We’ve gathered a Forex Glossary to help with understanding the complex world of Forex trading.
Trading and performing all operations on the currency market is based on specific terminology, which certainly complicates the work in this area.
Professional terminology must be properly understood in order to correctly interpret the processes and changes that occur in the forex market. A lack of understanding Forex terminology can hinder a trader’s progress in the industry.
For this reason we have developed a simplified Trading Forex Glossary to help you on your journey.
Adjustable Peg
Adjustable (correctable) peg – the form of the exchange rate at which the currency is fixed in relation to a strong foreign currency, but adjusted periodically in accordance with the established criteria. For example, Singapore dollar is sometimes pegged to the US Dollar.
Account Statement
It contains information about the transactions and the client account with a broker for the selected period.
Appreciation
The growth of unit value of one currency expressed in units of another currency.
Arbitrage
Risk-free type of trading where the same currency is simultaneously bought and sold against each other to make a profit due to the difference in the prices of the two counterparties.
Ask
Offer price – the price of the seller. The price at which a customer can buy the desired currency (a large figure of a bilateral quotation).
Basis Point
One-hundredth of a percent; used in relation to interest rates.
Bear
A market participant who is bearish on prices
Bear Market
“bear” market price (quotation) is characterized by a decrease.
Bid Price
The price at which the client can sell his desired currency (lower figure in the bilateral quotation).
Bond
A debt investment in which an investor loans money to an entity (typically corporate or governmental)
Broker
Mediator producing trades on behalf of clients for a commission.
Breakout
Sudden movement of the course through some conditional border (previous top or bottom level of consolidation).
Bull
A market participant, bullish prices
Bull Market
“Bull” market characterized by rising prices (quotes).
Chart
Graphical representation of price changes (course)
Confirmation
Verbal or written confirmation of the broker regarding a transaction.
Country Risk
Risk associated with changes in the political and economic situation in the country.
Commission
Brokers commission fee for using their services
Consolidation
Figure charting, characterizes price movement (course) in a direction without certain increasing or decreasing trends
Cross-Rate
The exchange rate of two currencies, neither of which is the US dollar.
Cryptography
A method of storing and sending data so that only those for whom the data is meant for can read it.
Day Order
A transaction order, which is valid for the day
Day Trading
Trading operations performed within one day
Dealer
Market participant who trade the company’s assets (the bank which employed him).
Direct Quote
Presentation of the cost of foreign currency units in the national currency units.
Discount Rate
The interest rate at which the central bank lends to the country’s financial institutions
Divergence
The discrepancy between the direction of the market price movements exhibited by the price chart and the direction of motion of a technical indicator.
Diversification
Trading in several markets (multiple instruments) to reduce commodity price risks.
Double Bottom
Figure charting, when the rate fell twice at a certain level and then raised again.
Double Top
Figure charting, when the rate was raised twice to a certain level, and then fell again.
Dow Jones Average
The Dow Jones index, which characterizes the business activity of the US stock market.
Downtick
The price moving down.
ECN
Electronic Communication Network; the bridge that links smaller participants in the market with tier-1 liquidity providers through an ECN broker.
Elliott Wave Analysis
A method of market technical analysis, based on Elliott wave theory (Ralph Nelson Elliott).
Eurocurrency
Currency held in deposit accounts with banks in countries other than the country issuing the currency.
Exchange risk
Risk of changes in value of the currency
Equity
The balance of the account based on profit or loss of open positions.
FalseBreakout
Short-term movement of the course through some conditional border (previous top or bottom level of consolidation), and then return and movement in the opposite direction.
Fibonacci Sequence
A sequence of numbers obtained by the Italian mathematician Leonardo Fibonacci. These numbers are widely used in technical analysis to determine the price levels (support and resistance) on the market.
Fundamental Analysis
It uses macroeconomic development indicators to predict the market situation.
Forward Contract
Agreement on the exchange of a certain amount of one currency for another in the future at a price fixed at a particular time.
Futures Contract
Standardized forward contract which is the subject of purchase / sale on the stock exchange.
Gap
The price range within which there were no quotes, forms a gap on the chart.
Good-Till-Cancelled (GTC) Order
An order for the transaction, available until it is canceled by the customer or executed by the broker.
Hard Currency
A freely convertible currency, without restriction exchanged for other currencies.
Hedging
The combination of long and short positions in different instruments in which the foreign currency risk is reduced.
Head and Shoulders
Figure charting, reminiscent of the shoulder line, the neck and head of a person.
Indirect Quote
Reverse quotation. Presentation of the unit value of the national currency in foreign currency units.
IBRD
International Bank for Reconstruction and Development.
IMF
International Monetary Fund.
Joint Account
Shared account, between 2 or more traders
Leverage
The ratio between debt and equity.
Libor
The interest rate at which major London banks lend to each other.
Limit Position
The maximum size of an open position.
Liquidity
Market, in which is always possible to make a deal (during business hours), is considered liquid.
Long Position
With respect to a particular currency – Open position at which the amount of the purchased currency exceeds the amount sold in the same currency. Buy position.
OTC
Meaning “Over the Counter” type of products. Forex market is an OTC market.