Forex Trading Glossary

Bid – The price at which the market maker/broker is willing to buy the currency pair. The value of the underlying currency pair affects the Bid price. Given its nature, the bid price is always lower than the ask price. Trailing stops are also similar but instead of a set price, they focus on pips. If you set a 20-pips trailing stop and the market price moves against you by 19 pip, your position will remain open. However, if you are profiting, the stop level will move along with it.

What are the 8 major currency pairs?

  • EUR/USD (Euro Dollar)
  • GBP/USD (Pound Dollar)
  • USD/CHF (Dollar Swissy)
  • USD/JPY (Dollar Yen)
  • AUD/USD (Aussie Dollar)
  • NZD/USD (Kiwi Dollar)
  • USD/CAD (Dollar Loonie)

Trading in CFDs may be impacted by changes in currency exchange rate movements thereby affecting your investment return therefrom. However, in view of currently applicable restrictions in Belgium, the contents of this website are not addressed to the Belgian public. In respect of the UK, AKFX Financial Services Limited is deemed authorised and regulated by the UK Financial Conduct Authority. The nature and extent of consumer protections may differ from those for firms based in the UK.

Support and Resistance

Federal Reserve – The official centralised bank for the regulation of economic activity in the USA. The Federal Reserve aims to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down.

ISDA fosters safe and efficient derivatives markets to facilitate effective risk management for all users of derivative products. Reserve Bank of Australia The Reserve Bank of Australia is Australia’s central bank. It conducts monetary policy, works to maintain a strong financial system, and… This is a technical analysis ratio which is used to forecast the behavior of Forex market.

Learn Trading with IFC Markets

The My Trading Skills Community is a social network, charting package and information hub for traders. Access to the Community is free for active students taking a paid for course or via a monthly subscription for those that are not. While this list is not all-inclusive, it covers the 15 most common terms regularly used by Forex traders. A warning call from your broker that your available margin has fallen below the minimum level to keep a position open.

forex terminology pdf

Divergence is considered either positive or negative ; both kinds of divergence signal major shifts in price direction. Positive/bullish divergence occurs when the price of a security makes a new low while the momentum indicator starts to climb upward. Negative/bearish divergence happens when the price of the security makes a new high, but the indicator fails to do the same and instead moves lower. Divergences frequently occur in extended price moves and frequently resolve with the price reversing direction to follow the momentum indicator.

Bill Williams Indicators PDF

When you are selling you will receive the bid price that is the lower of the two quotes. This is always a little higher and has the ‘spread’ from your broker added into the price. Find the approximate amount of currency units to buy or sell so you can control your maximum risk per position. Learn how to trade forex in a fun and easy-to-understand format.

Futures contract An obligation to exchange a good or instrument at a set price and specified quantity grade at a future date. Range When a price is trading between a defined high and low, moving within these two boundaries without breaking out from them. Rate The price of one currency in terms of another, typically used for dealing purposes.

forex terminology pdf

Understanding forex trading vocabulary is crucial to learning how to trade currencies and follow the financial markets. Forexpedia will explain all of the important terms you need to know. First, you must get the hang of the basics of foreign exchange. Foreign exchange, also known as Forex and FX, refers to the exchange of one currency for another, e.g. EUR/USD (Euro – US Dollar), USD/JPY (US Dollar – Japanese Yen), and GBP/USD (British Pound – US Dollar).

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Japanese economy watchers survey Measures the mood of businesses that directly service consumers such as waiters, drivers and beauticians. Readings above 50 activtrades review generally signal improvements in sentiment. Japanese machine tool orders Measures the total value of new orders placed with machine tool manufacturers.

These concepts may be applicable to certain currency transactions, such as those involving emerging market currencies. Determine significant support and resistance levels with the help of pivot points. The 4 tutorials below cover the basic features global tradeatf of Technical Indicators and how to utilize Technical Analysis to improve trading results. They are of great help for traders to understand the purpose and significance of the given indicators, as well as learn the best methods of using them.

Forex Glossary

Currencies are not able to be purchased or exchanged individually. For example; a bullish trader may say; “I have just entered a long trade with the strong trend higher”. This is because when trading CFD’s profits can be made from price moving both higher and lower. The largest factor that creates slippage in the markets is large volatility.

What are the major forex pairs?

  • The major currency pairs on the forex market are the EUR/USD, USD/JPY, GBP/USD, and USD/CHF.
  • The four major currency pairs are some of the most actively traded pairs in the world, along with the so-called commodity currency pairs: USD/CAD, AUD/USD, and NZD/USD.

