Forex Terms - Glossary

Terms #A

Abenomics - refers to the economic policy introduced by Japanese Prime Minister...
Adjustable Peg - refers to a currency policy where a country’s domestic currency is valued in...
Andy Krieger - was a currency trader at Bankers Trust who conducted a one-man raid...
API Trading - refers to all trading that uses a software program to interact with...
Appreciation - is simply the increase in value of a position, currency or financial instrument...
Arbitrage Strategy - is a trading strategy that attempts to exploit small price differences between...
Arbitrageur - is an investor who attempts to profit from pricing inefficiencies in the currency...
Ask Price - is the quote price at which a currency pair can be bought...
Australian Dollar U.S. Dollar - is a currency pairing whereby the Australian dollar and the...
Automated Currency Trading - is a method of trading where the forex trader allows...
Automated Trader - refers to a trader who relies almost entirely on software to inform his...

Accumulation

In trading, an investor is said to be accumulating wealth as he or she continues to expand their portfolio. The reinvestment of profits over the course of the period of investment makes a vast difference to the pace of wealth accumulation through the benefits of compounding.

Accumulative Average

An average price measurement which continually adds emerging price changes to its overall sum. This ‘smoothing out’ of data peaks and troughs makes it less responsive than other calculations.

Actionary Wave

The opposite of reactionary waves, these waves are characterised by a trend which moves in the same direction as a larger overall trend wave of which it is a part. Actionary waves are labelled with odd numbers and letters, as outlined in the Elliott Wave Theory.

Adjusted Current Account

Takes account of the difference between exported and imported goods, services and interest payments during a particular month. The goods portion of the equation is the same as the monthly Trade Balance figure. A higher than expected reading should be taken as positive/bullish for a nation’s currency, while a lower-than-expected reading should be taken as negative/bearish.

ADP

Stands for Automatic Data Processing, Inc. This monthly survey of private non-farm employment in the United States tends to give an early indication of the official government data ahead of its release.

ADP Nonfarm Employment Change

Measures the change in number of employed people during the previous month, excluding the farming industry. ADP, a leading provider of employment solutions for businesses, releases this indicator two days before the official Bureau of Labor Statistics (BLS) employment report. While the indicator has only been in existence since early 2007, it's shown some predictive value in regard to the BLS report.

Advance GDP Annualized

The total value of all goods and services produced by the economy of a specific nation. GDP is the broadest measure of the economy and is forecast by an official body in its ‘advance’ form.

Advance-Decline Line

In trading, this is generally known as the market breadth indicator and is used to spot divergences from indices such as the S&P 500 or Dow Jones Industrial average. It is calculated by subtracting each day's number of declining issues from the number of advancing issues during a given period. The net difference, often a negative number, is added to a cumulative total of the daily net advancing issues.

Adverse Excursion

The floating (potential) loss attributable to price movement against the position in any one trade. A Maximum Adverse Excursion is a metric developed by John Sweeney to measure the negative price performance of a series of trades before the trades closed with profit. For example, a trade closed with 50 pips in profit but during the time it was open, at one point, it was losing 100 pips- that was the Maximum Adverse Excursion for that trade. This metric is used to determine reasonable stop-loss levels based on backtested results.

AIG Services Index

The Australian Industry Group (AIG) Services Index rates the relative level of business conditions among service-based companies. Similarly to the manufacturing index, a reading above 50 indicates industry expansion, while below 50 indicates contraction. The same bullish/bearish caveats go with this index also.

AIG Manufacturing Index

The Australian Industry Group (AIG) Manufacturing index uses data from around 200 manufacturers to rate business conditions in the sector. A reading above 50 indicates expansion in the sector while a reading below 50 signals contraction. Traders watch these surveys closely as purchasing managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance. If the reading comes out higher-than-expected, this should be taken as a positive/bullish prospect for the AUD, while the converse is true of a lower-than-expected reading.

AIG Construction Index

Again, similar to the aforementioned AIG indicators, the AIG Construction Index rates the relative level of business conditions among construction companies.

All Industries Activity Index

Tracks the change in spending on goods and services – similar to the Tertiary Industry Activity Index, this also includes data from the primary sector including fishing, farming, forestry, mining, and manufacturing.

ANZ Commodity Price Index

Released by one of New Zealand’s leading banking and financial service firms on a monthly basis, this measure of inflation tracks the nation’s seventeen main commodity exports in order to identify price change.

Appreciation

Term used to describe a currency’s strengthening in price in response to market demand.

Asset Allocation

A method of investment practice which shares funds between a number of different markets in order to either minimise risk or achieve a level of return which is consistent with an investor's objectives.

Aussie

Nickname attributed to the Australian dollar.Automated Trading

Average Cash Earnings

The monthly variation in wages paid out to employees.

Arbitrage

The buying or selling of a financial instrument by taking up equal and opposite positions, in order to take advantage of a price difference between two or more markets.

Average Earnings Index

Often abbreviated to AEI, this indicator measures the average wage, including bonuses, paid to employees. The reading itself represents the change in the current quarter when compared to the same quarter year-on-year.

Average Hourly Earnings

The rate of inflation which occurs in the wages paid to non-farm jobholders, viewed by traders as a leading indicator of consumer inflation. A rising trend tends to have a positive effect on the nation’s currency through increased consumer spending power.

Average Weekly Hours

Measures the average number of working hours (average workweek) worked by employees on non-farm payrolls in the US. A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.


