In the Forex market, gold is a state of the currency. The internationally obtained code for gold is XAU, a symbol operated under the ISO 4217 currency norm to indicate one troy ounce of gold. It is considered a "safe-haven" investment, hoping to improve its value during volatility and economic tension.

XAU/USD Trading Terminology

The XAU/USD pair suggests to the trader how many US dollars (the quotation currency) are required to buy one Gold Ounce (the base money). The United States is the country that holds the most significant resources of gold on the globe.

Recognizing and understanding some of the most common terminologies in the Foreign Exchange (FOREX) market before conducting the trading activity is essential. Some of these relevant terminologies are defined as follows:

• Currency Pair – The Foreign Exchange (FOREX) market trades in currency pairs where each currency is simultaneously purchased and sold. For example, if a trader purchases XAU/USD, the trader will buy XAU or Gold ounce as the base currency and sell the other currency, USD, as the quote currency.
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• Base Currency – The base currency is a currency that comes first in the currency pair. For instance, EUR is the base currency in EUR/USD.
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• Quote Currency – The quote currency is a currency that comes second in the currency pair. For instance, USD is the quote currency in EUR/USD.
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• Primary Currency – USD is considered significant if it is involved in every currency pair, whether as the base or quote currency. Some examples include EUR/USD, GBP/USD, USD/JPY, and USD/CAD.
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• Cross Pair – The cross currency pair is a currency pair that does not consist of the US dollar. These will be currency pairs like EUR/GBP, EUR/CHF, CAD/JPY, etc.
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• Broker – In the Foreign Exchange (FOREX) market, a broker may also be known as a currency trading broker or a retail FOREX broker who provides access to the trading platform for traders to conduct the buying and selling of currency pairs. In return, the broker usually charges a commission or a fixed spread. For instance, a small margin would be added by the broker where a currency pair initially quoted at $5 to buy would be quoted at $7 by the broker, and a currency pair initially quoted at $5 to sell would be quoted at $3 by the broker.
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• Spread – It is known that every market has a spread, including the Foreign Exchange (FOREX) market. The spread is the difference between a specific currency pair's selling (bid) price and the buying (ask) price.
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·        Pips – A pip is the smallest unit of measurement in the currency pair's price. For trading XAU/USD on the Meta Trader 4 or the Meta Trader 5 platform, one micro lot equals $1 for a target of 100 pips. So, "Pip" is an acronym for a share in or cost interest point. Based on the forex market pattern, a pip is a minor whole unit cost move that an exchange rate can make. For instance, if a trader purchases one micro lot (0.01 lots) of XAU/USD at a price from 1855.00 to 1856.00, it is equal to $1 or 100 pips. If the trader purchases one mini lot from 1855.00 to 1856.00, it is similar to $10 for 100 pips. In addition, if the trader buys one lot from 1855.00 to 1856.00, it equals $100 for 100 pips.

• Lot – In the Foreign Exchange (FOREX) market, the currency pairs are traded in lots, which is the number of the trading unit size that a trader will purchase or sell. The sizes of lots range; however, the standard size for a lot is comparable to as much as 100,000 units of the base currency in the FOREX market. Other standard lot sizes are known as the mini lot and micro lot.
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• Leverage – Leverage is a prevalent concept in the FOREX trading activity where brokers offer traders the ability to borrow money to receive more capital from investing in the currency pair. The leverage is often shown in a ratio; for example, a leverage of 1:100 would mean that a $1,000 deposit would allow the trader to trade until as much as $100,000. Traders can use this opportunity to increase their profit from the FOREX trading activity. However, it should be noted that leverage could also increase losses. Since the broker provides a loan, the amount of leverage that can be used for new traders might have a specific limit depending on the broker's requirement.
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• Margin – In the Foreign Exchange (FOREX) market, the margin is the amount of money a broker keeps or holds in the account during a trader's open option until the trader closes their position.
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• Take Profit – The Take Profit (T/P) is the price the trader sets for profit. When the price reaches the take profit limit, the position will be closed automatically, and the trader will receive profit precisely that amount. Automatic trading systems like Meta Trader 4 and Meta Trader 5 provide traders with a take-profit order limit. It is often used by short-term traders interested in obtaining a quick profit. Long-term traders are usually uninterested in setting a take profit as it would prevent the possibility of getting a much higher yield.
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• Take Loss – The Stop Loss (S/L) is the same cost the trader sets for failure. When the price reaches the stop loss limit, the position will be closed automatically, and the trader will result in a loss of precisely that amount. Trading systems often provide the stop loss limit to limit losses in volatile market conditions. This makes the stop-loss function a valuable tool for all traders as their FOREX trading strategy.
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• Risk Management – Risk management in the Foreign Exchange (FOREX) market involves an individual's actions in reducing the drawbacks of a trade. It should be known that although higher risks would lead to a higher chance of obtaining more profit, they can also cause significant losses. For this reason, a trader must have the skill to manage their risks. Risk management can be implemented by first understanding the FOREX market and starting with a demo account. Individuals can also control their risks by setting stop losses, creating a good trading strategy, managing their emotions, and conducting trading activity positively.