Forex dictionary

A

Ask – The price a currency is offered for sale.

B

Buy – The purchase of the currency.

Bullish – A term used when buyers are in control.

Bid – The price you can sell a currency.

Bearish – A term used when the sellers are in control.

Breakout – When price moves past a key level of support or resistance.

C

Currency – A countries money issued by government.

Currency pair – Forex is traded in pairs e.g. USD/JPY when buying you are buying the first currency (USD) with the second (JPY).

Consolidation – When price movement has slowed and is moving sidewards in a range.

Commodities – These are natural materials which are often traded against the dollar e.g. gold, silver and oil.

Commission – The money the broker makes when you trade usually gained from the spread.

Central banks – These are the banks which control monetary policy and is in charge of keeping the economy stable.

D

Day trading – Day trading involves multiple positions entered and exited within the same day.

Diversify – This is when you don’t put all you trades in the same currency e.g. USD/CAD USD/JPY EUR/USD, by diversifying you will reduce risk e.g. USD/CAD GBP/EUR AUD/JPY .

E

Equity – The balance of your account including any running profits and losses.

F

Fakeout –  This happens when price breaks out of a key level of support or resistance but instead of continuing the break out it immediately moves back into the previous range.

Fill – When the buy or sell has been complete or “filled”.

Foreign exchange – This is FX, the exchange of currency.

G

Gap – When a currency jumps in price with no opportunity to buy or sell in-between, usually happens after closing hours.

Good till cancelled GTC – This is when a order has been set if the currency hits a certain price, GTC means it will stay on order until you manually cancel it.

H

Hedging – This is when you enter a trade in the opposite direction to the one your in, this can be used to protect your initial position when moving against you.

I

Interest rate – The interest rates are set by the central banks and is the rate which is paid when money is borrowed by the bank or the population.

J

K

L

Leverage – This is the ratio between the money in the account and the money the broker allowed you to trade.

Limit This is the lower level set to exit a trade.

Limit order – This is the lower price set to automatically enter a buy position, or the higher price set to enter a sell position, when the price is hit you order will be filled.

Liquidity – This is the availability to buy or sell a currency, if you want to sell there must be buyers, the more buyers the higher the liquidity.

Long – Putting on a long trade is when you buy expecting the price to rise.

M

Margin – This is the amount needed in your account to open new positions or keep your existing positions open.

Margin call – This is what happens when your account is below the req margin to keep your positions open, you will need to either add funds to your account or close positions.

Market makers – Market makers provide liquidity in the market.

N

O

Open position – A open trade

P

Pending order – These are orders which are set to complete if price reaches a certain price.

Pip – Percentage interest point.

Price – The price a currency can be bought or sold.

Profit – Money made from a completed trade.

Q

Quote – The price of a currency to be bought or sold.

R

Range – The difference between the lows and highs of a period of consolidation.

S

Scalping – Trading intra day to catch quick movements, often only keeping trades open for minutes.

Sell limit order – This is when you set a order to sell when price hits a higher price.

Short – This is when you sell expecting price to fall.

Slippage – This is when the price moves so quick your order or stop loss price cannot be filled at the actual price but maybe at a worse price.

Spread – The difference between the buy and sell price.

Stop loss – This is the price you set to automatically close your position if the price goes against you.

T

Tick – A one pip movement in price.

Trend – The direction of the markets movement.

U

V

Volatility – This is the variation of price over a certain time, quick movement equals high volatility.

W

Waves – The movements in price which extends and retraces are said to move in waves.

X

Y

Z

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