Terms #B

Back Office - refers to the IT, accounting and staffing support at a bank, forex trading firm, brokerage...
Backtesting - is the process of vetting a trading strategy by running it in different scenarios using...
Bad Fill - is a slang term for a trade that is not executed at the price the trader expected....
Balance of Trade (BoT) - is an economic measure of the difference between the value of exports and...
Bank of Canada - is the central bank for, you guessed it, Canada. The Bank of Canada controls the...
Bank of England - is the central bank for the United Kingdom. The Bank of England handles...
Bank of Japan - is the central monetary authority for Japan. Considered one of the major...
Baptism of Fire -  is a biblical term referring to the moment when a person’s faith is tested...
Bar Chart - is a graphical representation of a currency pairs price action that displays the open, high...
Base Currency - is the first currency to appear in a currency pair. In currency trading, all currencies...
Basket Currency - is a currency that is used as a reference point for a currency peg...
Bear Market - is a slang term for a financial downturn in a specific market segment, economy...
Bear Squeeze - is a trading situation where traders holding short positions in a currency are faced...
Bearish Trend - is a general downward movement in the value of a currency pair...
Belt-hold Line - A pattern seen in Japanese candlestick charts which represents either a falling or rising price...
Bias - In statistics, bias represents an inaccuracy in data which has occurred during...
Bid Price - is the quote price at which a currency pair can be sold. Essentially, the bid price represents...
Big Mac PPP - The Big Mac purchasing power parity is a novel way to measure the accuracy...
Black Wednesday - is a slang term for September 16th, 1992. This is the day George Soros broke the...
Blow Up The Account - is a slang term for losing all of the capital in a trading account...
Bollinger Bands - are a technical analysis tool created by John Bollinger to provide a quick visual...
Brazilian Real (BRL) - is the official currency of Brazil. The real was introduced in 1994 to replace...
Breakout - refers to an increase or decrease in the value of currency pair that takes it out of its...
Bretton Woods Agreement - was an early monetary system that was in force from the mid 1940s...
British Pound Sterling - is the official currency used in the United Kingdom...
British Pound U.S. Dollar - is a currency pairing whereby the British pound and the U.S...
Broadening Formation - is a chart pattern that is formed when the price of a currency pair sees...
Bull - is an individual trader who believes a particular currency is set to rise in value against other...
Buy Limit Order - is a forex trading order that opens a new long position or adds to an existing...

Back Office

The departments and processes related to the arrangement of financial transaction in governments, businesses etc.

Backtesting

In trading, the process of testing a trade strategy on historical price data. Instead of taking years to test out a strategy in a forward-testing mode, which could take years, a trading strategy is tested or optimized on historical data before it is applied to current market data. This is a commonly-used most technical-analysis strategy.

Benchmark

Refers more generally to certain standards or averages against which stocks are pitted and their performance judged. These could include stock bonds, mutual funds, commodities or a number of other securities. Traders can use these so-called benchmarks to evaluate the performance of the security they are holding and make a decision as to whether it may be more profitable to invest in the benchmark itself.

Best Efforts

A legally binding agreement arranged between an underwriter and an issuer which often involves the offer of a new security. The underwriter agrees to sell the issuer’s securities, but refuses to guarantee the amount raised. If the underwriter fails to sell all securities, it is not responsible for any unsold inventory.

Billion

A number equivalent to one thousand million items or units. In the short scale (US and modern Britain) represented as a 1 followed by nine zeros: 1 000 000 000. In the long scale (obsolete British & Australian) it's a number represented by 1 followed by twelve zeros: 1 000 000 000 000.

Black Swan

A so-called "black swan" event is one that is highly improbable (and unforeseen) that nonetheless occurs and has a significant impact.

Breadth

The amount of participation in the movement of the stock market as measured by a number of indicators known as ‘breadth’ or ‘internal market indicators’. These indicators may include basic measures such as new highs vs. new lows, up volume vs. down volume, but can also include more complex indicators such as the advance/decline line, the advance/decline ratio, the absolute breadth index or the Hughes breadth oscillator.

BSI Large Manufacturing Conditions

Measures the number of new residential building permits issued. A rising trend has a positive effect on the nation's currency because obtaining a permit is one of the first steps in the home construction process. Permits therefore act as a leading indicator for the housing market. A high level of housing activity signals that the construction industry is healthy and that consumers have the capital to make large investments. More importantly, new housing activity creates an economic ripple effect as home owners buy goods such as appliances and furniture for their homes, and builders buy raw materials and hire more workers to meet demand.

Budget Deficit

The total amount by which a body’s total spend exceeds its income over a given period of time. Otherwise known as deficit or deficit spending, and the opposite of what is known as a budget surplus.

Bull Trap

Sign which can be identified in price action trading which appears indicates that bullish trend may be about to change direction and begin rising. In reality, the price continues to decline hence the term ‘trap’.

Bundesbank

The central bank of Germany and perhaps one of the most influential member of the European Spread of Central Banks (ESCB) given the size of Germany’s economy.

Buy On Close

The name attributed to the buying action taken at the end of a trading session; purchasing within the closing range of the asset.

Buyline

A term affiliated with the practice of technical analysis which refers to a value below which an indicator must fall before any upturn becomes noteworthy.

Terms #C

Cable - is a slang term for the British Pound sterling and U.S. Dollar currency pair (GBP/USD)...
Canadian Dollar - is the official currency of Canada. The Canadian dollar is considered to be...
Candlestick Chart - is a chart that tracks the price range of a currency pair using a combination line...
Capitulation - is synonymous with surrender or defeat, usually a military defeat...
Carry Trade - is a currency investing strategy that takes advantage of the difference in...
Central Bank - is a public institution that acts as a nation’s monetary authority...
Central Bank Rate - is the interest rate that central banks charge domestic banks on loans...
Charting - refers the use of historical data points such as price and volume to create a graphical...
Chasing the Market - refers to a currency trader who reacts late to market trends...
Chilean Peso (CLP) - is the official currency of Chile. It is issued by the Banco Central de Chile...
Chinese Yuan (CNY) - is the official currency of China. Unlike the currencies of countries of...
Choppy Market - is a market where the price volatility is high, but the overall direction...
Closed Position - refers to a currency trade that has been settled...
Cockroach Theory - is a market theory that states that bad news tends to be released in bunches...
Coiled Market - is a market that has the potential to make a strong move in one direction after...
Commodity Currency - is the currency of a country that has lots of natural resources like oil or...
Consolidation - refers to a period during which a currency pair’s price action fluctuates in...
Consolidation Pattern - refers to a range of technical analysis formations that appear when a...
Contagion - is a damaging effect that has a tendency to spread. In economic terms...
Continuation Pattern - refers to a range of technical analysis formations that appear...
Country Risk - refers to the possibilities of events or political changes within a nation...
Cross Currency Pair - are currency pairs that do not have the U.S. dollar as either the...
Currency Converter - is a tool, usually provided online, which helps the user calculate how...
Currency Intervention - is a situation where a nation’s central bank attempts to control...
Currency Pair - is the standard quotation method for a forex trade...
Currency Peg - an exchange rate policy by which a country’s exchange rate...
Currency Trader - is an individual who seeks to profit from the changes in value between two...

