The following is a complete glossary of forex terms, which provides key definitions in the simplest way possible. The act of taking advantage of countervailing prices within different markets through the sale or purchase of a currency. Thus, simultaneously taking an equal and opposite position in a related market to profit from small price differentials.

The opposite of a bear market, this term describes when the price of an asset, currency, or security is rising. Relates to when an investor borrows at a lower-than-average interest rate in order to buy assets that can potentially produce higher interest rates. Closing a position means bringing a transaction to an end, incurring any related profits or losses as a result. Sometimes listed as the closing price, it represents the final value that a currency is traded at during any specific time frame, day, or candle.

Currency futures are contracts that state the price that a currency can be sold or bought for at a predetermined future date. Future contracts are a widely-used hedging tool amongst traders.

A graph that breaks down the movements of a particular currency that have occurred within a single trading day. The volume of active buying and selling orders placed for a currency, covering a wide degree of prices. Representing a distinct type of broker. An ECN Broker makes use of Electronic Communications Networks ECNs to provide clients with access to liquidity providers.

Representing what the forex market is built upon, the exchange rate is the cost at which one currency can be traded for another. This term refers to when a trade is put in motion and subsequently completed.

If an investor has a set price in mind for a forex transaction, he or she can choose to implement a fill or kill order. A term used to describe any exchange rate that is currently not fixed. A floating exchange rate tends to fluctuate dependent on the supply and demand along with other factors of a particular currency relative to other currencies.

Similar to a daily chart, a forex chart is a digital chart that highlights points and price movements related to a currency pair. Forex charts can usually be extended to cover days, weeks, months, and even years. A notable trading strategy that is based upon the idea that if you open and close a trade—buying and selling a currency—within a short space of time, you are likelier to earn profit than you would through large price movements.

Arguably the most commonly advertised forex service, a forex signal system works by issuing forex signals to subscribers related to current market activity. This signal which can be issued through a number of means can trigger a trade either automatically or manually.

The forex spot rate determines the exchange rate that a currency can be purchased or sold at. The act of determining the impact that key political and economic events unemployment rates, interest rate announcements, and so forth have on the forex market. Traders conduct such analysis as a means to predict the future direction of the market with regard to their portfolios.

Opposite of a soft currency, a hard currency is one that is often most resilient in times of political and economic instability and thus is generally considered to be dependable. For example, the Great Britain Pound GBP , US Dollar USD , and Euro EUR are well-known hard currencies. A method of trading that is used to protect an investor by reducing the risk that is associated with volatile markets.

Hedging requires the trader to make two independent investments that work to balance each other out. This works to minimise the loss that could be incurred by price fluctuations.

This usually constitutes a direct entering of the market, which can then increase the level of control that nation has over the currency exchange rate.

Leverage is a service offered by forex brokers that allows a trader to maximise his or her buying power. It gives the trader the ability to deposit a small amount of capital yet still trade currency in large volumes. Representing an instruction to either close or open a transaction at a future price. The amount or volume of a set currency currently available for active trading. Opposite of a short position, any investor who takes a long position buys a base currency with a view to profiting on a market price increase.

A lot is a standardised quantity of the currency you are choosing to trade with, with one lot equalling , units of a particular currency. This is an alert that notifies you that you need to make an additional deposit in order to increase your margin to keep remaining positions active.

Micro lot refers to 1, units of the base currency within a pair. Made up of two limit orders, where the execution of one automatically triggers the cancellation of the other.

A simple term to describe the position that a trader takes on a currency pair, subject to any profits and losses that it may accrue. A seldom-heard term in the era of online forex trading; an over-the-counter trade is a traditional way of handling a forex transaction.

It involves pushing through an order via a telephone or electronic device and thus is no longer commonly seen. When a trader decides to keep a position open overnight and carry it over into the next trading day. More often than not, a currency is presented to four decimal points, with the smallest alteration in price occurring within the final decimal of the price listed.

Closing a forex position as a means to collect the related profit. The price level that a currency finds difficult to go beyond. Considering the oftentimes-tumultuous nature of the forex market, traders must adopt risk management as a means to protect capital. Risk management practices usually take on the form of related strategies and tools that work to limit the financial risk as much as possible.

Incurring a rollover rate means the interest that a trader must pay or earn when he or she holds an open position overnight. When the base currency within the pair is eventually sold, then the position is assumed to be short. This tends to occur during times of high volatility, when investors make use of stop-loss orders and market orders.

Opposite of a hard currency, a soft currency is one that is often hit hardest by economic and political events and thus is generally considered to be unstable. Representing a specific type of trader, anyone who is classified as a speculator is willing to take big risks while trading.

The hope is that by embracing increasing levels of risk, the eventual profit return will be high. Used to describe a sharp downward or upward movement in currency price that occurs during a short space of time. Contrary to popular belief that a spike can only describe an upward trend, in the world of forex, it has also been used to describe a downward trend. The spread represents the difference between the ask and bid price of any currency pair.

In most instances, this figure represents brokerage service costs and replaces transactions fees, with it usually presented in pips.

It should be noted the spread could take on one of three forms through a fixed spread, a fixed spread with an extension, and a variable spread.

A market order to either buy or sell a currency when it hits a certain price. Generally speaking, a stop-loss order is placed in order to control losses occurring or due to occur in a set position.

