Forex Glossary

Just like every other industry, Forex trading also have its own set of technical terms and language which may be difficult to understand for traders who are trading Forex for the first time with no financial background. If you are also one such trader, then this Forex glossary will be quite useful for you to understand the basic and advance technical terms that are used frequently in FX trading.

Here is a list of some Forex words that you should know before you jump start trading currencies:

Appreciation

It describes the strength of a currency in response to the market demand.

Ask

It is the price at which the broker is willing to sell the base currency.

At Par Forward Spread

This is when the forward and spot price equals.

At-the-Price-Stop-Loss-Order

This is when the stop-loss order is executed at the desired request level regardless of the conditions prevailing in the market.

At the Money

It is when the strike and exercise value of the underlying asset is equal to or near the predicted price.

Base Currency

The first currency is the FX pair in Forex trade is called the base. The value of the base is determined against the quote value also known as the second or counter FX in the pair.

Basing

This is a technical analysis charting method where the demand and supply of a product are equal. It showcases a narrow trade range and merging of support and resistance levels.

Bear

This is a downward moving market where the prices show a negative/declining direction.

Bid Price

In foreign exchange trades this is the value at which traders can sell off the base FX. For example, you have a FX pair of GBP/USD and you speculate that the value of GBP will decrease, then you can choose to sell it for USD at the value that is stated in the bid quote.

Boilinger bands

This is a technical analysis tool in which a band is plotted with two standard deviations that determine support and resistance levels.

Bull

This market depicts rising prices.

Cable

This is a term used for GBP/USD FX pair in the Forex arena.

Closing Position

It is when a trader stops a live trade through your account.

Copy Trading

This is a technique practised on social investment networks that enable novice traders to copy trades of advance traders in real time automatically.

Currency Pair

Comprises of two currencies such as EUR/USD. It makes up for the FX rate.

Day Trading

This is a practice in which the trader opens and closes positions within the same day, so that there is no open position at the end of the day.

Expiry

The time and date when an option expires.

Exotic Currency Pair

A less widely traded FX pair

Forex

It is the abbreviation used for foreign exchange. The trade instruments used in Forex are FX pairs.

Fundamental Analysis

This focuses on analysing all those macroeconomic factors that have impact on the value of currencies.

Gold Trading

This is when you buy and sell in the gold commodity market.

Hedging

This is an activity where several positions are opened at once to reduce the risk of one position against the other. It protects the asset or liability from foreign exchange fluctuations instead of making profits.

In-the-Money

This term is used when the trader makes accurate speculation of the value movement of the underlying instrument.

Kiwi

Slang for NZD/USD FX pair.

Leverage

It is also called margin. Leverage ratio is offered by brokers to traders that helps make small deposits turn into large total contract values thus increasing your potential profit.

Long Position

It refers to buying a contract.

Margin

It is the minimal deposit that traders have to put up to engage in transactions.

Pip

It is the smallest unit of price. Pips are added or subtracted from the 4th decimal place.

Risk

It is an exposure to uncertain changes.

Short Position

It refers to selling of a contract.

Spread

This is the difference between the bid and ask value of a currency. This can be fixed or floating depending on the broker.

Strike

This is the value at which the option holder can buy or sell the underlying asset.

Technical Analysis

This is the process in which charts and FX patterns are analysed to make wise profit maximizing decisions.

Time to Maturity

The time remaining until the expiry of the contract.

Yield Curve

The graph that shows the changes in yields of the underlying asset depending on time to maturity.

Recommendation:

Recommendation:

Risk warning: Trading binary options, CFD or other leveraged products carries a high degree of risk. Be aware that you can lose even more than the capital you invested. Only trade with money that you can afford to lose. This site is purely informational and cannot replace getting professional advice before trading for real money.