DAY 2: Review of Trading Terms and Basic Concepts

Hello everyone. On DAY 1, we discussed “organizing the trader's mindset” from the perspective of business and laying the mental foundation.

On DAY 2,we will整理 basic terms in FX and tradingto get them in order.

If you have words like “I’ve heard them somewhere, but I actually don’t understand them very well…,” I recommend clearing them all up here at once.

1. Basic FX terms

(1) pips

• Meaning：In FX, price movements of currency pairs are expressed in “pips.”
• Example：USD/JPY where “1 pip = 0.01 yen,” “EUR/USD where 1 pip = 0.0001 dollars.”
• Points：
  • When calculating profit/loss, we express it as “gained ○ pips, lost ○ pips.”
    
    

(2) Lot

• Meaning：Trading volume. Depending on the broker, it is often defined as “1 lot = 100,000 units.”
• Example：Trading USD/JPY in 1 lot (100,000 units) would result in approximately 1,000 yen profit/loss for a 1 pip move.
• Points：
  • The larger the position size, the larger the profit or loss due to market movement.
  • For beginners, it’s conventional to start with a “small lot” to manage risk.
    
    

(3) Spread

• Meaning：Difference between bid (buy) and ask (sell) prices. It’s okay to think of it as the broker's cost.
• Example：If USD/JPY is “buy 130.001, sell 130.000,” the spread is 0.01 yen.
• Points：
  • Pairs with narrower spreads have lower trading costs and are easier to profit from.
  • Spreads can widen significantly due to economic indicators or unexpected news, so be cautious.
    
    

(4) Leverage

• Meaning：A mechanism that allows you to move more money than your available capital.
• Example：With 25x leverage, you can trade up to 1,000,000 yen with about 40,000 yen margin.
• Points：
  • Higher leverage can target larger profits but also increases risk.
  • If you mismanage funds, you can quickly lose your capital, so be careful.
    
    

(5) Margin and margin call

• Meaning：Money deposited as collateral when trading FX.
• Margin call：If unrealized losses grow and maintenance margin falls below a certain level, the broker will notify you to add more margin.
• Points：
  • Keep the maintenance margin in mind to avoid excessive losses.
  • Overusing leverage can force you into a rapid downturn when markets move suddenly.
    
    

2. Basic concepts of trading

(1) The concepts of “buy” and “sell”

• Buy position (Long)：Profit if price rises from now.
• Sell position (Short)：Profit if price falls from now.
• Points：
  • FX offers profit opportunities in both rising and falling markets.
  • However, for beginners, it may be clearer to practice mainly with “buy.”
    
    

(2) Technical analysis vs fundamental analysis

• Technical analysis：Use chart patterns and indicators (RSI, MACD, moving averages, etc.) to find buy/sell points.
• Fundamental analysis：Interpret economic indicators, interest rate policies, news, and other real economic conditions to predict the market.
• Points：
  • Learning both sides in balance improves trading accuracy.
  • Automated trading systems often combine these elements.
    
    

(3) Risk management and mental management

• Risk management：Position sizing, stop-loss rules, capital management, etc.
• Mental management：Keep emotions from shaking due to consecutive losses or gains by following rules.
• Points：
  • In FX, controlling losses is more important than chasing profits.
  • To support calm decision-making, always set a stop-loss line.
    
    

3. Why everyone should first understand these basics

• (1) If you don’t understand terms, information gathering becomes difficult
  Even when viewing trading information on SNS, blogs, or YouTube, you won’t understand well without basic terms.
• (2) To read charts and reports with evidence rather than feeling
  A vague “this looks like a win, so I’ll enter” is dangerous in the long run.
  Understanding terms allows you to make judgments like “risk-reward ratio fits” and “avoid when spreads widen,” improving your win rate through repeated practice.
  
  

4. Points to privately use learned terms

1. Check not only the meaning of words but also in actual trading screens

   • Example: Practice on a demo or small lots to feel what pips feel like and how spreads widen, so it sticks.

2. Make a habit of using terminology in daily market checks

   • Say or note things like “Today EUR/JPY moved by ○ pips,” or “Spread is ○ pips, a bit wide,” to imprint it.

3. Deeper term understanding changes risk-taking

   • When you properly understand terms and concepts, you naturally make more prudent judgments like “maybe keep leverage moderate” or “keep more margin available.”
     
     

5. Summary & next preview

• Summary

  1. Understanding FX-specific terms (pips, lot, spread, leverage, margin, etc.) clarifies market movements and risk management.
  2. Grasping concepts like “buy (long)” and “sell (short)” and technical/fundamental analysis builds a foundation to stay calm and make sound judgments in any situation.
  3. Even just mastering basics enhances information gathering and study efficiency, making it easier to create trading rules that work for you.

• Next time (DAY 3) topic: How charts work – candlesticks and price action
  Next, we will explain how to read candlesticks, the basis of chart analysis, and the concept of price action. Learning how to interpret buyers’ and sellers’ psychology from candlestick shapes may make the market feel alive. Please look forward to it!
  

  
  

  
  

  If you’re interested in automated trading, please also check out the link below.
  https://www.gogojungle.co.jp/users/147322/products

  
  

  If this was helpful, we would appreciate it if you click "Read more.".
  Thank you.