A market order that stipulates that a position is to be closed once it hits a predetermined price or price range, thus taking all generated profit. Investors use technical analysis as a means to forecast future price changes within the forex market.

How this is conducted is by sifting through current and prior market data via trading indicators, charts, and other related tools. This addresses the degree of uncertainty and related price fluctuations of a security, currency pair, or specific currency. It can also be used as a term to describe the state of the forex market as a whole. Click here to read customer reviews. The bid is the price at which the market is prepared to buy a specific currency pair in the forex market.

At this price, the trader can sell the base currency. It is shown on the left side of the quotation. This means you sell one British pound for 1.

At this price, you can buy the base currency. It is shown on the right side of the quotation. This means you can buy one euro for 1. The ask price is also known as the offer price. These digits are often omitted in dealer quotes. Round-turn means a buy or sell trade and an offsetting sell or buy trade of the same size in the same currency pair.

A cross currency is any pair in which neither currency is the U. These pairs exhibit erratic price behavior since the trader has, in effect, initiated two USD trades. Cross currency pairs frequently carry a higher transaction cost. When you open a new margin account with a forex broker, you must deposit a minimum amount with that broker. Each time you execute a new trade, a certain percentage of the account balance in the margin account will be set aside as the initial margin requirement for the new trade.

The amount is based upon the underlying currency pair, its current price, and the number of units or lots traded. The lot size always refers to the base currency.

Mini accounts trade mini lots. It is the ability to control large dollar amounts of a financial instrument with a relatively small amount of capital.

Remember Me. Impress Your Date with Forex Lingo. Major and Minor Currencies. All other currencies are referred to as minor currencies. Base Currency. Quote Currency. A pip is the smallest unit of price for any currency.

Notable exceptions are pairs that include the Japanese yen where a pip equals 0. Bid price. Bid-Ask Spread. Quote Convention. Transaction Cost. Cross Currency. Leverage varies dramatically with different brokers, ranging from to

You, the newbie, must know certain terms like the back of your hand before making your first trade. The base currency is the first currency in any currency pair.

The currency quote shows how much the base currency is worth as measured against the second currency. In the forex market, the U. The primary exceptions to this rule are the British pound, the euro, and the Australian and New Zealand dollar. The quote currency is the second currency in any currency pair.

This is frequently called the pip currency and any unrealized profit or loss is expressed in this currency. In this instance, a single pip equals the smallest change in the fourth decimal place — that is, 0. One-tenth of a pip. Some brokers quote fractional pips, or pipettes, for added precision in quoting rates. The bid is the price at which the market is prepared to buy a specific currency pair in the forex market.

At this price, the trader can sell the base currency. It is shown on the left side of the quotation. This means you sell one British pound for 1. At this price, you can buy the base currency. It is shown on the right side of the quotation. This means you can buy one euro for 1. The ask price is also known as the offer price. These digits are often omitted in dealer quotes. Round-turn means a buy or sell trade and an offsetting sell or buy trade of the same size in the same currency pair. A cross currency is any pair in which neither currency is the U.

These pairs exhibit erratic price behavior since the trader has, in effect, initiated two USD trades. Cross currency pairs frequently carry a higher transaction cost.

When you open a new margin account with a forex broker, you must deposit a minimum amount with that broker. Each time you execute a new trade, a certain percentage of the account balance in the margin account will be set aside as the initial margin requirement for the new trade. The amount is based upon the underlying currency pair, its current price, and the number of units or lots traded. The lot size always refers to the base currency.

Mini accounts trade mini lots. It is the ability to control large dollar amounts of a financial instrument with a relatively small amount of capital. Remember Me. Impress Your Date with Forex Lingo. Major and Minor Currencies. All other currencies are referred to as minor currencies. Base Currency. Quote Currency. A pip is the smallest unit of price for any currency.

Notable exceptions are pairs that include the Japanese yen where a pip equals 0. Bid price. Bid-Ask Spread. Quote Convention. Transaction Cost. Cross Currency. Leverage varies dramatically with different brokers, ranging from to FOREX A-Z.

What is forex? What is traded in forex? Buying And Selling Forex Market Size And Liquidity Different Ways How to Make Money? What is a Pip in Forex? What is a Lot in Forex? Forex Lingo Demo Trade Can you get Rich?

What is margin trading? Support and Resistance Levels Japanese Candlesticks Fibonacci Important Chart Patterns Double Top Double Bottom? Trend Retracement or Reversal? How to Set Stop loss, Take Profit and trailing stop How to Identify Reversals?

Swing Trading Protect You Risk Management Avoid Trading Failure Types of Breakouts How to trade breakouts? How to find fakeouts? False breakout Trading multiple time Time frame is best Multiple time frame What time frame analysis USDX How to use the usdx? What is the trading plan? Why Do You Need A Trading Plan? Consistent Profitability What Is Your Risk Capital? Which Kind Of Returns? Gobal FX Strategy. Contact Info. globalfxtraining gmail.

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Request a Free Broker Consultation. Cool and Unique Jobs Check them out! Spread The spread represents the difference between the ask and bid price of any currency pair. Spike Used to describe a sharp downward or upward movement in currency price that occurs during a short space of time. When you open a new margin account with a forex broker, you must deposit a minimum amount with that broker. A simple moving average SMA is slow to respond to price and is more suitable on longer timeframes. Execution This term refers to when a trade is put in motion and subsequently completed.

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