Understanding of the Forex trading terms makes trading easier for the currency traders and investors. Some important Forex trading terms are explained below.
Forex Trading Terms
Trade Balance
It is equal to the total export of a country minus total import. Total exports greater than total imports will result in positive trade balance but total exports lesser than total imports will result in negative trade balance. Trade Balance will help to predict the behavior of any currency in future.
Balance
It means the amount remained in your account including recent proceeds to continue your Forex Trading. It does not integrate hovering profit/loss.
Equity
It means the amount remained in your account including recent proceeds and integrating hovering profit/loss.
Margin
The equity required to be deposited by an investor to collateralize an opened position.
Free Margin
It is the quantity of equity remained in your account that is not yet consumed by the opened positions or the losing positions.
Margin Call
It is the request from a dealer or broker to the trader to deposit extra funds to continue an opened position, the price of which has moved downward. Margin call is generated when the equity balance of your account is less than the margin requirement. This means that margin call starts ringing as soon as the free margin of your account is ended. If an account rises more than the maximum allowable leverage then all the open positions will be liquidated immediately.
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