Forex Glossary
Master the language of the markets with our comprehensive trading dictionary.
Ask Price
The price at which a broker is willing to sell a financial instrument. Also known as the offer price.
Appreciation
An increase in the value of an asset or currency.
Arbitrage
The simultaneous purchase and sale of an asset to profit from an imbalance in the price.
Aussie
Slang term for the Australian Dollar (AUD).
Analysis
The process of examining market data to predict future price movements. Includes Technical and Fundamental analysis.
Base Currency
The first currency quoted in a currency pair. For example, in EUR/USD, the Euro is the base currency.
Bear Market
A market condition in which prices are falling or are expected to fall.
Bid Price
The price at which a trader can sell a financial instrument.
Broker
An individual or firm that acts as an intermediary between an investor and a securities exchange.
Bull Market
A market condition in which prices are rising or are expected to rise.
Balance
The total amount of money in a trading account, excluding open positions.
Bollinger Bands
A technical analysis tool defined by a set of trendlines plotted two standard deviations (positively and negatively) away from a simple moving average.
Breakout
When a price moves above a resistance level or below a support level with increased volume.
Cable
Slang for the GBP/USD currency pair.
Candlestick Chart
A style of financial chart used to describe price movements of a security, derivative, or currency.
Carry Trade
A trading strategy that involves borrowing at a low-interest rate and investing in an asset that provides a higher rate of return.
Central Bank
A national bank that provides financial and banking services for its country's government and commercial banking system, as well as implementing monetary policy and issuing currency.
Commission
A service charge assessed by a broker or investment advisor for providing investment advice or handling purchases and sales of securities.
CPI (Consumer Price Index)
A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.
Currency Pair
The quotation of two different currencies, with the value of one currency being quoted against the other.
Day Trading
The act of buying and selling a financial instrument within the same trading day.
Derivative
A financial security with a value that is reliant upon or derived from an underlying asset or group of assets.
Dividend
The distribution of some of a company's earnings to a class of its shareholders.
Doji
A session in which the candlestick for a security has an open and close that are virtually equal and are often components in patterns.
Drawdown
A peak-to-trough decline during a specific period for an investment, trading account, or fund.
ECN Broker
Electronic Communication Network broker providing direct access to potential buyers and sellers.
Equity
The value of a trading account plus the floating profit/loss of open positions.
Exchange Rate
The value of one currency for the purpose of conversion to another.
Execution
The completion of a buy or sell order for a security.
Economic Calendar
A schedule of dates of significant releases or events that may affect the movement of individual security prices or the market as a whole.
Fibonacci Retracement
A method of technical analysis for finding support and resistance levels.
Forex (FX)
The foreign exchange market, where currencies are traded.
Fundamental Analysis
A method of evaluating a security by attempting to measure its intrinsic value.
Futures
Financial contracts obligating the buyer to purchase an asset or the seller to sell an asset at a predetermined future date and price.
FOMC
The Federal Open Market Committee, the branch of the Federal Reserve Board that determines the direction of monetary policy.
GDP (Gross Domestic Product)
The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.
Gapping
A trading range where no trading has occurred. For example, if a price opens higher than the previous day's high.
Going Long
Buying a security/currency with the expectation that the asset will rise in value.
Going Short
Selling a security/currency with the expectation that the asset will fall in value.
Hawk
A policy maker or advisor who favors higher interest rates to keep inflation in check.
Hedge
An investment to reduce the risk of adverse price movements in an asset.
High-Frequency Trading (HFT)
A method of trading that uses powerful computer programs to transact a large number of orders in fractions of a second.
Inflation
A general increase in prices and fall in the purchasing value of money.
Initial Margin
The percentage of the purchase price of a secruity that must be covered by cash or collateral when using a margin account.
Interest Rate
The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
Interbank Rate
The rate of interest charged on short-term loans made between banks.
Japanese Yen (JPY)
The official currency of Japan.
Jobber
A slang term for a trader who aims for small, short-term profits.
Kiwi
Slang term for the New Zealand Dollar (NZD).
