Professional traders use Forex terms very often, which can be difficult for beginners.
Professional traders very often use vocabulary that seems complex and incomprehensible to beginners. Forex trader terminology includes many acronyms and abbreviations that you need to know if you want to understand the ins and outs of forex and stock trading.
First, let's understand the most important term.
❓ What does the word FOREX ? ❓
➡️ The answer is an abbreviation for Foreign Exchange, that is, currency exchange. And FX is short for Forex and has the same meaning. Traders use certain Forex terms for a reason. Let's try to look at the terms that are included in the Forex trader's vocabulary and may be useful to you in trading.
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Glossary of Forex terms
A
Actualise – assets or other instruments traded in the cash market.
Agio (agio) is a monetary surplus that is paid in some cases for the exchange of coins for paper currency. In the Forex market, “agio” is the difference in exchange rates.
At best – favorable rate. Transmitting instructions to a broker or dealer to buy or sell a currency on the Forex market at the best (most favorable) rate.
At or better – at a specified or favorable price. A Forex dealer receives instructions from a trader to buy/sell currency at a clearly established or more favorable rate.
Arbitration (currency arbitrage, Arbitrage) is the simultaneous carrying out of opposite operations on the foreign exchange exchange in order to generate income from the difference in exchange rates of currencies. The trader simultaneously opens positions to sell and buy a certain asset and, as a result of a short-term divergence in rates, makes a profit.
Auto trading Forex is a trading process using special programs (advisers) that fully automate all operations: analyze the market situation and open or close positions, fixing profits.
B
Used (break-even trading, break-even) – moving the Stop Loss to the price level at which the transaction was opened.
Sideways (lateral movement) – the absence of a clearly defined direction of the price trend for a certain asset. A state of “rest” on the currency exchange (see also flat).
Quotes base – grouped information about current exchange rates.
Base Currency is the currency that comes first in the currency pair record. Shows the value of a unit of the base currency when exchanged for the quoted one (the one in second place). For example, a USD/CHF quote of 1.7263 means that 1 dollar is worth 1.7263 Swiss francs.
Basis point is the number that comes last when recording quotes or bank rates. Depending on the number of decimal places used, the basis point can take on different meanings.
Buy limit – sending an order to a broker or dealer to buy a currency at a rate that is lower than the current level. Those. currency is purchased after the price drops to a certain value. Learn more about order types
Forex bar is a time period (timeframe), presented in the form of a schematic diagram with opening/closing prices for a certain time period. Bars allow you to analyze the market situation on the timeframe of interest to the trader.
A bar trend is a type of displaying a price trend in the Forex market. Used primarily for technical analysis. The chart is formed in the form of bars, each of which is plotted over the established time frame.
Binary options are futures contracts with a predetermined level of risk and a profit indicator in case of winning. The expiration period of binary options is set by the broker.
Buy stop is a pending order in the Forex market, allowing a trader to open positions to buy a currency at a price that is higher than the existing level. Learn more about order types
The Bretton Woods Agreement was an agreement that established fixed exchange rates for major currencies. In addition, the dollar was supported by gold reserves. One ounce of gold was then equal to 35 dollars. The agreement was in force until 1971, and was canceled by President Nixon (USA). Today, exchange rates are floating.
Forex broker is a legal entity that is an intermediary providing access to the interbank foreign exchange market. In other words, the broker brings together sellers and buyers of currency and receives a certain percentage of the profit from their transactions.
Brokerage commission/remuneration (Commission) – % of deductions from the main turnover on traders’ transactions. Essentially, the broker's earnings.
Bull Market is a situation in the foreign exchange market when the dominant position is occupied by traders interested in the growth of the exchange rate. Such market players are called bulls; it is believed that bulls “raise” the price with their horns. Currency quotes are constantly rising in a bull market.
The Bundesbank is the central banking institution of the Federal Republic of Germany.
Paper loss/profit (Floating Loss/Profit) – profit/loss until it is recorded. The trader’s position on the Forex market in this case remains open.