Candlestick Chart

Now popular with forex traders the world over, the Japanese candlestick chart originated in Japan over 300 years ago. Their popularity is largely down to the fact that these charts are simple to read and provide a clear indication of the relationship between a currency’s open and close price for the day. White candlesticks – often referred to as clear – form when the close price is higher than the opening price, indicating a downward trend. For black candlesticks (solid) the converse is true; as the stock price declines throughout the day, the candlestick gradually builds its long black body.

Central Bank

The entity responsible for the monetary policy of a particular nation or its group of member states (as with the US). The primary objective of the central bank is to ensure that the country’s currency and supply of money remains stable. Banks are also tasked with the job of controlling subsidised loan interest rates and acting as a ‘bailout’ lender of last resort should the banking sector should be subjected to unexpected

CFD - Contract for Difference

A Contract designed to make a profit or avoid a loss by reference to movements in the price of an underlying item. The underlying item is not bought or sold itself. Similar to spread betting. Increasingly popular as an alternative to actual share trading as it allows margin deposit trading and legally avoids stamp duties or similar taxes. Typically, a Quoted CFD price will track the underlying share price quite closely

Chartist

A term sometimes used to describe a technical analyst; a person who uses charts and the past performance of assets to identify patterns which may be used to predict future activity.

Chooser Option

The foreign exchange market offers investors this specific type of forex trading option; imbuing them with the right, but not the obligation, to buy or sell a specified amount of one currency for another at a specified price on – or in some cases before – a specified date. Options do not have to be taken up by the purchaser and they are not required to provide any additional funds on non-completion, the holder will however lose any money spent to buy the option in the first place.

Clearing

Process by which an organisation acts as an intermediary between the buyer and seller in a given transaction.

Close Price

The last quoted price at the end of a specified time period – this could constitute on minute, one hour, one day, week, month or year.

Commitment Of Traders Report

This report is published every Friday by the Commodity Futures Trading Commission (CFTC), an organisation which seeks to provide investors with information on investor positions and the like. Traders use these reports to help determine the likelihood of a trend continuing or change.

Commodity

In basic terms, a commodity refers to any good exchanged during commerce – including on exchange markets. Goods such as oil, gold and grain are considered to be interchangeable with other products of the same type and are considered to be traditional commodity goods which are used for producing another good or service. But recently the definition has expanded to include financial products such as foreign currencies. When traded on an exchange, commodities must meet specified minimum standards, also known as a basis grade.

Commodity Channel Index (CCI)

Used to measure the deviations of a given security’s price from its moving average. This technical tool was first developed by Donald Lambert in 1980 and is used to help determine when an investment vehicle has been overbought and oversold, giving a slightly different picture than other oscillators. The CCI is not bounded, that is, it can rise above 100 and below -100.

Commodity Currencies

Those currencies which belong to economies based on the production of a commodity, such as gold in Australia and oil in Canada. Often closely affiliated with the economic success or failure of interrelated economies.

Commodity Futures Trading Commission (CFTC)

An independent federal agency that oversees and regulates commodity futures and option markets in the United States.

Commonality

The commonality is the central thesis of a business cycle and is one of the five cycle principles. It is seen when the peaks and troughs of cyclic rhythms and the relative magnitudes are similar when over-laid in graphic form.

Compound

Also known as "compound interest" is the ability of an asset to generate earnings, which are then reinvested in order to generate more earnings. The growth curve of such an investment is exponential. An example: two trades increase a trader's portfolio by 10% each one. At the end of the second trade, how big is the portfolio? If you said 120%, you missed the effect of compounding. The right answer is: 110% * 110% = 121%.

Core CPI

The Core Consumer Price Index (CPI) measures the changes in the price of goods and services, excluding food and energy. The CPI measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation. A higher than expected reading should be taken as positive/bullish for the GBP, while a lower than expected reading should be taken as negative/bearish for the GBP.


Terms #D

Daily Chart - is a chart that displays the price action of a currency pair in intervals of one day...
Darvas Box Theory - is a trading strategy developed by a world famous ballroom dancer...
Day Trader - is a currency investor who opens and closes all positions within the same...
Day Trading - is a style of forex trading where all of a trader’s positions are opened...
Deutsche Bundesbank - is Germany’s central bank. The Deutsche Bundesbank...
Directional Trading - refers to trading positions that are opened in order to profit from...
Dirty Float - occurs when a country’s central bank attempts to influence the value of its currency...
Divergence - refers to a situation where the price action of a currency pair separates...
Dividend - is part of the total return one gets from holding stocks...
Dollar Bear - is a currency trader or investor who is very pessimistic about the future value...
Dollar Bull - is a currency trader or investor who is very optimistic about the future value...
Dollar Index (USDX) - is a market index that tracks the value of the U.S. dollar relative...
Dow Jones Industrial Average (DJIA) - is a stock market index that was created by Charles Dow...

Delivery

An FX trade where both sides make and take actual delivery of the currencies traded.

Devaluation

The deliberate downward adjustment of a currency's price, normally by official announcement.

Direct Quote

A foreign exchange rate quoted as the domestic currency per unit of the foreign currency. In other words, it involves quoting in fixed units of foreign currency against variable amounts of the domestic currency.

