Glossary

Forex Glossary

The most important terms related to Forex trading are presented in this glossary:

Term	Meaning
ADX (Average Directional Index)	Standard technical indicator that measures the strength of a trend
Ask (Offer)	Price of the offer, the price you buy for
Aussie	A forex slang name for the Australian Dollar
Bank Rate	The percentage rate at which central bank of a country lends money to the country's commercial banks
Bid	Price of the demand, the price you sell for
Broker	The market participating body which serves as the middleman between retail traders and larger commercial institutions
Cable	A forex traders slang word GBP/USD currency pair
Carry Trade	In forex, holding a position with a positive overnight interest return in hope of gaining profits, without closing the position, just for the central banks interest rates difference
CCI (Commodity Channel Index)	A cyclical technical indicator that is often used to detect overbought/oversold states of the market
CFD	A contract for difference — special trading instrument that allows financial speculation on stocks, commodities and other instruments without actually buying
Commission	Broker commissions for operation handling
CPI	Consumer price index the statistical measure of inflation based upon changes of prices of a specified set of goods
EA (Expert Advisor)	An automated script which is used by the trading platform software to manage positions and orders automatically without (or with little) manual control
ECN Broker	A type of forex brokerage firm that provide its clients direct access to other forex market participants. ECN brokers don't discourage scalping, don't trade against the client, don't charge spread (low spread is defined by current market prices) but charge commissions for every order
ECB (European Central Bank)	The main regulatory body of the European union financial system
Elliott Waves	A set of principles for chart analysis based on 5-wave and 3-wave patterns
Fed (Federal Reserve)	The main regulatory body of the United States of America financial system, which division — FOMC (federal open market committee) — regulates, among other things, federal interest rates
Fibonacci Retracements	The levels with a high probability of trend break or bounce, calculated as the 23.6%, 32.8%, 50% and 61.8% of the trend range
Flat (Square)	Neutral state when all your positions are closed
Fundamental Analysis	The analysis based only on news, economic indicators and global events
Gap	A difference between the previous period's close price and the next period's open price. In forex usually only occurs during weekends — between the Friday’s close and the Monday’s open price
GDP (Gross Domestic Product)	Is a measure of the national income and output for the country's economy; it's one of the most important forex indicators
GTC (Good Till Canceled)	Order to buy or sell of a currency with a fixed price or worse. The order is alive (good) until execution or cancellation
Hedging	Maintaining a market position which secures the existing open positions in the opposite direction
Jobber	A slang word for a trader which is aimed toward fast but small and short-term profit from an intra-day trading. Jobber rarely leaves open positions overnight
Kiwi	A forex slang name for the New Zealand currency — New Zealand Dollar
Leading Indicators	A composite index (year 1992 = 100%) of ten most important macroeconomic indicators that predicts future (6-9 months) economic activity
Limit Order	Order for a broker to buy the lot for fixed or lesser price or sell the lot for fixed or better price. Such price is called limit price
Liquidity	The measure of markets which describes relationship between the trading volume and the price change
Long	The position which is in a buy direction. In forex, the primary currency when bought is long  and another is short
Loss	The loss from closing long position at lower rate than opening or short position with higher rate than opening, or if the profit from a position closing was lower than broker commission on it
Lot	Definite amount of units or amount of money accepted for operations handling (usually it is a multiple of 100).
Margin	Money, the investor needs to keep at broker account to execute trades. It supplies the possible losses which may occur in margin trading
Margin Account	Account which is used to hold investor's deposited money for forex trading
Margin Call	Demand of a broker to deposit more margin money to the margin account when the amount in it falls below certain minimum
Market Order	Order to buy or sell a lot for a current market price
Market Price	The current price for which the currency is traded for on the market
Momentum	The measure of the currency's ability to move in the given direction
Moving Average (MA)	One of the most basic technical indicators. It shows the average rate calculated over a series of time periods. Exponential moving average (EMA), weighted moving average (WMA) etc. Are just the ways of weighing the rates and the periods
Offer (Ask)	Price of the offer, the price you buy for
Open Position (Trade)	Position on buying (long) or selling (short) for a currency pair
Order	Order for a broker to buy or sell the currency with a certain rate
Percentage Allocation Management Module (PAMM)	A broker-side system that allows investor to invest with traders, and allows traders to manage investors' funds using the broker's platform
Pivot Point	The primary support/resistance point calculated basing on the previous trend's high, low and close prices
Pip (Point)	The last digit in the rate (e.g. for EUR/USD 1 point = 0.0001)
Profit (Gain)	Positive amount of money gained for closing the position
Principal Value	The initial amount of money of the invested
Realized Profit/Loss	Gain/loss for already closed positions
Resistance	Price level for which the intensive selling can lead to price increasing (up-trend)
RSI (Relative Strength Index)	Indicator that measures of the power of direction price movement by comparing the bullish and bearish portions of the trend
Scalping	A style of trading notable by many positions that are opened for extremely small and short-term profits
Settled (Closed) Position	Closed positions for which all needed transactions has been made
SL	See stop-loss order
Slippage	Execution of order for a price different than expected (ordered), main reasons for slippage are — "fast" market, low liquidity and low broker's ability to execute orders
Spread	Difference between ask and bid prices for a currency pair
Standard Lot	100,000 units of the base currency of the currency pair, which you are buying or selling
Stop-Limit Order	An order to sell or buy a lot for a certain price or worse
Stop-Loss Order	An order to sell or buy a lot when the market reaches certain price. It is used to avoid extra losses when market moves in the opposite direction. Usually is a combination of stop-order and limit-order
STP (Straight Through Processing)	An order processing that doesn't require any manual intervention and is fully automatic. In fact, 99.9% of all on-line forex brokers support order handling with STP
Support	Price level for which intensive buying can lead to the price decreasing (down-trend)
Swap	Overnight payment for holding your position. Since you are not physically receiving the currency you buy, your broker should pay you the interest rate difference between the two currencies of the pair. It can be negative or positive
Take-Profit Order	An order to sell or buy a lot when the market reaches certain price. It is used to fixate your profit. Usually is a combination of stop-order and limit-order
Technical Analysis	The analysis based only on the technical market data (quotes) with the help of various technical indicators
TP	See take-profit order
Trend	Direction of market which has been established with influence of different factors
Unrealized (Floating) Profit/Loss	A profit/loss for your non-closed positions
Useable Margin	Amount of money in the account that can be used for trading
Used Margin	Amount of money in the account already used to hold open positions open
Volatility	A statistical measure of the number of price changes for a given currency pair in a given period of time
VPS (Virtual Private Server)	Virtual environment hosted on the dedicated server, which can be used to run the programs independent on the user's pc. Forex traders use VPS to host trading platforms and run expert advisors without unexpected interruptions