Forex Trading Glossary

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Arbitrage - The simultaneous purchase and sale of an instrument in two different markets to profit from a temporary price disparity.
Ask Price – Sometimes called the Offer Price, this is the market price for traders to buy currencies.
Aussie - Nickname for the Australian dollar.

Bank Rate - The rate at which a countries central bank lends money to commercial banks.
Base Currency - The first currency quoted in a currency pair. EG. Eur/Usd the euro is the base currency.
Bar Chart – A type of chart used in Technical Analysis.
Bearish - An opinion or expectation the the price of a currency will fall relative to another.
Bid Price – is the price a trader can sell currencies.
Bid/Ask Spread – is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.
Broker - A Company or individual individual who accepts buy and sell orders in return for a commission.
Buck - Nick name used for the American dollar.
Bullish - An opinion or expectation that the price of a currency will rise relative to another.

Cable - A market term used for the British Pound Sterling.
Candlestick Chart - A type of chart used in Technical Analysis.
Carry Trade - A trader holds a open trading position with a positive overnight interest rate indefinitely in order to benefit from the interest differential between the 2 currencies.
CPI- Consumer Price Index A statistical measure of inflation recording price changes based on a specific basket of goods.
Cross Currency – A currency pair that does not include US dollars – e.g. EUR/GBP.
Currency Pair – Two currencies involved in any FOREX transaction – e.g. EUR/USD.

ECB - (European Central Bank) The regulatory bank for the European Union Nations.
ECN Broker - A Forex Brokerage firm that provides its clients direct access to other forex market participants.
Economic Calander – A statistical report issued by governments or academic institutions indicating current economic conditions within a country.
Euro - The common currency of the member nations of the European Union.
Exotic Currency - A currency with little liquidity and limited dealing, which is neither a major or minor currency.

Fed - (Federal Reserve) Regulatory body of the American Financial system.
Fiber - Nickname for the Euro Currency.
Flat - All trading positions closed.
FOMC - Federal open Market Committee. Responsible for interest rate decisions made in America.
Foreign Exchange (FOREX, FX) – Simultaneously buying one currency and selling another.
Fundamental Analysis – Analysis of political and economic conditions that can affect currency prices.
Fundamental Announcement - Economic news announced by countries to measure the health of the economy of that country.

GTC - ( Good till cancelled) A forward order placed to buy or sell a currency that remains in force until cancelled.

Hedging - Used to maintain a market position by entering a trade in the opposite direction on the same currency pair.

Indicator - An analysis tool used to predict future price movement.
Initial Margin - The initial amount of capital deposited with your broker to trade forex.

Leverage - The use of borrowed capital to improve the speculative capacity and rate of return from an investment.
Liquidity - The measure of the currencies relationship between price change and trading volume.
Libor - London Interbank Offered Rate. This is the rate at which banks will lend to each other, set at 11:00 a.m. London time.
Limit Order – A forward order placed to buy below the current market price or sell above the current market price.
Long - Buy the base currency.
Lot – This is the minimum amount we can buy or sell at a time when entering a forex trade. Standard lots are worth about 100,000 US dollars.

Major Currency - The Euro, Swiss franc, British pound, United States $ and Japanese yen.
Margin Account - The account in which the traders funds are placed in order to facilitate trading.
Margin Call - Is a demand by a broker to deposit additional funds to maintain trading positions currently held by the trader. (In Forex trading when minimum margin limits are exceeded the broker will close all positions to avoid having the trader owe the broker money that the broker might never recover.
Market Maker - A trading platform that consistently provides two way prices, providing both a bid and an offer.
Market Order - An order to buy or sell at the current market price.
Market Price - The current price of the currency.
Micro account - A forex trading account that requires an absolute minimum amount of capital investment to start trading with.
Mini Account - A forex trading account that requires less capital than the standard account account to start trading with.
Minor Currency - The Canadian dollar, the Australian dollar, and the kiwi are minor currencies.

Offer (Ask) - The price you buy at.
One Cancels the Other (OCO) – Two orders placed simultaneously with instructions to cancel the second order on execution of the first.
Open Position – An active trade that has not been closed.
Overnight interest - An amount of interest paid or earned, depending on the interest rate differential between the 2 currencies traded, when holding trades overnight.

Pip – (Price Interest Point) The smallest unit a currency can be traded in.(also referred to as a point)

Quote Currency – The second currency in a currency pair. In the currency pair EUR?USD the USD is the quote currency.

Rollover – Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using swap points based on interest rate differentials.

Stop Loss - A forward order placed to limit losses on a trade.
Stop order - A forward order place to buy a currency above the current price or sell below the current price.

Technical Analysis – Analysis of historical market data to predict future movements in the market.

Trend - Current, Long Term trend or direction of the market for a specific currency.
Tick – The minimum change in price.
Transaction Cost – The cost of a FOREX transaction – typically the spread between bid and ask prices.

Unrealised Profit/Loss - The value of all open trading positions.
Usable Margin - The amount of capital available in your trading account that is available to open new positions.
Used Margin - The amount of capital in your trading account that has been used to hold your open positions.

Volatility – A statistical measure indicating the tendency of sharp price movements within a period of time.

Whipsaw - Price volatility, especially after major fundamental announcements, causing price to first go one way then reverse and go in the opposite direction.

Tags: Trading Glossary

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