FX Glossary

All Basic Concepts You May Encounter When Trading in the Fx Market

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FX Glossary
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All Basic Concepts You May Encounter When Trading in the Fx Market

FX Glossary

An open position is a trade that has been entered, but which has yet to be closed with a trade going in the opposite direction.

It is the standard price in the market determined for the investor to purchase the investment instrument of their choice.

Arbitrage is the purchase and sale of an asset in order to profit from a difference in the asset's price between markets.

The state of being ready to sell the investment tool at the current price.

A broker is an individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.

Bearish markets follow a downward trend as investors sell riskier assets such as stocks and less-liquid currencies such as those from emerging markets..

It refers to the highest and lowest level of price movement in the specified time period.

It is the amount required to enter the intended position and transaction in the Forex market.

The base currency is the currency against which exchange rates are generally quoted in a given country.

Basis points (BPS) refers to a common unit of measure for interest rates and other percentages in finance.

It refers to the purchase price of the investment instrument in the market by the customer.

Compound interest (or compounding interest) is interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan.

Abbreviation for Bank of England.

A bull market is a market that is on the rise and where the economy is sound.

Abbreviation for Japanese Central Bank.br

A broker is an individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.

German Central Bank.

A buy limit order is an order to purchase an asset at or below a specified price.

A buy stop order instructs a broker to purchase a security when it reaches a pre-specified price.

The Canadian dollar is the currency of Canada.

A candlestick chart is a style of financial chart used to describe price movements.

A carry trade is a trading strategy that involves borrowing at a low-interest rate and investing in an asset that provides a higher rate of return.

Turnover is the total money value of all executed transactions in a given time period.

A cross rate is the currency exchange rate between two currencies when neither are the official currencies of the country in which the exchange rate quote is given.

Core inflation is the change in the costs of goods and services but does not include those from the food and energy sectors.

A floating exchange rate is a regime where the currency price of a nation is set by the forex market based on supply and demand relative to other currencies.

Day trading is the act of buying and selling a financial instrument within the same day or even multiple times over the course of a day.

An individual or firm acting as a principal, rather than as an agent, in the purchase and /or sale of securities.

Deflation is a decrease in the general price level of goods and services.

An account funded by fake money to place fictitious trades.

Support describes a price level where a downtrend pauses due to demand for an asset increasing.

A devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system.

Resistance refers to a level where an uptrend reverses as a sell-off happens.

Parity refers to the exchange rate between the currencies of two countries making the purchasing power of both currencies substantially equal.

It is an expert advisor appointed by the brokerage firm you chose to support you, especially when starting to trade in the Forex market.

Exotic pairs usually consist of a major currency alongside a thinly traded currency or an emerging-market economy currency.

Economic indicators include various indices, earnings reports, and economic summaries.

Abbreviation for European Central Bank.

Inflation is when prices rise over a designated time period. The inflation rate is the percent increase. It will lowers your standard of living.

Abbreviation for Federal Reserve System.

A financial instrument is a monetary contract between parties.

The forex market is the market in which participants can buy, sell, exchange, and speculate on currencies.

A currency forward is a binding contract in the foreign exchange market that locks in the exchange rate for the purchase or sale of a currency on a future date.

The Federal Open Market Committee.

These are the forms that allow the analysis by revealing the price fluctuations on the horizontal and vertical plane as date and price levels.

Gross National Income (GNI) is a measurement of a country's income. It includes all the income earned by a country's residents, businesses, and earnings from foreign sources.

Moving average is a calculation to analyze data points by creating a series of averages of different subsets of the full data set.

An aggressive tone. A monetary policy stance is said to be hawkish if it forecasts future interest rate increases.

Forex hedging is the act of strategically opening additional positions to protect against adverse movements in the foreign exchange market.

The interbank rate is the benchmark rate to determine the value of dollar and sets the direction for open market rates.

A trader who buys and sells, often frequently, to seize short-term market opportunity.

Leverage is an investment strategy of using borrowed money—specifically, the use of various financial instruments or borrowed capital—to increase the potential return of an investment.

An instruction level to close a trade at a specific rate, if the price is going in your favour,

The quote currency, commonly known as "counter currency" is the second currency in both a direct and indirect currency pair and is used to value the base currency.

It refers to the support and resistance levels in the continuous currency trend determined as a result of chart analysis.

The Short Position is a technique used when an investor anticipates that the value of a stock will decrease in the short term, perhaps in the next few days or weeks.

It means that the investment instrument or the exchange rate touches both the support and resistance points twice.

It is the fee demanded by the brokerage firm from investors per transaction other than Spread. There is no such application in the Forex market.

Currency convertibility is the ease with which a country's currency can be converted into gold or another currency.

It expresses the risk of loss arising as a result of the uncertainty in exchange rates caused by the changes in global financial environments.

Pound, unit of avoirdupois weight, equal to 16 ounces, 7000 grains, or 0.45359237 kg.

Liquidity refers to how active a market is. It is determined by how many traders are actively trading and the total volume they're trading.

With a buy limit order, the brokerage platform will buy the stock at the specified price or a lower price if it arises in the market.

It refers to the sales order in which foreign currency or other investment instruments are made at prices above the market price.

A long refers to the purchase of an asset with the expectation it will increase in value—a bullish attitude.

A standard lot is the equivalent of 100,000 units of the base currency in a forex trade.

A large-scale economic system

Margin is the money borrowed from a brokerage firm to purchase an investment. It is the difference between the total value of securities held in an investor's account and the loan amount from the broker.

A dealer in securities or other assets who undertakes to buy or sell at specified prices at all times.

It is an authorized institution that determines the national monetary policies of the countries and provides information and suggestions to the state by constantly examining the economic analysis.