Dual Exchange Rate

A situation in which there is a fixed official exchange rate and an illegal market-determined parallel exchange rate. The different exchange rates are used in different situations, either in exchanges or evaluations, as mandated by the government.

Terms #E

Economic Indicator - is a public report or release of financial data that gives insight into...
Economic Reports - refer to the public release of important data that reflects on the health...
Elliot Wave Theory - is a style of technical analysis that was popularized by Ralph Elliott...
Euro (EUR) - is the official currency of a majority of the member nations in the European...
Euro British Pound - is a currency pairing whereby the euro and the pound can be...
Euro Japanese Yen - is a currency pairing whereby the euro and the yen can be...
Euro U.S. Dollar - is a currency pairing whereby the euro and the U.S. dollar can be...
European Central Bank - is the central bank for the European Union member states...
Exchange Rate - is the market price at which one unit of currency can be traded for...
Exit Strategy - refers to a trader’s predetermined method of closing an open trade...
Exotic Currency - is a currency that falls outside of the major currencies that make up...
Expert Advisor (EA) - is a software program that analyzes data and provides a trader...

ECN

Acronym for Electronic Communication Network, an electronic trading system connecting buyers and sellers for the purpose of direct electronic trading. The system eliminates the need for any third party by circulating information about orders and allowing execution to take place through internal matching of interested parties. Besides avoiding market makers (and their spreads) an ECN also protects a trader’s anonymity (often important for large transactions).

Economy Watchers Current Index

Measures the current mood of businesses that directly service consumers, such as barbers, taxi drivers, and waiters. A reading above 50 signals an improvement in sentiment. These businesses, dubbed "Economy Watchers" because they directly observe the economy during their everyday business, are thought to hold important insights from the microeconomic level.

Elliott Wave Principle

First developed by professional accountant Ralph Nelson Elliott in the 1920s, this tool was designed to make sense of an otherwise chaotic market. Elliott Wave Principle (or Theory) dictates that the market will fluctuate in a recurring pattern of five upward movements and three downward waves.

Emerging Market Economy

Refers to the economies of a number of Asian and Latin American countries that share a relatively short and unreliable history of open market relations and investment into the nation. These nations display a continued progression towards taking on free-market status, having previously had centrally planned economies. Higher market efficiency and strict standards in accounting as well in the existence of some form of market exchange and regulatory body are common characteristics of these emerging market nations. Investors are inevitably drawn to these economies, as they can be marked by faster growth and, therefore, high returns. But they can also be hindered by socio-political instability and domestic infrastructure problems.

Engulfing Pattern

A bullish engulfing pattern has a black candle followed by a white candle, indicating a wide range with with a higher close. The body of the second candle totally encompasses the body of the first candle. The bearish pattern is the inverse. Engulfing patterns are considered exceptionally strong signals of price change.

Equilibrium

In technical analysis terms, it's a price area representing a balanced supply and demand equation.

Equities

Common stocks (ordinary shares) traded in a securities market. The US equities market, for example, comprises of the New York Stock Exchange (NYSE), with its large trading floor and system of specialists, the NASDAQ National Market,a computerized system of brokers/dealers with no physical trading space, and the American Stock Exchange (AMEX). The European equities market, on the other hand, comprises the Euronext, which is currently the second-largest stock market in Europe and the OMX, which is composed of Scandinavian and Baltic stock exchanges.

Equity Curve

It's the equity value of an account graphed over a specific period of time. An equity curve displays the trading's performance revealing equity Drawdowns and the gain periods. Flat or non-trading periods are also visible in a detailed graph. This graphic tool may be used to build well balanced trading portfolios by combining trading systems and offsetting their periods of losses and gains.

Euro-Bund

This is a benchmark for European the bond market. The Euro-Bobl future, along with the Euro-Bund and Euro-Schatz futures, are the most heavily traded fixed-income securities in the world. Traded on the CBOT and EUREX.

European Financial Stability Facility

The EFSF a special purpose vehicle created by the 27 member states of the European Union on 9 May 2010, to offer funding to financially distressed eurozone members. As part of its function, the EFSF can issue debt instruments on the market to raise the funds needed to provide loans to eurozone countries in financial troubles, recapitalize banks or buy sovereign debt. The Facility is headquartered in Luxembourg City and the European Investment Bank provides treasury management services and administrative support to it through a service level contract. It is rated AAA by the three major rating agencies, Moody's, Standard & Poor's and Fitch.

Eurosclerosis

Eurosclerosis is a term coined in the 1970s and the early 1980s to describe both a period of economic growth in Europe when countries experienced high rates of unemployment and lagging job creation in contrast to fast-moving markets, e.g. their North American counterparts.

Event Trading

Also called "news trading" consists of capitalizing of price movements caused by the release of economic indicators. It can be also seen as a short term use of contrary opinion.

Exchange Traded Fund

Similar to an index mutual fund, an ETF consists of a portfolio of stocks, bonds, currencies or in some cases other investments that trade on a stock exchange. They can be bought and sold at any time during the day (unlike most mutual funds). Some ETF track an index while others are more actively managed. ETFs are more tax-efficient than normal mutual funds.

Exchange Traded Notes

An Exchange Traded Note is a contractual obligation made by an issuer to pay the holder a return which is often used to track exotica like future contracts, volatility indices, currencies the performance of one or more shares, an index, or a commodity. ETNs are related to ETFs in that they track an underlying index and are traded on the stock exchange, and offer returns based on the performance of a market index upon maturity, minus applicable fees, no period coupon payments are distributed and no principal protections exists. ETNs are often said to be unsecured debt, although many of them are backed by collateral (without collateral you’re 100% exposed to counter-party risk).

Exhaustion Gap

An exhaustion gap usually occurs at the end of a rapid, extensive advance or decline. Initially, it is similar to a runaway gap, but it is more likely to be closed quickly. They are usually associated with a point in the market when fear or greed has reached a climax.

Exotic Pair

Refers to a currency pair that is traded less frequently as opposed to the majors, like emerging market currencies. Also a term used to describe unusual or complicated financial instruments, opposite of plain vanilla.