IN
Account Statement – a document containing information about the transactions performed and the current status of the trader’s account. Data is sorted based on time criteria.
Elliott waves are figures of mathematical theory, consisting of eight constantly repeating waves (three against the trend and five along the trend), which allow you to assess the state of the market and make a decision about opening a profitable transaction on Forex.
Upward trend – an increase in the value of a traded asset over a certain period of time. It is generally accepted that with a growing trend, each subsequent minimum and maximum value on the chart is higher than the previous one.
Gross Domestic Product is a macroeconomic indicator that reflects the total value of all goods and services produced within a country in one year.
Gross National Product – gross domestic product + income from work performed by residents of a given country abroad.
Quote currency in the Forex market is the currency in second place in a currency pair, indicating how much you need to pay per unit of the base currency.
Currency intervention is the intervention of central banks in the process of forming quotes in order to regulate prices in foreign exchange markets. The intervention may be coordinated (in the case where several central banks agree to jointly adjust exchange rates).
Currency Basket is one of the methods for establishing the weighted average exchange rate of one currency in relation to a set of foreign ones. The list of currencies for determining parity (equality) is selected arbitrarily, based on the set (specific) goal.
Forex Currency Pair – two currencies, written separated by a slash, that make up a Forex quote. For example, the EUR/USD pair shows how many dollars you need to pay to buy/sell 1 euro.
Currency risk is the probability of a trader losing the amount invested in a transaction as a result of an error in making a forecast regarding changes in the exchange rate value of traded assets.
Variation Margin is an additional amount that a trader must pay to a broker in connection with fluctuations and adjustments in exchange rates on the exchange.
Over-the-counter market (OTC market) is a term that is used to characterize currency purchase/sale transactions that are concluded outside the exchange.
Forex volatility is an indicator that characterizes a certain trend in price changes in Forex currency quotes. Essentially, this is the change in the price of a currency over time.
The World Trade Organization (WTO) is an organization created in 1994 to regulate relations arising in the course of international trade. The WTO includes representatives of more than 120 countries (including Russia since 2012).
Offsetting transaction is a form of trading operations that allows you to reduce or completely eliminate market risks associated with an open transaction.
Wash trade is a transaction that brings neither profit nor loss to the trader. Often called a zero deal.
G
Hong Kong Dollars - according to the ISO classification (three-letter notation), HKD is the national currency of Hong Kong.
Gap Forex is a gap in currency quotes in which the previous candle closes at one price, and the next one opens at a completely different one. The price gap is easy to determine visually. Read more about gaps and trading on them here
G7 – G7 countries: USA, Germany, Japan, France, UK, Canada, Italy.
Grid – fixed limits within which exchange rates can change, another name is “coordinate grid”.
D
Jobber (jargon) is a trader who is interested in making a small but quick income from intraday trading. Jobber, as a rule, does not leave open trades for the next day.
Backwardation is the amount of excess of the forward price (agreed for the future) over the spot price (the current cost of supply of currency).
Value Date – date of payments (fulfillment of obligations under foreign exchange contracts). In the spot market, the value date is usually considered to be the second business day following the transaction day.
Transaction Date – the date of the immediate conclusion of the agreement (transaction).
Double Top is a technical analysis figure that foreshadows a future trend reversal. The exchange rate rises to a certain price level twice, after which a downward trend appears.
Double Bottom is a technical analysis figure consisting of two lows. Indicates that the asset price is moving upward.
Two-Way Quote – a simultaneous quotation indicating the sale/purchase price of a currency on the Forex exchange.
Good Until Cancelled (GTC) – an order to a dealer to buy or sell currency at a pre-agreed price. GTC is valid until the transaction is canceled or executed.
Forex Range (Range market) – the price value for the current trading session, which is calculated as the difference between the maximum and minimum value of a currency. Essentially, this is the corridor in which the price of a currency pair was located during the trading session (or any other time period).
Capital diversification – distribution of the investment portfolio in order to reduce the level of market risks.
