Forex trading glossary
A
Arbitrage
Taking advantage of different prices of an asset in two markets is called arbitrage. For example, buying an asset for 100 dollars in market A and selling it for 105 dollars in market B.
Ask
it is the highest price at which a trader is willing to pay to buy a particular asset or currency.
Asset
it refers to something valuable, such as a currency.
Averaging down
When a trader buys an asset, the price reduces, and if the trader buys more, the price drops even more. This is known as averaging down.
B
Base Currency
The first currency of any currency pair is called the base currency. for example, the USD is the base currency in this currency pair: USD/EUR
Bear
Traders that believe a market, asset, or financial instrument is moving down are known as bears.
Bear Market
It describes a situation in which a market is experiencing price declines.
Bid
It is the lowest price at which a trader is willing to sell a particular asset or currency.
Bond
Bonds are a type of financial investment in which you lend money to a company for a set length of time. Depending on the type of institution you are lending to, they normally come in two varieties: corporate bonds and government bonds.
Bull
Bulls are investors who believe that the value of a market, instrument, or sector will rise in the future.
Bull Market
It describes a situation in which a market is experiencing increasing prices.
Buy Limit Order
it is an order to buy an asset or currency at or lower than a specific price level and it helps traders to control the amount of money they pay to buy something.
C
Carry Trade
it is a trading strategy in which a trader borrows an amount of money with a low-interest rate and invests that money in an asset that provides a high rate of return.
Closed Position
A trade that is no longer active and its profits or losses are realized.
Closing Market Rate
the final value of a currency or an asset at the end of a specific time frame (usually regular market hours)
Closing Price
This is the final price at which an asset was traded on a given day.
Commission
The fee that an investment broker charges for making trades on behalf of a client is known as commission.
Commodity
A commodity is a fundamental physical asset that is frequently used as a raw material in manufacturing goods or services.
Currency Appreciation
an increase in the value of a currency compared to another one.
Currency Futures
these contracts specify the price of a currency for a predetermined date in future.
Currency Pair
a currency pair is what’s being traded within any forex transaction, and it includes two different currencies; the first one is called the base currency, and the second one is called quote currency. For example: USD/EUR
D
Daily Chart
A diagram that analyzes the price movements of a specific asset for the period of one working day.
Day Trade
A trade that is opened and closed on the same day.
Demo Account
A forex trading account that is virtual and works with virtual money. Novice traders can use it to explore the market and become familiar with the environment of a forex market.
Depth of Market
it represents the volume of bids and asks of a currency or an asset at the current best prices.
Drawdown
after a currency plunges, the gap between the peak and the new low level is called drawdown.
E
Equity
Equity is a crucial concept in finance that takes on different meanings depending on the situation. “Shareholders’ equity,” which is calculated by subtracting a company’s total assets from its total liabilities, is perhaps the most common type of equity.
ETF
ETF is an abbreviation for exchange traded fund, which is a type of investment security that can be bought and sold on exchanges.
Expiry Date
The expiry date is the date on which a trading position automatically closes.
Exchange Rate
the value of a currency in terms of another currency.
Execution
putting into motion or the process of completing a trade is called execution.
Exposure
it represents the amount of money that an investor may lose in a particular trade.
F
Federal Reserve
The Federal Reserve Bank of the United States is the central bank in charge of monetary and financial stability in the country. It is part of a larger system known as the Federal Reserve system, which includes 12 regional central banks located in major cities throughout the United States.
Fiat Currency
A fiat currency is a national currency that is not linked to the price of a commodity like gold or silver. The value of fiat money is mainly determined by the public’s trust in the currency’s issuer, which is usually the government or central bank of that country.
Fibonacci Retracement
A Fibonacci retracement uses percentages and horizontal lines drawn on price charts to identify possible support and resistance levels. Traders can use this information to decide when to open and close positions and when to use stop losses and limit orders.
Fill Price
the price at which an order is executed.
