buy whereas Bears are the ones that Sell. Where did this analogy come from? This quote “a bull thrusts its horns up into the air, while a bear swipes its paws downward.”
“Without action, the best intentions in the world are nothing more than intentions” The Wolf of Wall Street, again
➡️ Never be short of action!
In other words, go long in action and short in doubts. If that makes no sense, then you probably don’t know what long and short positions are. When you open a long position it means that you’re buying. Which means that you are speculating that the asset your trading is currently in a bullish/buying phase.
On the other hand, if you open a short position, it means you’re selling - you’re speculating, that is, that the asset you’re trading is currently in a bearish/selling phase.
Great, now let’s go and explore a few other terms:
➡️ What’s your favourite spread?
A spread is the difference between the price of Bidding and Asking. Bidding is the selling price and Asking is the buying price. And how is the difference measured? In pips. Why?
Because… Pips don’t lie!
A pip is the most accurate point at a price. Being the last decimal in an asset’s price, a pip determines the smallest change in its price.
And that means a lot!
A lot is the number of units of a forex asset you will be trading. Let us rephrase: A “lot” is the number of units of a forex asset you will be trading. In the olden days, traders were only able to trade in 100.000-sized lots which is still considered the standard. But that belongs to the past! At NAGA you can trade as low as 0.1 lot!
➡️ Wanna swap?
A swap is the action upon which the forex industry is based! You basically swap one currency for the other at the agreed price.
Now that you have a basic understanding of the trading’s most used terms, why don’t you go read a few articles so you can start getting a sense of the markets?
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