Forex Glossary

The most important terms related to Forex trading are presented in this glossary:

Ask (Offer)
Price of the offer, the price you buy for.

ATR (Average True Range)
A standard technical indicator that measures the currency pair's volatility.

A Forex slang name for the Australian dollar.

Bank Rate
The percentage rate at which central bank of a country lends money to the country's commercial banks.

The market participating body which serves as the middleman between retail traders and larger commercial institutions.

Carry Trade
In Forex, holding a position with a positive overnight interest return in hope of gaining profits without closing the position in order to gain from the central banks interest rates difference.

CCI (Commodity Channel Index)
A cyclical technical indicator that is often used to detect overbought/oversold states of the market.

A Contract for Difference — special trading instrument that allows financial speculation on stocks, commodities, and other instruments without actually buying or selling those assets.

Broker commissions for operation handling.

EA (Expert Advisor) or Robot
An automated script that is used by the trading platform software to manage positions and orders automatically without (or with little) manual control.

ECN Broker
A type of Forex brokerage firm that provide its clients direct access to other Forex market participants. ECN brokers do not discourage scalping, do not trade against the client, do not charge spread (low spread is defined by the current market rates) but instead charge commission for every executed order.

ECB (European Central Bank)
The main regulatory body of the eurozone's financial system.

Elliott Waves
A set of principles for chart analysis based on 5-wave and 3-wave patterns.

Fed (Federal Reserve)
The main regulatory body of the United States of America financial system, whose division — FOMC (Federal Open Market Committee) — regulates, among other things, the federal interest rates.

Fibonacci Retracements
Levels with a high probability of trend break or bounce, calculated as the 23.6%, 32.8%, 50%, and 61.8% of the trend range.

A Forex traders slang word EUR/USD currency pair (euro vs. US dollar).

Flat (Square)
Neutral state when all your positions are closed.

Floating Leverage
A leverage that changes depending on the total size of open positions.

Fundamental Analysis
The analysis based only on news, economic indicators, and global events.

A difference between the previous period's close price and the next period's open price. In Forex, usually only occurs during weekends — between the Friday's close and the Monday's open price.

GDP (Gross Domestic Product)
A measure of the national income and output for the country's economy; it is one of the most important fundamental indicators in Forex.

GTC (Good 'Til Canceled)
An order to buy or sell of a currency at a fixed rate or worse. The order is alive (good) until its execution or cancellation.

Maintaining a market position which secures the existing open positions in the opposite direction.

A slang word for a trader who is aimed toward fast but small and short-term profit from intraday trading. Jobber rarely leaves open positions overnight.

A Forex slang name for the New Zealand currency — the New Zealand dollar.

Leading Indicators
A composite index (year 2010 = 100%) of ten most important macroeconomic indicators that predicts future (6-9 months) economic activity. Released monthly by the Conference Board.

Limit Order
An order for a broker to buy a lot for fixed or lesser price or sell a lot for fixed or better price. Such price is called a limit price.

A measure of markets that describes relationship between the trading volume and the price change.

A position which is in a Buy direction. In Forex, the primary currency when bought is long and another is short.

A loss from closing a long position at a lower rate than opening or from closing a short position with a higher rate than opening. Loss may also occur if the profit from a position's closing was lower than the broker's commission on it.

A definite amount of units or amount of money accepted for operations handling (usually, it is a multiple of 100).

Money that the investor needs to keep at a broker's account to execute trades. Margin supplies the possible losses that may occur in margin trading.

Margin Account
An account that is used to hold investor's deposited money for trading.

Margin Call
A broker's demand to deposit more margin money to the margin account when its size falls below a certain minimum.

Market Order
An order to buy or sell a lot at a current market rate.

Market Price
A current rate, at which the currency is traded in the market.

A position sizing strategy that involves doubling the bet after each loss.

A measure of the currency's ability to move in a given direction.

