CHAPTER 2 GLOSSARY
Before explaining more detail how the Forex trading works and how to trade it, it is important that you master the Forex basic vocabulary. VOCABULARY: FOREX FOUNDATION CFD: CONTRACT FOR DIFFERENCE: Currencies pairs are known as CFD,meaning contract for difference, they are the ideal products to talk about speculation in financial markets. In other words, it is simply a "contract in which the difference in the price of a financial instrument is exchanged at the time of an opening position of the contract and the price at the time of a closing position of the contract." This definition is also quite perfect for the term speculation, at least ,applied to the context in which we work. CFDs reflect the exact prices which are trading various financial instruments such as stocks, commodities, indices and currencies. Forex currencies are financial instruments type: CFD LEVERAGE : Magic Leverage is the amount of capital that we can borrow from the broker to increase our trades. It is generally used as a tool to do more with less. It can allow us to increase our trading account faster, but we must never forget that this is a double-edged sword. Just as you can make a lot of money, you can also lose a lot of money. Thanks to leverage, we can negotiate in markets such as currencies with relatively small accounts. The interesting application of leverage, is that we will use to open more than one trade at a time and to be able to diversify our portfolio and trade with more money that we have available in our account. The problem arises when leverage is used negligently.
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