Leverage
The use of borrowed capital for (an investment), expecting the profits made to be greater than the interest payable.
Limit Order
A direction given to a broker to buy or sell a security at a specified price or better.
Liquidity
The efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price.
Long Position
Buying a security such as a stock, commodity or currency with the expectation that the asset will rise in value.
Lot
The standardized quantity of a financial instrument used in trading. In forex, a standard lot is 100,000 units.
Margin
The collateral that an investor has to deposit with their broker or exchange to cover the credit risk the holder poses for the broker or exchange.
Margin Call
A demand by a broker that an investor deposit further cash or securities to cover possible losses.
Market Maker
A bank or financial institution that stands ready to buy or sell a currency at any time.
Market Order
A buy or sell order to be executed immediately at current market prices.
Micro Lot
A contract size of 1,000 units of base currency.
Mini Lot
A contract size of 10,000 units of base currency.
NFP (Non-Farm Payroll)
An economic indicator released monthly by the US Department of Labor that reports total paid US workers, excluding farm employees.
Noise
Price fluctuations in the market that may confuse interpretation of market direction.
Offer
The price at which a seller is willing to sell a security.
Open Position
An active trade that has not yet been closed.
Order
An instruction sent to a broker to buy or sell a currency pair.
Overbought
A situation where a security is believed to be trading at a level above its intrinsic or fair value.
Oversold
A situation where a security is believed to be trading at a level below its intrinsic or fair value.
Pip
The smallest price change that a given exchange rate can make. Usually the fourth decimal place.
Pivot Point
A technical indicator used to determine the overall trend of the market over different time frames.
Platform
The software provided by a broker to execute trades and analyze the market.
Portfolio
A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents.
Profit Taking
Selling a security that has appreciated in value to realize the profit.
Quote Currency
The second currency quoted in a currency pair. In EUR/USD, the USD is the quote currency.
Quantitative Analysis
A technique that seeks to understand behavior by using mathematical and statistical modeling, measurement, and research.
Quantitative Easing (QE)
A monetary policy where a central bank purchases government securities or other securities from the market to lower interest rates and increase the money supply.
Rally
A period of sustained increases in the prices of stocks, bonds, or indexes.
Range
The difference between the high and low prices for a trading period.
Resistance
A price level where selling is thought to be strong enough to prevent the price from rising further.
Risk Management
The process of identification, analysis and acceptance or mitigation of uncertainty in investment decisions.
Rollover
The process of keeping a position open beyond its expiry to the next trading day.
Scalping
A trading strategy attempting to make many profits on small price changes.
Short Position
Selling a security with the expectation that the price will decline.
Slippage
The difference between the expected price of a trade and the price at which the trade is executed.
Spread
The difference between the bid and the ask price of a security or asset.
Stop Loss
An order placed with a broker to sell a security when it reaches a certain price.
Swap
The interest paid or earned for holding a position overnight.
Support
A price level where buying is thought to be strong enough to prevent the price from falling further.
Take Profit
An order enabling traders to automatically close a position when prices reach a predefined level.
Technical Analysis
A trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity.
Tick
A measure of the minimum upward or downward movement in the price of a security.
Trend
The general direction of a market or of the price of an asset.
Trading Plan
A systematic method for identifying and executing trades that takes into consideration a number of variables including time, risk, and the trader's objectives.
Underlying Asset
The financial instrument (stock, futures, commodity, currency, index) on which a derivative's price is based.
Unemployment Rate
The percentage of total labor force that is unemployed but actively seeking employment and willing to work.
Volatility
A statistical measure of the dispersion of returns for a given security or market index.
Volume
The number of shares or contracts traded in a security or an entire market during a given period of time.
Whipsaw
A condition where a security's price moves in one direction but then quickly moves in the opposite direction.
Whale
A trader with a massive amount of capital, capable of influencing the market.
Yard
A slang term for a billion units.
Yield
The earnings generated and realized on an investment over a particular period of time.
Zero Sum Game
A situation in which one person's gain is equivalent to another's loss, so the net change in wealth or benefit is zero.