Fill or Kill
when traders use the “fill or kill” strategy, they want a transaction to be executed only at a specific price, and if the order does not fulfil that price, it will be cancelled.
Forex Chart
this chart focuses on the price movements of a currency with different predetermined time periods.
Floating Exchange Rate
this term is used to describe currently unstable exchange rates which are fluctuating.
Forex Scalping
this is a trading strategy based on which you can make more profit by buying and selling a currency in a short period of time compared to longer periods.
Forex Signal System
this system sends signals to users based on the current situation of a market. The signal may lead to the automatic execution of a trade.
Forex Spot Rate
the current price at which a currency can be bought or sold.
Forex Trading Robot
it is a software that gives you advice about your activities. It helps you find the right time to buy or sell an asset.
Futures Contract
A futures contract is an agreement between two parties to buy or sell a specific asset at a predetermined price at a future date.
Fundamental Analysis
finding the effect of political or economic events and news on the forex market. Traders can use this information to predict the future prices of an asset.
G
GDP
GDP is an abbreviation for gross domestic product, which is the total value of goods and services produced in a country over a given time period. It is used to gauge the size and health of a country’s economy.
H
Hard Currency
it refers to the currencies which are usually stable during political or economic instabilities. For example, US Dollar and Euro.
Hedge
a strategy that helps investors reduce the risks of their activities. In this strategy, a trader makes different investments in a way that they balance each other out.
Heikin Ashi
Heikin Ashi is a chart pattern that is commonly utilized in technical analysis. Heikin Ashi charts are similar to candlestick charts, except that Heikin Ashi charts employ daily price averages to depict an asset’s average price movement.
I
Intervention
the actions of a central bank that effect the value of a nation’s currency.
Ichimoku Cloud
Ichimoku Cloud is a technical indicator that identifies levels of support and resistance as well as a measure of momentum, all of which help traders make trading decisions. Ichimoku Kinko Hyo, is a Japanese term that roughly translates to “one-look equilibrium chart.” This is because traders can get a wide range of information with just one glance.
Index
An index is a collection of financial assets that serve as a performance indicator for a specific industry. The plural term of the index is indices.
Interest
The monetary payment for the privilege of borrowing money is known as interest, and it is usually stated as an annual percentage rate. The amount of money received by a lender or financial organization in exchange for giving out money is referred to as interest.
Inflation
Inflation is defined as a rise in the price of goods and services in a given economy. Inflation may also be thought of as a currency devaluation since each unit of the currency will be worth less of any item or service due to inflation.
L
Leverage
the ratio of a company’s loan capital to the value of its ordinary shares. For example, a ratio of 1:100 increases traders buying power by 100 times.
Limit Order
an order to buy or sell an asset with a restriction on the maximum price to be paid or the minimum price to be received. The order can only be executed at a predetermined price or even better than that. But the execution of the order is not guaranteed.
Liquidity
The amount of available currency at the moment which can be used in active trading. Also, it refers to the ease at which an asset can be converted into cash.
Long Position
buying an asset and expecting an increase in its value in the future.
Lot
it refers to a standard amount of an asset traded in an exchange or broker. One lot equals 100,000 units of a currency or 100 units of shares for stocks.
M
Margin
it is the borrowed capital from a broker to open a position, and it refers to the difference between the total value of an investment and the borrowed amount.
Margin Call
a notification from the brokers that asks you to deposit more money in your account to keep your remaining position active by increasing your margin.
Market Order
an order that needs to be executed quickly at the best price available.
Market Maker
A market maker is a person or organization that buys and sells significant quantities of a certain asset in order to facilitate liquidity.
MetaTrader
One of the world’s most prominent electronic trading platforms is called MetaTrader.
Micro Lot
it refers to 1000 units of a base currency.
Moving Average
In technical analysis, a moving average is a typical indicator used to analyze asset price movements while reducing the impact of random price surges.