Forex Terminology

Rate/Quote

Rate is the price of one currency in terms of another.

Base Currency

The base currency is the first currency listed in any currency pair. Its value is determined against the counter currencies value.
(For example, if the following currency pair EUR/USD rate is 1.3525, then the EUR is the base currency and it is worth 1.3525 USD.)

Counter Currency (also known as Quote Currency, or Pip Currency)

The counter currency is the second currency in any currency pair. Its value is determined against the base currencies value.
(For example, in the following currency pair EUR/USD, the counter currency is USD.)

Bid Price (also known as Sell Price)

The bid price (left quote display) is the price at which traders can sell the base currency.
If you think that the value of the Euro will decrease then you can chose to sell it—you can sell EUR for USD at the price displayed in the bid quote.

Ask Price (also known as Buy price, or Offer Price)

The ask price (right quote display) is the price at which traders can buy the base currency.
If you think that the value of the Euro will increase then you can chose to buy it—you can buy EUR for USD at the price displayed in the ask quote.

Spread (also known as Bid/Ask Spread, or Market Spread)

The spread is the difference between the bid price and the ask price

Pip (also known as Points)

A Pip is the smallest price increment in the last digit in the rate (i.e., in the decimal place).

Day Trading

Day Trading refers to transactions that are opened and closed on the same trading day.

Transaction Cost

Transaction cost is the cost you will incur when you make a trade.
It is calculated in the following manner: Transaction Cost = Ask Price - Bid Price.

Stop Loss

A trade type in which an open position is automatically closed at a specific price is referred to as a stop loss order. You can put in a stop loss order to minimize losses in case the market moves in ways that are the opposite of what you expected.

Margin

Margin is a cash deposit that you have to provide as collateral to cover possible future losses.

Leverage ( x 400)

The leverage is the loan you get from your dealer, which enables you to transact quickly and cheaply with a small amount of initial capital.
It is expressed as the ratio between the total capital (that is available) to the actual capital (which is the amount of money you can borrow).
(For example, a 1:400 leverage will allow you to buy or sell 10,000 USD with only $25 USD.)

Please note

Trading currencies on margin increases your buying power.

If you have 25 USD cash in a margin account whose leverage is 400:1, you could purchase up to 10,000 USD worth of currency because you only have to post 0.25% of the purchase price as collateral. This means that while initially you had 25 USD cash, you now have 10,000 USD worth of buying power.

However, while more buying power can increase your profits, it can also increase your losses. It is highly recommended that you take the time to understand the risks. Make sure to read the margin agreement, to underdstand how your margin account works, and to ask questions whenever you come across things that are unclear to you.