Forex Glossary

A

Asset – An item with a certain value

Aussie – Trader slang for the pair AUD/USD

B

Base currency – The first currency in a Forex pair. Ex: in EUR/USD, Euro is the base currency and the Dollar is the quote currency

Bear – A trader who thinks price will go down

Bear market – A market that has been declining for an extended period of time

Brokerage firm – Also known simply as a “Broker”, is a company that offers trading services for individual and professional traders

Bull – A trader who thinks price will go up

Bull market – A market that has been rising for an extended period of time

Buy Limit – An order to buy a currency at a lower level

Buy Stop – An order to buy a currency at a higher level

C

Chartist – A person who analyses price movement and attempts to predict future moves by examining past moves recorded on a chart

Correlation – A relationship that exists between two currencies. For example, EUR is positively correlated with the GBP. If EUR/USD goes up, it is possible that GBP/USD will go up also.

Day trader – A trader that usually closes all his transactions within the same day, profiting from short term moves

Foreign Exchange – Selling or buying a currency against another. “Forex” is the acronym for Foreign Exchange

F

Fundamentalist – a trader who bases his decisions on fundamental analysis

Fundamental analysis – A type of analysis that studies the economic environment and the way economic factors influence the movement of currencies

G

Going Long – Buying a currency pair

Going Short – Selling a currency pair

I

Introducing Broker – A person or firm that introduces customers to a brokerage company in exchange for a commission

M

Margin – The amount of money required to hold a position open.

Margin call – A notification from your brokerage firm that you need to deposit more money because the value of the account is bellow the required margin for your open positions

Market Order – An order to open a transaction immediately, at the best available price

Martingale – Often called a Martingale System, this gambling strategy requires the gambler to double the amount after every loss. A win would make up for previous losses and would bring you a small profit, but the amount of money needed to trade this system can be huge due to the exponential growth of position size.

Moving Average – Usually drawn as a line on a chart, the Moving Average is a representation of price, calculated by averaging the prices for a given period. There are different formulas for different types of Moving Averages.

N

News Trader – A trader who bases his trading decisions on the immediate impact of news on the financial market

O

OscillatorsTechnical indicators characterized by the fact that they show overbought and oversold conditions in the market.

P

Pip – The smallest move quoted in Forex. For example, if the EUR/USD quote is 1.2020 and it moved to 1.2021, it means it moved for 1 pip

Q

Quote Currency – The second currency in a currency pair. In EUR/USD, USD is the Quote Currency; in USD/JPY, JPY is the Quote Currency

R

Rally – A period when price rises

Ranging market – A period when price moves in a horizontal channel

Resistance – A price level where we can see strong selling pressure

Risk Management – The use of appropriate strategies for controlling or reducing risk

S

Scalping – A fast way of trading, taking small profits and quickly exiting the market

Sell Limit – An order to sell a currency pair at a higher level

Sell Stop – An order to sell a currency at a lower level

Slippage – When a trade is not opened or closed at the instructed price. This can happen due to high market volatility or low liquidity. Another reason can be the lack of interest manifested by your broker.

Spread – The difference between bid price and ask price of a pair

Stop Loss Order – An order to close a transaction at a predetermined level. This type of order is used for limiting risk to a certain amount. If the trader bought the currency pair, the stop loss order is placed below the entry price. If the trader sold the currency pair, the stop loss order is placed above the entry price.

Support – A level where we can see strong buying pressure

T

Take profit order – An order placed by the trader to secure his profits and at the same time reduce his market exposure by partially or entirely closing a position.

Technical Analysis – A method of trying to predict future price movement by analyzing past data, charts, indicators, moving averages and other technical tools

Technical trader – A trader that uses technical analysis

Trailing Stop Loss – Similar to a Stop Loss, but the Trailing Stop Loss moves behind price, following it and locking more and more profits if price moves in the direction of your trade. If price moves against the trade, the Trailing Stop Loss will not move away from price

Transaction – Buying or selling a currency pair

Trend – Current direction of the market

U

Unrealized profit – The profit a trader would make if the trade were to be closed at the current time and price.

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