Revaluation When a pegged currency is allowed to strengthen or rise as a result of official actions; the opposite of a devaluation. Rights issue A form of corporate action where shareholders are given rights to purchase more stock. Normally issued by companies in an attempt to raise capital. Risk Exposure to uncertain change, most often used with a negative connotation of adverse change. Risk management The employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.

Ask – The price at which the market maker/broker is willing to sell the currency pair. It is also based on the value of the underlying currency pair. Support and resistance are one of the most important concepts in technical analysis. Since retail Forex is mostly traded with CFDs, traders are able to bet both on rising prices and falling prices.

Broker with small spreads, then you can often be paying far too much just to make your trades. This is crucial for you to understand because each market and Forex pair will have hugely varying spreads. This difference is the spread you will pay when making your trades. Forex Market opens wide opportunities for newcomers to learn, communicate, and improve trading skills via the Internet. Close at Profit Order – a market order used to close a profitable position once it reaches a certain level. Stop Loss Order – a market order used to close a losing position once it has reached a certain level.

Finally, exotic pairs include exotic currencies which are not in the Top 10 of the most traded currencies, such as the Mexican peso, Turkish lira or Czech koruna. Since those currencies can be extremely volatile, they should be left to be traded by the pros. Those are basic terms of the Forex market that all traders need to know. A limit order is placed when the market price reaches a limit set by you. As a result, a buy limit is always below the actual price while a sell limit is always above it.

If you’re just beginning with trading, you should focus on the major pairs since they usually offer very low transaction costs and enough liquidity to avoid high slippage. If you’re a beginner in the Forex market, chances are you’ve stumbled upon an article or forum post that include terms such as “pips”, “cross-pairs”, “margin” and others. Round trip A trade that has been opened and subsequently closed by an equal and opposite deal. Running profit/loss An indicator of the status of your open positions; that is, unrealized money that you would gain or lose should you close all your open positions at that point in time.

At or better An instruction given to a dealer to buy or sell at a specific price or better. AUS 200 A term for the Australian Securities Exchange , which is an index of the top 200 companies listed on the Australian stock exchange. Aussie Refers to the AUD/USD (Australian Dollar/U.S. Dollar) pair. One of the most popular and widely used technical analysis techniques in the stock and Forex markets is support and resistance. We introduce people to the world of currency trading, and provide educational content to help them learn how to become profitable traders. We’re also a community of traders that support each other on our daily trading journey.

Dealing spread The difference between the buying and selling price of a contract. Delivery A trade where both sides make and take actual delivery of the product traded. Delta The ratio between the change in price of a product and the change in price of its underlying market.

Currency pairs consist of two currencies – the first one is the base currency and the second one the counter-currency. Spread – The difference between the Buy/Sell (Bid/Ask) prices, offered to traders on the trading platform. When a CFD provider offers lower spreads than its competitors, this means traders can enjoy a smaller difference between the Buy and Sell price of the underlying FX trading pair. Hedge A position or combination of positions that reduces the risk of your primary position.

This can often be caused by news announcements or unexpected market shocks.

Most traders don’t follow movements in pipettes, even though some brokers use them in their trading platform. Today, pipettes are mostly used to measure the bid/ask spread, where a tenth of a pip is needed. For example, the spread in EUR/USD might be 1.4 pips, or one pip and four pipettes. The United Nations currently recognise 180 currencies that are used in 195 countries across the world. Keep the powder dry To limit your trades due to inclement trading conditions.

The long-term correlation coefficient is largely negative, but shorter-term correlations are less reliable. Gold certificate A certificate of ownership that gold investors use to purchase and sell the commodity instead of dealing with transfer and storage of the physical gold itself. Gold contract The standard unit of trading gold is one contract which is equal to 10 troy ounces. Good for day An order that will expire at the end of the day if it is not filled. Good ’til cancelled order An order to buy or sell at a specified price that remains open until filled or until the client cancels.

The exchange rate is often simply called the price, since it shows the price of the base currency expressed in terms of the counter-currency. For example, if the exchange rate of EUR/USD is 1.15, this means that one euro costs $1.15, equiti review or it takes $1.15 to buy one euro. G7 Group of 7 Nations – United States, Japan, Germany, United Kingdom, France, Italy and Canada. Gap/gapping A quick market move in which prices skip several levels without any trades occurring.

The markets are made of crowds of people that speculate, hedge, trade, invest or gamble in the markets. Since people have memory, they remember certain price-levels where the price had difficulties to break below in the past. CFD traders speculate on the price changes of a certain trading instrument such as Forex, Commodities or Indices. Going long or entering the market with a long position means you buy a base currency. You are expecting that the base currency will gain value over the quote currency. That means you are expecting that the base currency will lose value compared to the quote currency.

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