Forex dealer is a legal entity (less often an individual) who is the second party to a transaction. In other words, a trader working with a dealer buys and sells contracts to him. The dealer makes transactions at his own expense and on his own behalf, publicly announcing quotes for currency pairs.
Long position is an open transaction, the profit on which increases as the value of the currency rises. The trader who opens this position buys the underlying currency.
Day Trader is a market player who conducts operations within one day (session) and does not leave open positions overnight to transfer them. Such traders are called “speculators”.
Derivatives are contracts that allow you to fix the cost of purchasing one or more goods on the foreign exchange market. This is beneficial if a trader wants to buy a certain asset, however, does not have the resources, but is confident that its value will increase.
A dealing center is a company that allows traders to trade various types of assets. Trading operations can be carried out both on the external foreign exchange market (interbank) and on the internal one (the dealing center itself).
Dealing Desk – trading operations are carried out on the internal platform of the dealing center. All transactions are carried out between internal trading participants (clients) and the dealing company.
Non-Dealing Desk (NDD) – trading operations with access to the interbank market. The broker does not have the opportunity in this case to “interfere” in the trading process.
Friends, for all beginners it will still be more useful to read the Forex for Beginners section.
E
The European Monetary Union is an organization whose main goal was the introduction of the euro in countries that are members of the European Union.
Euro currency is the official monetary unit of the European Monetary Union.
The European Central Bank is the main (central) bank of the European Union (EU).
Hedgehog is the name of the euro/Japanese yen currency pair.
ECN account is one of the most optimal trading accounts for working with the Forex currency exchange. An undeniable advantage is trading in the Non-Dealing Desk (NDD) system.
EMS is the European Union's monetary system.
EDI – Electronic Information Interchange.
EFT is the EU electronic money transfer system.
Z
Closed Position – a position that is no longer affected by currency price fluctuations. Essentially, closing a position is repurchasing or selling the same amount of currency as when entering into the transaction.
Offer price/offer – the price for selling currency by a dealer (the same as “ask”).
"Greenback" is a slang expression. Name of the American dollar.
AND
Average Directional Index/ADX is a technical analysis indicator that shows the strength of the trend direction. Included in the list of standard indicators.
The Dow Jones Average is an indicator of the business activity of the stock market of the United States of America. It is calculated based on an analysis of the state of the country's largest enterprises.
Indicative quote - a quote that informs the trader about the current value of the currency pair at which he can make a transaction.
Forex instrument (Tool Forex) - currency pairs or contracts for difference (over-the-counter instruments that allow market players to earn money on changes in the value of the assets underlying such contracts).
Initial margin is a guarantee for the fulfillment of the broker’s obligations to the trader. The margin paid by a market player to open a trade.
Consumer Price Index is an indicator that measures the average level of cost of the consumer basket (the most necessary goods and services) for a certain time period.
An investment portfolio is a list of investor investments that differ in levels of risk and return. Investments can be material (purchase of goods, etc.) and intellectual (development of vaccines, etc.).
TO
Carry trade is a strategy for conducting trading operations in which profit is made from the difference in interest rates on deposits and loans in different countries. This type of trading can bring good income. The trader buys the currencies of countries with high interest rates, and sells them with low interest rates (not making a profit).
Cable FX (Cable FX) – British pound to dollar quote. The name "cable" comes from the fact that pound quotes began to be transmitted to America via the transatlantic cable in the late 19th century.
Copey (jargon) – Danish krone.
Kiwi is the name of the New Zealand dollar (ISO notation - NZD).
“Kitchen” is a brokerage company that bases its work on deceiving clients.
Clearing (FX clearing) – carrying out mutual settlements on traders’ transactions.
Currency symbols are a sequence of symbols (numbers and letters) agreed upon by an international standard that are used to designate the national currencies of world states, for example: EUR - euro, GBP - British pound, AUD - Australian dollar, etc.
Short position is a transaction in which the profit increases when the market price of an asset falls. A trader is in a short position when he sells the base currency that comes first in the pair's entry.