Terms #F

Fast Market - is a period of time when heavy trading volume is accompanied by a wider...
Federal Reserve - is the central banking system for the United States...
Fiat Currency - is a currency that has been officially legislated by a nation’s government and...
Fifty Percent Principle - predicts that, before continuing, an observed trend will undergo...
Fighting the Trend - refers to a currency trader placing trades that go against the established...
Financial Porn - is a slang term for the constant stream of financial information a...
Fiscal Cliff - is a slang term for a difficult economic situation that requires political..
Flag Pattern - is a technical analysis continuation pattern where a strong...
Flat Position - refers to a trade where the currency pair being traded hasn’t moved...
Flow Trader - work for the banks that make up the interbank market and provid...
Foreign Exchange Market - is a decentralized market where national currencies...
Foreign Exchange Option - is a financial contract that gives the owner the right to exchange...
Forex Broker - is a firm or individual who offers trading services to people...
Forex Coach - is a professional trader who teaches beginners how...
Forex Demo Account - is a training tool that beginner traders can use to practice...
Forex Trading Robot - are a class of forex trading software that can execute trades without...
Forex Virtual Private Server - refers to a private server that contains a virtual machine that a...
Forex VPS Hosting - refers to a virtual machine that runs MetaTrader expert advisors...
Forward - or Forward Contract, is a term describing a forex purchase contract...
Forward Points - are the premium or discount pips added to or subtracted from...
Fox-Trot Economy - is an economy that experiences periods of rapid growth...
FTSE - is a slang term for the FTSE 100 index...
Fulcrum Point - is a point of inflection or congestion on a graph where...
Fundamental Analysis - is the study of the economic situation of a nation in order to make...
Fundamental Trader - is a currency trader who looks for economic factors that will influence...

Face value

The value of money expressed in the base currency held. If a trader wishes to buy 200, 000 GBPUSD, they would actually be purchasing 拢200,000. If your account is in dollars, then the amount required for this position is 拢200,000 in U.S. dollars converted at the time you open the position.

Fair Value

In financial markets, the estimate of the price of an asset that is due to be exchanged between two willing speculators. Those who would place stock in the efficient market hypothesis would assert that prices are generally close or equal to the fair value, with traders acting efficiently on new information which may discount future prices. In reality, future prices often diverge from fair value for reasons of bias amongst buyers and sellers. Behavioural finance recognises such a phenomenon, explaining that anomalies often cause such divergence from fair value in an unpredictable and chaotic fashion.

Fat Tail

Also referred to as heavy-tailed distribution. Indicates price movement in one direction for a longer period than would be experienced with normal distribution. These fat tails are often considered undesirable because of the additional risk they imply.

Favorable Excursion

The potential win attributable to price movement in favour of the position on any trade. Traders also refer to the Maximum Favorable Excursion, a tool which measures the positive price performance of a series of trades before they closed with a loss.

Federal Open Market Committee

A policy committee made up of the 12 members of the Federal Reserve. The members meet eight times per year to make decisions on economic policy and to set short-term objectives in open market operations

Fibonacci Extensions

In technical analysis, used to represent static support and resistance (where traders will look to take profits). The most popular potential price objectives are calculated by taking the distance from the low to the high of the trend and drawing the 138.2%, 161.8% and 261.8% levels beyond the standard 100%.

Financial Crisis Inquiry Commission

The Financial Crisis Inquiry Commission (FCIC) is a ten-member commission appointed by the United States government with the goal of investigating the causes of the financial crisis of 2007–2010. The purpose of the Commission is to examine the causes (domestic and global) of the current financial and economic crisis in the United States, like the examining the causes of the collapse of major financial institutions, among many other statutory mandates.

Financial Instrument

Examples of financial instruments include: currencies, equities, futures, options, warrants, mutual funds, etc.

Fisher Equation

The Fisher equation is primarily used in redemption yield (YTM) calculations of bonds or rate of return calculations of investments. In economics, this equation is used to predict nominal and real interest rate behavior. The fisher equation is simply: nominal interest rate = real interest rate inflation If inflation is positive, which it generally is, then the real interest rate is lower than the nominal interest rate. If we have deflation and the inflation rate is negative, then the real interest rate will be larger.

Fixed exchange rate

Set rate of exchange between the currencies of countries. At the Bretton Woods international monetary conference in 1944, a system of fixed exchange rates was set up, which existed until the early 1970s, when a floating exchange rate system was adopted.

Flat Position

Trader jargon used to describe a position that has been completely reversed, also called "square". For example, a trader sells $100,000 then buys $100,000, thereby creating a neutral (flat) position.

Flat Yield Curve

A flat yield curve is where short term yield are almost the same as long term yields. This can suggest a slowing of the economy or that short term rates have been raising.

Floating currency exchange rate

Movement of a foreign currency exchange rate in response to changes in the market forces of supply and demand.

Floating Point Number

Numbers that may contain a decimal point.

Floating Position

Term referring to unrealized Profit/Loss. It's the potential gain or loss on open positions valued at current market rates. A floating position is constantly changing in value as market prices change and once closed it becomes an actual win or loss. On online broker platforms, floating positions are reflected in the account's equity but are not yet reflected in the account's balance.

Floor Trader

A person who trades on the floor of a commodities exchange. There are pit brokers who tend to trade for a brokerage company or a large firm, and locals who tend to trade their own accounts.

Footsie

A jargon term for the FTSE 100 Index.

Forex Dealer Member

The term “Forex Dealer Member” is created by the NFA. In general, Forex Dealer Members are NFA Members if registered with the CFTC as retail foreign exchange dealers (RFEDs) or if they are the counterparty or offer to be the counterparty to Forex transactions. The term “Forex Dealer Member” is not defined in the Commodities Exchange Act (CEA) and is not a specific CFTC registration category.