It is the most used trading platform that facilitates transactions in the Forex market.

The microeconomic perspective focuses on parts of the economy: individuals, firms, and industries.

A micro lot is 1,000 units of the base currency in a currency pair.

A mini lot is a currency trading lot size that is one-tenth the size of a standard lot of 100000 units - or 10000 units.

The value of one's investment position, calculated as the position's market value less the initial cost of entering that position.

An open-high-low-close chart (also OHLC) is a type of chart typically used to illustrate movements in the price of a financial instrument over time.

The ounce is the name of several different units of mass, weight, or volume used in most British derived customary systems of measurement.1 ounce is equal to 437.5 grains or 28.349 grams.

Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security.

The money market refers to trading in very short-term debt investments. At the wholesale level, it involves large-volume trades between institutions and traders.

Parity occurs in the Forex market when two currencies are of equal value.

A pip is the smallest price move in a forex or CFD exchange rate.

A forex pivot point is where a trader believes that the sentiment in the market is about to turn.

It is the generally accepted transaction price in the case of supply-demand balance in the market..

A dealer in securities or other assets who undertakes to buy or sell at specified prices at all times.

Refers to the profit and earnings from investments.

A recession is a significant decline in activity across the economy lasting longer than a few months.

It refers to the appreciation of the national currency of the country compared to other countries' currencies.

A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves.

It expresses the possibility of decreasing or losing the capital put forward to gain profit during transactions in the market.

It refers to the selling off price of the investment instrument decided to trade in the Forex market.

A sell signal is anything that alerts a trader to sell an asset.

Scalping is a trading style that specializes in profiting off small price changes, generally after a trade is executed and becomes profitable.

It refers to the sales order in which foreign currency or other investment instruments are made at prices above the market price.

Sell Stop is the price level set by the trader when they wish to sell an asset in the future.

A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold.

To short forex means to sell high then buy low and is often used by traders to hedge currency exposure or simply to profit from forecasted analysis.

Slippage occurs when a trade order is filled at a price that is different to the requested price.

In the world of finance, speculation, or speculative trading, refers to the act of conducting a financial transaction that has substantial risk of losing value but also holds the expectation of a significant gain or other major value.

The sudden large movement on the Forex market due to an imbalance of liquidity is called a spike.

The spot price is the current price in the marketplace at which a given asset—such as a security, commodity, or currency—can be bought or sold for immediate delivery.

The spot market is where financial instruments, such as commodities, currencies and securities, are traded for immediate delivery.

Spread is the difference between the bid (sell) price and the ask (buy) price of a currency pair.

A standard lot is the equivalent of 100000 units of the base currency in a forex trade.

A stop-loss is designed to limit an investor's loss on a security position.

It is the level at which all of a trader's positions are automatically shut because their margin has decreased to the point whereby it cannot support a continuing open position.

It is the minimum amount of equity that an investor must maintain in the margin account after the purchase has been made.

Swap refers to an exchange of one financial instrument for another between the parties concerned.

Swing trading is a speculative trading strategy in financial markets where a tradable asset is held for one or more days in an effort to profit from price changes or 'swings'.

A custodian bank, or simply custodian, is a specialized financial institution responsible for safeguarding a firm's or individual's financial assets.

Take profit is a trading command which allows profit to be fixed to a certain amount when the price reaches a certain level.

Technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.

Fundamental analysis, in accounting and finance, is the analysis of a business's financial statements; health; and competitors and markets.

The base currency – also called the transaction currency - is the first currency appearing in a currency pair quotation.

The balance of trade, commercial balance, or net exports, is the difference between the monetary value of a nation's exports and imports over a certain time period.

A tick in the context of forex tick charts is the change in price of a forex pair caused by a single trade.

A trader is an individual who engages in the buying and selling of financial assets in any financial market, either for himself or on behalf of another person or institution.

A trailing stop is a modification of a typical stop order that can be set at a defined percentage or dollar amount away from a security's current market price.

It expresses the general direction of movement of the investment instrument or index in a positive or negative sense.

A consumer price index measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households.

Refers to the fact that the value of the financial asset used for investment is directly dependent on a different financial asset.

It refers to the steady upward trend of the prices in the market.

TA divergence in forex occurs when the price and the indicator fail to simultaneously make higher highs or lower lows.

A long—long position—refers to the purchase of an asset with the expectation it will increase in value—a bullish attitude.

A producer price index is a price index that measures the average changes in prices received by domestic producers for their output.

Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security.

The total amount of transactions that traders conducted in a specific market.

A stop-loss is designed to limit an investor's loss on a security position.

How Many Order Types We Have In Forex?

In order to make conscious and profitable transactions in the Forex market, we need to know in detail the order types.

A market order represents an order you give to your online forex broker to enter or exit a trade at the best available price, at a specific time.

There are two types of stop orders in Forex. The first is the stop loss order, the other is the take profit order.

Stop Loss Order: A stop-loss order is an order placed with a broker to buy or sell a specific stock once the stock reaches a certain price.

Take Profit Order: Take profit is a trading command which allows profit to be fixed to a certain amount when the price reaches a certain level. This command helps to reduce risks.

Pending order is to give orders of opening transaction at price level, which will be occured in the future or is determined manually, in advance, instead of appraising transaction from an instant price.Here is the most preferred pending order types in Forex:

Buy Limit: A buy limit order is an order to purchase an asset at or below a specified price.

Sell Limit: It refers to the sales order in which foreign currency or other investment instruments are made at prices above the market price.

Buy Stop: A Buy Stop is the price level set by the trader when they wish to buy an asset in the future.

Sell Stop: Sell Stop is the price level set by the trader when they wish to sell an asset in the future.

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