Adjustment – adjustment of the internal policy of the state in relation to the state of the exchange rate. This procedure influences changes in currency quotes on the Forex market.
Adjustable peg - an exchange rate in a country at which the value of the national currency is fixed in relation to the banknotes of another state. For example, the hryvnia is pegged to the dollar. The adjustable peg is typical of the Bretton Woods system.
Forex correlation is a stable relationship between quotes of currency pairs on the Forex market. Traders in practice very often use currency correlation, which simplifies the trading process.
Forex correction is an arbitrary change in the direction of a trend against the main trend that has formed in the Forex market.
Forex Quote (Quote forex) – the price of a currency pair or a single Forex instrument for which a trader performs trading operations: buy or sell. The quotation is expressed by two prices: “Ask” (at which the seller agrees to sell) and “Bid” (which the trader is willing to pay to buy the asset).
Quoted currency (Counter Currency) is the currency that is in second place in the quote record of a currency pair. Shows how much the unit of base currency in first place is worth.
Forex leverage (Level) – the ratio between the collateral amount and the volume available for the transaction: 1:100, 1:200, 1:500, etc. For example, a leverage of 1:200 means that to open a position, the amount of the trader in the trading account with the broker can be 200 times less than the amount of the transaction itself.
Forex cross course – exchange rate of currencies (one for another), excluding the participation of the American dollar. For example, EUR/GBP.
Forex consolidation is a slowdown in price movement in the Forex market after a sharp increase or decrease in the value of an asset.
L
Market liquidity is the ability to open a large transaction that does not affect the price movement as a whole due to the amortization of supply and demand. The Forex market is a prime example of a liquid market.
A Sell Limit order is an order to a broker to sell an asset at a price higher than and equal to that specified in the order. Learn more about the types of orders
Forex Personal Account (Personal Area) is a trader’s personal account on the brokerage company’s website, which is intended to identify a market player, record non-trading transactions and post reference information.
Locked positions – simultaneous opening of long and short positions on the same instrument with the same volumes. For example, a trader opens 2 lots to buy the EUR/GBP pair and 3 lots to sell EUR/GBP. In this case, 2 lots to buy and 2 lots to sell are locked positions. 1 lot for sale is a normal transaction.
Forex Lot (Lot) – designation of volumes of currency for trading using the terminal/standard volumes of currency for trading on the Forex market, which are used to simplify mutual settlements. A standard lot is equal to 100,000 US dollars.
Bollinger Bands are a technical analysis tool for the Forex currency market that allows you to assess the current state of the exchange by comparing historical data on asset prices.
M
Margin Call is a requirement of a brokerage company for the trader to deposit an additional amount as collateral. Margin Call often occurs due to a “drawdown” during trading operations. In case of refusal to deposit additional funds into the account, the broker decides to forcefully close the trader’s transaction.
Majors are the main currency pairs in the Forex market. Five main currencies: USD, EUR, GBR, JPY, CHF.
Margin is a mandatory collateral that a trader must deposit into a broker’s account in order to conduct trading operations.
Margin trading (Reserve Funds Trading) is trading using leverage, when the client is given the opportunity to open transactions with volumes that are 100-1000 times greater than the amount of capital deposited into the account.
Market Maker is a dealer who regularly publishes purchase/sale prices of financial instruments on his website with an obligation to conduct trading operations at these prices.
Bear Market is a situation in the foreign exchange market when the majority of market players are looking to reduce the value of an asset. As a result, quotes for currency pairs have a downward trend.
Martingale is a trading strategy that is based on probability theory. In accordance with the Martingale system, after each failure, the trader doubles the transaction volume. There are analogues like the averaging strategy in Forex
Mini Forex is a special account for working on the foreign exchange market, with a lot size reduced by a hundred times. Accordingly, the minimum trader deposit amount is also much less.
Money Management is the rational distribution, control and management of funds that are in the trader’s account in order to increase profitability.
Minus tick (Downtick) is a transaction on the foreign exchange market with a price that is lower than it was in the previous trading operation.