Forward Contract

A cash market transaction that specifies the price and quantity of an asset to be delivered in the future. Unlike futures, forward contracts are not standardized and are not traded on organized exchanges. They are privately negotiated over the counter and not easily transferred or canceled. Thus, they are not liquid. Another difference to a futures contract is that a futures contract has fixed terms, such as delivery date and quantity. Forward markets are most prevalent in currency trade (forward exchange transactions) as dealers attempt to hedge against future exchange rate movements. Although the delivery is made in the future, the price is determined on the initial trade date. This may be the current price or exchange rate, or an agreed forward price/rate, which would be at a discount or premium to the spot rate. If the value of the underlying spot rate changes, the value of the forward contract becomes positive or negative, depending on the position held. Further, the two parties must bear each other's credit risk, which is not the case with a futures contract. Like in the case of a futures contract, the first step in pricing a forward is to add the spot price to the carrying charges. The price may also include a premium for counterparty credit since the two parties must bear each other's credit risk (otherwise the forward price would equal the futures price).

FPI

The Food Price Index (FPI) measures the rate of inflation for food and food services. FPI can give traders a peek into the upcoming quarterly CPI release since it is the only component of CPI that is reported on a monthly basis.

Fungibility

The property of financial instruments which are identical in specifications and interchangeable. that is, when it is assumed that everyone values all goods of that class as the same. For example, options and futures contracts are highly fungible, since they are highly standardized arrangements which simplifies the exchange/trade process. The same happens to stocks which can be bought (or sold) on one market or exchange, and then sold (or bought) on another market or exchange. Some commodities (e.g. gold, silver, corn, etc.) and currencies are also fungible. On the other hand, forwards and swaps are not considered fungible, since they are customized arrangements. Instruments that are highly fungible tend to be very liquid, and so transaction costs tend to be low. Fungible financial instruments are often used in arbitrage trades.

Futures Contract

Exchange-traded contracts that give the holder the obligation to buy or receive a certain amount of a product at a specific prices on a specific date. Futures are used by business as a hedge against unfavorable price changes and by speculators who hope to profit from such changes.

Futures market

An organized exchange where futures contracts and options on futures contracts are traded. Exchanges may trade commodities, financial derivatives, or a combination of the two, as well as futures and options on indices and equity products.

Terms #G

G8 Group – Group of Eight - is a forum of developed countries assembled by France in 1974...
George Soros - is a hedge fund manager and currency speculator...
Gnomes of Zurich - was the nickname British Labor party politicians gave to the Swiss bankers...
Gold - is a precious metal that plays an important role in world markets...
Gold Standard - A gold standard is a monetary system where each unit of currency...
Golden Cross - is a technical analysis pattern where the short term and long term...
Goldilocks Economy - is an economy served up just how Goldilocks likes her porridge...
Grid Trading - is forex trading strategy, similar to scalping or a serial basis...
Gross Domestic Product - is an economic measure that adds up the value of all the goods...
Growth Currency - is the currency of a country that is growing rapidly in economic terms...

Gambler’s Fallacy

The falsely held belief that a series of consecutive trade results should not occur, and when they do, the expectation flips towards the opposite result. For example, if a trader loses six consecutive trades, the gambler’s fallacy says that the trader will then believe that he/she is due a win, statistically speaking.

Gap

A break between prices on a chart that occurs when the price makes a sharp move up or down with no trading occurring in between. Gaps are created by a big imbalance in the buying or selling pressure, for example at a breakout of a significant level, or during a news release. To carry interest for the chart technician or trader, a gap must be wider that the normal price vacuums that occur under normal circumstances. Less liquid market sessions and trading vehicles, or a faster moving rate, can result in small gaps being formed between candles or bars in a chart.

Gaussian

Relates to Karl Gauss and his theories of probability. The word is used as an adjective to describe a random variable that exhibits a normal distribution (Gaussian distribution), or a bell shaped curve on a chart.

Geometric

Another word for the geometric average, a figure calculated by multiplying a set of values and taking the nth root, where n represents the number of values in the set. This measurement is used to minimise or “normalise” the effects of any extreme movements within the set, counteracting the effect that any one abnormal result would have on the weighting. The U.S. Dollar Index is an example of such a geometric mean.

Geometric Moving Average

A simple moving average based on percentage changes between previous periods over a specific time span – most often, long-term movements or long data intervals where the price has passed through a wide number of points. Also used by traders to calculate the component parts of an index.

Gearing

In trading, describes the financial leverage offered to traders. There is a direct correlation between the size of your position and your margin deposit in forex trading, a highly geared position usually poses a significant risk to your account but offers the potential for large gains.

Gilt-edged Securities

Debt securities issued by certain national governments. Originally of British origin, the term referred to debt securities which were issued by the Bank of England and were edged with gold. The term is now also used to refer to securities issued by Ireland and some other Commonwealth countries.

Globalization

Describes the process of international integration, both in terms of national capital markets and socio-political ideals.

Good Until Cancelled (GTC)

Describes an order that does not cancel after a normal trading day but rather stays open until normally the end of the month latest.

Greenback

Nickname for the US dollar. It derives from the popular name the US paper currency received from the original note that was printed in black and green on the back side. However, in the mid of the 19th century, "greenback" was a negative term. They were created to finance war expenditures, but the greenbacks did not have a secure financial backing.


Terms #H

Hard Currency - refers to a currency that is perceived as being stable by a majority...
Hawkish - is a comment on the attitude of a central bank towards inflation within...
Head and Shoulders - is a technical analysis pattern where rallies in a currency pair’s...
Headline Effect - effect refers to the impact of bad news from the popular press on...
Headline News - is a slang term that refers to any news event that has an impact...
Hyperinflation - refers to a period of rapid inflation in a nation’s currency...

Haircut

A term used to describe the percentage that is subtracted from the market value of an asset that is being held as collateral. The amount taken – or size of the haircut – depends on the perceived risk associated with that particular asset.

