Forex Glossary

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.

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.

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.