Soft currency is a monetary unit that is characterized by a low level of liquidity (the ability to quickly exchange for goods or other currency), as well as practically zero collateral. A currency typical of Third World countries.
N
Night trading on Forex (Overnight trading) – carrying out trading operations in the period from 21:00 to 8:00 local time of the country in which the trader works. The main indicator of night transactions is the time of their implementation, and not the duration.
Non-trading operation is an operation in the Forex market that is not directly related to the trading process, but serves only as a tool for securing transactions. An example of a non-trading operation is replenishing an account or withdrawing funds.
Downward trend is a time period on the price chart, which is characterized by a decrease in the value of the main currency in the pair. Visually, the downward trend is directed downwards.
ABOUT
Online trading – trading currency pairs, stocks, bonds and other instruments using special programs and remote access to the broker’s server via the Internet.
Currency depreciation is a decrease in the market value of a currency as a result of the forces of supply and demand.
Exchange rate is the value of a banknote of one country, expressed in monetary units of another country.
Indirect Quote – the cost of a unit of national currency in foreign currency.
Forex market volume (Turnover) is the total amount of turnover (the value of all transactions carried out) in the Forex market for a certain period.
Transaction size is an indicator that is calculated by multiplying the lot size by the total number of open transactions (for a given lot).
Leading Indicators are statistical data that predict the future development of the economic situation in the world.
Forex Order – a trader’s order (sent to a broker) to conclude a transaction at a specified price.
The US Prime Rate is the rate at which banking institutions in the United States make loans to borrowers.
Open position is a transaction carried out by a trader for which a reverse position has not yet been opened.
Market Opening is the resumption of operations on the currency exchange after weekends, holidays, as well as a break between the previous and next trading sessions.
Open order is a type of order that is not limited in time, which means that the trader does not need to open this order again every day. Typically an open order is associated with a GTC (good until cancelled) order.
Forex Pending order is a type of order whose opening parameters are set in advance. Those. an order to open/close a transaction occurs when the price reaches certain levels. Learn more about order types
Lack of positions (Square Forex) – a situation when the volumes bought and sold by a trader for the same instrument are similar to each other (in the absence of open transactions).
Odd lot – a lot of non-standard sizes (non-round lot).
Relative Strength Index (RSI) is an indicator that measures the strength of price movement by comparing bullish and bearish segments in a trend.
P
Parity is a situation where the trader’s price corresponds to the current market level.
Forex overbought is a condition in the Forex market when the demand for currency is at its maximum. Buyers of assets have already carried out transactions at a rate that suits them.
Forex oversold (Oversold) is a situation when there are much more contracts for the sale of assets on the foreign exchange market than for the purchase. The value of currency pairs is stabilizing. This situation foreshadows a trend reversal and the emergence of an upward trend.
A level breakdown is a price going beyond a certain conditional level (limit), which is the limit of an increase or decrease in the exchange rate value of a currency. After the breakout, the price continues its further movement.
Position transfer/rollover (Rollover Forex) – transfer of an open transaction to the next trading session (value date).
Forex peak (Spike) is a sharp price jump up or down in a relatively short time interval.
Floating profit/loss – profits and losses that have not yet been recorded and are subject to change in accordance with prevailing exchange rates. A similar definition is paper profit/loss.
Position at the end of the working day (Overnight Position) – transfer of an open position (without fixing profit/loss) to the next trading session (working day).
Delivery of currencies under a transaction (Delivery) is a transaction on a foreign exchange exchange in which its participants agree to deliver currency after a certain time.
Quotes flow – a list of quotes for each instrument available for trading, which is displayed in the terminal. The client has the right to open one or another transaction at the specified quotes at any time.
FIFO rule - all open positions in the Forex market are closed in order of priority, starting with those that were opened first. FIFO means "first in first out".
Uptick Rule – a restriction on trading operations for US traders. Its essence is simple: investors do not have the right to sell shares short (the short sale price must be higher than the last price of the transaction carried out on the foreign exchange market). This rule was created with the aim of leveling the pressure of speculators on the price of an asset in order to reduce its value.