Hedge fund

Fund which allows (usually wealthy) holders to employ aggressive buying strategies that tend to be unavailable to mutual fund holders. The hedge fund allows for the taking up of both long and short positions, the use of derivatives as well as the ability to invest in a number of markets; they often take large risks on highly speculative strategies.

Hedging

In trading, a defensive strategy which allows trader to offset or reduce any adverse price fluctuations. A type of protective strategy designed to reduce or offset adverse price fluctuations. In spot Forex, hedging refers to a combination of positions that reduces the risk of a primary position, for example a buy of one lot EUR/USD and a sell of the same quantity of the same pair. Note that not all Forex brokers have hedging facilities. In other financial markets, creating a hedge can be done with call options, put options, by short-selling, or using futures contracts. The strategy always aims to reduce risk: by buying or selling the market, an investor bets that the price of the purchased security will move in a certain direction. In order to offset the risk of losing money if the price moves in the opposite direction, an investor hedges against this risk employing a strategy that minimizes this risk of loss. A hedge can also be used to lock in profits or prices, for example, when an importer of sugar or manufacturer of that commodity sells futures contracts to offset losses if prices fall.

High Price

The highest price quoted for a currency within a given time period, pertaining to a specific currency pair. This time period could be anything from one minute to one year.

High-Frequency Trading

A form of trading which involves using computers to take up almost instantaneous positions on trades in incredibly high volumes. The mechanism uses the rules of previous market conditions to make rapid decisions on whether to buy or sell any given asset. The method has been criticised as limiting the potential for regular retail traders. While proponents of the strategy insist that it helps to increase liquidity and narrows spreads, thus improving overall market access.

Horizontal Line

In trading, a support or resistance line that is plotted at a given price level on a chart. There are occasions where horizontal lines will be plotted on technical indicators below the price chart.

Hot-Potato Trading

Term used by speculators to describe the rapid passing of inventory imbalances between dealers, often those involved in the high-frequency market maker firms.

Terms #I

Ichimoku Chart - An ichimoku chart is a price action graph that combines much of...
In the Money - In the Money, or “ITM”, is a term that refers to a call or put option...
Inflation - is an economic condition where the prices for goods and services...
Initial Margin - is the initial deposit of collateral required by a broker/dealer...
Institutional Trader - are entities that control huge pools of capital and thereby...
Interbank Rates - in the Forex world are the foreign exchange rates at which...
Interest Rates - refer to the extra money a borrower must pay above the principal...
International Monetary Fund - is an international organization, consisting of 185 member countries...
International Organization for Standardization - the international standard setting...
Intervention - is an action taken by a central bank designed to influence...
Intraday - is a trading term that means within the day...
Intrinsic Value - has several meanings. It can mean the perceived value...

Income Tax

Annual deduction from an individual or corporation’s net profit or income levied by the government. Generally speaking, we see income tax increase in times of economic strife and decrease when a nation is enjoying prosperity.

Indicative Quote

In forex trading, a currency quote that is provided by a market maker to a trading party but that is not firm. In other words, when a market maker provides an indicative quote to a trader, the market maker is not obligated to trade the given currency pair at the price or the quantity stated in the quote. Contrast this to a firm quote, in which a market maker guarantees a specified bid or ask price to a trader up to the maximum quantity specified in the quote.

Indirect Currency

In the forex markets, currency prices are quoted in terms of their relative value to one another. In most cases direct quotes are used – meaning that a currency is always quoted against one unit of the US dollar. Indirect quotes therefore, tell a speculator how many US dollars are needed to purchase one unit of the alternate currency in the pair. Currencies quoted in this way are Euro, British Pounds, Australian Dollars and New Zealand Dollars.

Inflation Target Rates

This performance measure is used by central banks to examine the extent to which targets for the annual inflation rate have been met. The benchmark for measuring the price level is judged on a basket of consumer goods. If the annual inflation rate drifts from the targeted level by a significant amount, monetary authorities may be liable to step in and cut lending rates or add liquidity to the economy.

Informed Players

In the forex markets, these are traders who manage their buying or selling extremely well relative to market highs and lows. Their ability to handle high pressure, emotionally-charged market conditions helps to mark them out as ‘informed’, thought their ability to read charts incredibly effectively. These players tend to act contra to the majority of market traders and have a stabilising effect on the markets.


Terms #J

Japanese Yen - is the official currency of Japan...
John Rusnak - is a former Allfirst Bank currency trader who lost $690...
Junk Currency - is a slang term for the money of a nation that is seen to be inflating...

January Effect

Term referring to a specific quirk of seasonality in the financial markets where equity prices increase in January; this chimes with the end of tax-related selling before the year is out. Investors who are income tax-sensitive and who hold small stocks, will generally choose to sell some of their stock just before the end of the year in order to claim a capital loss for tax purposes and quickly reinvest their money after the first day of the new year.

Japanese Housewives

Term used to describe the large number of Japanese housewives who resorted to currency trading in the first decade of the 21st century, aiming to increase the low returns on their portfolios since Japaneseinterest rates were near zero percent.

JASDAQ Securities Exchange

Securities exchange located in Tokyo, Japan, founded in 1963 as an over-the-counter securities market.

Jawboning

Strategy used by monetary authorities which allows them to step into the market by hinting that intervention would be possible. Generally the jawboning is achieved through making comments in the media about a preferred level for the currency and suggesting that action may follow. Generally perceived as a precursor to official action designed to either supress or inflate currency prices.

Jensen's Performance Index

Index that judges whether a specific security has managed to outperform its expected return (in theory) by using the Capital Asset Pricing Model (CAPM).

Jobber

Slang term used by the markets to describe traders who engage in short-term intraday trading in the hopes of making a small profit or in a bid to make commission for brokers.

JOC-ECRI Industrial Price Index

Often considered a leading indicator of inflation, this commodity index of industrial prices compares the price levels of a range of basic industrial materials at regular intervals. Unlike other commodities indexes, the JOC-ECRI has close relationship with inflation rates and excludes items such food, grains, and precious metals in favour of a focus on raw industrial materials. These include: cotton, burlap, steel, copper, aluminium, zinc, lead, tin, nickel, hides, rubber, tallow, plywood, red oak, benzene, crude oil, ethylene and natural gas.