Moving Average (MA)
One of the most basic technical indicators. It shows the average rate calculated over a series of time periods. Exponential moving average (EMA), weighted moving average (WMA), adaptive moving average (AMA), etc. differ by the way of weighing rates and periods in calculation

Offer (Ask)
A rate of the offer — the rate you buy for.

Open Position (Trade)
A position on buying (long) or selling (short) of a currency pair.

An order for a broker to buy or sell a currency at a certain rate.

Percentage Allocation Management Module (PAMM)
A broker-side system that allows investors to invest with traders, and allows traders to manage investors' funds using the broker's platform.

Pivot Point
A primary support/resistance point calculated based on the previous trend's High, Low, and Close rates.

Pip (Point)
The last digit in a currency rate (e.g., for EUR/USD, 1 point = 0.0001).

Profit (Gain)
A positive amount of money gained for closing the position.

Prop firm
A proprietary trading firm (or a scouting firm) is a company that provides funds for financial traders to trade with. In other words, a prop firm trades with its proprietary funds. In retail FX trading, prop firms allow profitable traders earn substantial gains without risking too much of traders' own money.

Principal Value
The initially invested amount of money.

QE (Quantitative Easing)
A monetary policy employed by central banks. It involves buying and holding the financial assets from the country's financial institutions to provide money supply and keep the prices of those financial assets from falling.

Realized Profit/Loss
A gain or loss of an already closed position.

A price level where an uptrend stalls. Its breach can lead to a significant price rally.

RSI (Relative Strength Index)
A technical indicator that measures the power of a directional price movement by comparing the bullish and bearish portions of the trend.

A style of trading notable by a big number of positions that are opened for extremely small and short-term profits. See the scalping trading strategy.

Settled (Closed) Position
A closed position, for which all needed transactions have been made.

See Stop-Loss Order below.

Execution of an order at a rate different from expected (ordered). The main reasons for slippage are "fast" market, low liquidity, and poor execution quality by broker.

A difference between Ask and Bid rates of a currency pair.

Standard Lot
100,000 units of the base currency of a currency pair you are buying or selling.

Stop-Limit Order
An order to sell or buy a lot at a certain rate or worse after it first reaches some opposite price level. It is a combination of a stop-order and a limit-order.

Stop-Loss Order
An order to close a position when the market reaches a certain rate. Normally, it is used to avoid extra losses when the market moves in the opposite direction. Sometimes, it can be used to lock in some amount of profit (See Trailing Stop-Loss below).

STP (Straight Through Processing)
A type of order processing that does not require any manual intervention and is fully automatic. In fact, 90% of all online Forex brokers support order handling with STP.

A price level where a downtrend stalls. Its breach can lead to a significant price decline.

An overnight payment for holding a position in Forex. Since you are not physically receiving the currency you buy nor delivering the currency you sell, the broker should pay or charge an interest rate difference between the pair's two currencies. Swaps can be be negative or positive.

Take-Profit Order
An order to close a position when the market reaches a certain price. It is used to realize your profit.

Technical Analysis
A analysis method based only on the technical market data (rates, time, and volume) with the help of various technical indicators.

See Take-Profit Order above.

Trailing Stop-Loss
A stop-loss level that is moved closer to the current market rate as the position's loss decreases or its profit increases.

A market's direction established under an influence of various factors.

Unrealized (Floating) Profit/Loss
Profit/loss on your open positions.

Usable Margin (Free Margin)
Amount of money in a margin account that can be used for trading.

Used Margin
Amount of money in a margin account already used to hold open positions.

A statistical measure of the number of price changes for a given currency pair in a given period of time.

VPS (Virtual Private Server)
A virtual environment hosted on a dedicated server that can be used to run the programs independent on the user's PC. Forex traders use VPS to host trading platforms and run expert advisors without unexpected interruptions.

VSA (Volume Spread Analysis)
A chart analysis method that focuses on the trading volume and the price range.

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