Price transparency – availability of quotes for each market participant to the same extent.
Interest rate (Discount Rate) is the interest rate at which the central banking institutions of a country provide loans to commercial banks.
Direct Quote – the cost of a unit of foreign banknotes, expressed in units of national currency. In other words, the price (in national currency) that must be paid for the purchase/sale of a unit of foreign currency.
Forex Pip – minimum price change of a currency. Typically, a pip in Forex is the second/fourth decimal place when recording a quote (i.e. 0.01 or 0.0001).
Forex drawdown is a decrease in a trader’s security deposit, which is a consequence of several unsuccessful transactions in a row.
Forex slippage is the execution of a transaction at a price that differs from the one presented in the quote (the difference between the expected and actual price). This phenomenon can be both positive and negative. Slippage very often occurs during periods of unstable market conditions.
Pivot Point is a key point of a support or resistance line, which is calculated based on an analysis of previous maximum and minimum peaks, as well as the closing price of the trend.
R
Cash Market – A market in which traders deal in real, physical commodities, as opposed to futures or options.
Market Risk is the probability of a trader losing his capital during the trading process due to sharp fluctuations in the exchange rate caused by factors associated with fundamental factors in the economy.
Rebate Forex is a compensation payment, as a result of which the trader returns part of the spread, which allows him to reduce his additional trading costs.
Requote – the impossibility of executing an order in the trading terminal, which arose as a result of a change in the price of a specific asset. In this case, the trader is asked to accept the new price and carry out the transaction.
Rally – price movement in an upward direction after its fall/restoration of the upward movement of asset prices.
WITH
Storage is a fee for the simultaneous purchase and sale of the same amount of currency with different transaction execution dates (swap).
Moving Average/MA is the main indicator of technical analysis, showing the average price value over a certain period of time.
Swissy is a slang term for the Swiss currency (franc), which is designated CHF.
Free margin is free funds in a trader’s personal account that can be used to open new transactions. The formula for determining free margin is: account balance minus the margin required to cover open positions.
A hard currency is a currency of developed countries that is stable and popular among investors.
Free funds (Equity) – funds in the trader’s personal account (balance) that can be used to open new positions. Depending on overall financial
IN
GDP (Gross Domestic Product)
Gross domestic product is a macroeconomic indicator that reflects the market value of all final goods and services produced during the year in all sectors of the economy in the state. This indicator is used as an analysis of the economic growth of the state.
Currency
The monetary unit of a country, which is officially recognized in other countries. Currency is issued by the state and is used as a means of exchange for goods and services, being a carrier of value. It is generally accepted that each state has its own currency, with the exception of the eurozone - here a number of countries use the euro as a single currency. Currency is the most accessible forex trading market.
Currency pair
A trading instrument in the Forex market, which is presented in the form of a ratio of the value of currencies. In the text version, it has a combination of codes for the currencies used, for example, EUR/USD 1.3600, which indicates the price of one euro of 1.36 US dollars. Speaking about the Forex market, in the case of buying or selling a certain number (lots) of a trading instrument, the trader simultaneously buys and sells. For example, having opened a trade on the EUR/USD pair with a price of 1.3600, a trader sells 1.36 dollars and receives 1 euro for them, and vice versa.
Day trading
[English] day trading]
One of many trading strategies that involves opening and closing transactions on the same day they were executed. This is a fairly popular strategy among traders on the Forex market, as it allows you to minimize losses in the market, for example, in the event of the release of serious news or the so-called. "gap". This trading strategy requires increased attention and reaction from the trader, since the price can change significantly in one trading day. By the way, a trader cannot always be in front of a monitor screen all day, so this strategy is quite in demand.
Volatility
Price deviation for a specific period of time. A common way of expressing volatility in financial markets is the standard deviation of price. To determine volatility, the VIX index is quite popular on the stock market, which reflects the expected strength of fluctuations in the S&P500 index. Many traders expect strong volatility in the market, which allows them to make significant money on sharp price fluctuations in a short period of trading session.
