Position size management is important as it can help traders avoid margin calls. Before you start speculating on the foreign exchange market, it would help to get a better understanding of technical analysis, as well as risk management , so you can better analyse price action and protect yourself from sudden market moves. In leveraged forex trading, margin is one of the most important concepts to understand. Margin is essentially the amount of money that a trader needs to put forward in order to place a trade and maintain the position.

Margin is not a transaction cost, but rather a security deposit that the broker holds while a forex trade is open.

Foreign exchange swap - how does it work?

Trading currencies on margin enables traders to increase their exposure. Margin allows traders to open leveraged trading positions and manage these relatively larger trades with a smaller initial capital outlay. If a broker offers a margin of 3. Margin level refers to the amount of funds that a trader has left available to open further positions. Trading forex on margin is a popular strategy, as the use of leverage to take larger positions can be profitable. Traders should take time to understand how margin works before trading using leverage in the foreign exchange market.

Traders need to be aware that their forex positions could be liquidated if their margin level falls below the minimum level required. Experience our powerful online platform with pattern recognition scanner, price alerts and module linking. Start trading on a demo account. Disclaimer CMC Markets is an execution-only service provider.

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The material whether or not it states any opinions is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is or should be considered to be financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. CMC Markets does not endorse or offer opinion on the trading strategies used by the author.

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Search for something. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The accuracy of the reports has fluctuated over time, but the market still pays attention to them in the short-run.

You might be a position trader if:

Models Synonymous with black box. Systems that automatically buy and sell based on technical analysis or other quantitative algorithms. MoM Abbreviation for month-over-month, which is the change in a data series relative to the prior month's level. Momentum A series of technical studies e. Momentum players Traders who align themselves with an intra-day trend that attempts to grab pips.

Net position The amount of currency bought or sold which has not yet been offset by opposite transactions. New York session am — pm New York time. No touch An option that pays a fixed amount to the holder if the market never touches the predetermined Barrier Level. The Offer price is also known as the Ask. The Ask represents the price at which a trader can buy the base currency, which is shown to the right in a currency pair. Offsetting transaction A trade that cancels or offsets some or all of the market risk of an open position.

On top Attempting to sell at the current market order price. One cancels the other order OCO A designation for two orders whereby if one part of the two orders is executed, then the other is automatically cancelled.

What is a Net Position?

One touch An option that pays a fixed amount to the holder if the market touches the predetermined Barrier Level. Open order An order that will be executed when a market moves to its designated price. Normally associated with good 'til cancelled orders. Option A derivative which gives the right, but not the obligation, to buy or sell a product at a specific price before a specified date.

Order An instruction to execute a trade. Order book A system used to show market depth of traders willing to buy and sell at prices beyond the best available. Over the counter OTC Used to describe any transaction that is not conducted via an exchange. Overnight position A trade that remains open until the next business day. P Paid Refers to the offer side of the market dealing. Pair The forex quoting convention of matching one currency against the other.

Paneled A very heavy round of selling. Parabolic A market that moves a great distance in a very short period of time, frequently moving in an accelerating fashion that resembles one half of a parabola. Parabolic moves can be either up or down. Partial fill When only part of an order has been executed. Patient Waiting for certain levels or news events to hit the market before entering a position.

Long or Short | Daily Price Action

Pips The smallest unit of price for any foreign currency, pips refer to digits added to or subtracted from the fourth decimal place, i. Political risk Exposure to changes in governmental policy which may have an adverse effect on an investor's position. Portfolio A collection of investments owned by an entity. Position The net total holdings of a given product. Premium The amount by which the forward or futures price exceeds the spot price.

Price transparency Describes quotes to which every market participant has equal access. Profit The difference between the cost price and the sale price, when the sale price is higher than the cost price. Pullback The tendency of a trending market to retrace a portion of the gains before continuing in the same direction. Purchasing managers index PMI An economic indicator which indicates the performance of manufacturing companies within a country.



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Purchasing managers index services France, Germany, Eurozone, UK Measures the outlook of purchasing managers in the service sector. Such managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries and inventories. Readings above 50 generally indicate expansion, while readings below 50 suggest economic contraction.

Put option A product which gives the owner the right, but not the obligation, to sell it at a specified price. Q Quantitative easing When a central bank injects money into an economy with the aim of stimulating growth. Quarterly CFDs A type of future with expiry dates every three months once per quarter. R Rally A recovery in price after a period of decline. Range When a price is trading between a defined high and low, moving within these two boundaries without breaking out from them.

Rate The price of one currency in terms of another, typically used for dealing purposes. Real money Traders of significant size including pension funds, asset managers, insurance companies, etc. They are viewed as indicators of major long-term market interest, as opposed to shorter-term, intra-day speculators. Resistence level A price that may act as a ceiling.

The opposite of support. Retail investor An individual investor who trades with money from personal wealth, rather than on behalf of an institution. Retail sales Measures the monthly retail sales of all goods and services sold by retailers based on a sampling of different types and sizes.

This data provides a look into consumer spending behavior, which is a key determinant of growth in all major economies. Revaluation When a pegged currency is allowed to strengthen or rise as a result of official actions; the opposite of a devaluation. Rights issue A form of corporate action where shareholders are given rights to purchase more stock. Normally issued by companies in an attempt to raise capital.