Joint Clearing Members

Clearing houses that operate on more than one exchange.

Jumping The Gun

In trading, the act of buying impulsively before all the relevant information has been revealed and an informed decision taken.

Junk Bond

A fixed-income security rated below investment grade by one of the three major ratings agencies in operation. This poor status tends to be awarded only when the corporation, nation or other entity has displayed that they are at high risk of defaulting on a repayment. On the upside from brave investors, because of the risk involved with so-called junk bonds, yields are significantly higher.

Terms #K-L

Killer Trade - is a slang term that describes a very profitable trade...

Kagi Chart

Finding its origins in 19th century Japan, the Kagi chart does not feature time on the horizontal x axis. Instead, the chart uses vertical lines that depend solely on price action, filtering out random noise and concentrating on the important moves that act as drivers of an asset's trend.

Kangaroos

Slang term given to Australian stocks which are traded on the All Ordinaries index.

Keltner Channel

Technical analysis indicator which comprises a central moving average line with two channel lines above and below. Named after Chester W. Keltner, the central line is a simple 10-day moving average of typical price (taking into account the average of high, low and close price for that day). Most often used in conjunction with volatile markets, the Keltner Channel identifies an overbuy when prices rise above its top band. While an oversell is indicated by a price fall to beneath the lower band.

Key Currency

A reference currency used to set exchange rates. The key currency originates from one of the G7 countries: France, Canada, Germany, Italy, Japan, United Kingdom, and United States.

Key Reversal Bar

Otherwise known as an outside reversal bar, this is a weaker form of an island reversal and can take the form of a bullish or bearish reversal. A bearish key reversal forms when one bar hits a new high in an upward trend, ultimately reversing and hitting a new low that is lower than the previous low and closing below the previous close. A bullish key reversal performs the opposite movements, forming when a downtrend may be due to reverse and form into a new uptrend. Such movement may also be dubbed ‘pipe formation’.

Kilroy Bottom

In trading, a term used to describe the easily-recognisable inverted Head and Shoulders formation. The pattern itself is made by three consecutive price lows, with the lowest occurring in the middle of the pattern. As the pattern hits the bottom each time, the implications are for some form of reversal trend to take place.

Kneejerk Reaction

Term used to describe the phenomenon whereby traders act hastily in the face of a new development within the markets. This may, for example, be the result of anticipation leading up to a big news event and the consequent thrust in price as traders take profits from the news.

Knock-in Option

This type of option refers to the process by which a spot price hits a barrier level and is transformed into a regular option. Once this barrier is reached, the option is said to have knocked-in. Obviously, the knock-in must occur before the option expires if it is to become a normal spot option, and traders have the choice between buying into down-and-in options or those of the up-and-in variety.

Knock-out Option

A purchased option that has been nullified as a result of the underlying instrument reaching a certain price. The barrier ceases to exist as the underlying spot price hits the relevant price level.

Kondratieff Wave

Otherwise known as supercycles, great surges, long waves or K-waves, this theory states that modern western economies are subject to alternating periods of rapid growth and relatively slow progress over periods of 50+ years. Founded by Soviet era economist Nikolai D. Kondratieff, this theory is not currently accepted by mainstream economics.

Kurtosis

Term of Greek origin meaning ‘bulging’ or ‘swelling’. In trading, it is essentially used to measure a bell curve and is a good gauge to determine whether prices are trending or moving sideways. Kurtosis measures whether the data is sharp or flat relative to normal distribution. A positive kurtosis is typical of a sideways market (when the peak of the distribution is greater than normal- most prices are close to the arithmetic mean). A negative kurtosis is associated with a trending market because it appears flatter than normal distribution with prices more dispersed from the arithmetic mean.


Terms #L

Lagging Indicator - is a data point, formation or piece of information that follows after...
Leading Indicator - is a data point, formation or piece of information that comes before...
Lender of Last Resort - is the safety net for economies following the central banking model...
Let Your Profits Run - is one half of the forex trading idiom “cut your losses...
Leverage - is the ability of a forex trader to control large sums of a currency without...
Limit Order - is a forex trading order that is executed when a preset level is reached...
Line Chart - is a basic type of forex chart that plots the closing price for each interval...
Long Position - refers to a trade that will profit if a specific currency appreciates relative...
Long Term Trader - is a forex trader who holds a position in a currency pair for weeks...
Look-Ahead Bias - occurs when trading simulation includes data that would not...

Terms #M

Margin - is the amount of money a trader needs to deposit in a trading...
Margin Account - is a forex account that allows a trader to leverage deposited...
Margin Call - is a notice from a forex broker to an account holder that tells...
Market Jitters - are a period of nervousness in the market stemming from uncertainty...
Market Reaction - is a sustained period of volatility or a strong directional movement that...
Maximum Trading Power - refers to the largest possible trade a trader can make given...
MetaTrader 4 (MT4) - is an online trading platform. MetaTrader 4 has many features...
MetaTrader Forex Indicators - are a vast collection of standard and user-defined indicators...
Mexican Peso - is the official currency of Mexico. It is issued by the...
Milton Friedman - was an American economist and a recipient of the Nobel Memorial...
Mini Account - is a brokerage account that allows traders to buy and sell in...
Momentum - is a term used to describe the property the price behavior...
Momentum Trader - is a forex trader who trades around events or technical...
Monetary Easing - is a type of currency intervention where a nations central bank...
Monetary Policy - refers to all of the strategies used by a central bank to control the...
Moving Average (MA) - is a technical charting tool that helps traders view the general...
Mrs. Watanabes - is a slang term to refer to the large number of Japanese housewives

Mark-to-Market

Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.

Maintenance Margin

The minimum amount of equity that must be maintained in an account to support all open trades.

Market Rate

The most up-to-date price quote for a currency pair.


Terms #N

New Zealand Dollar - is the official currency of New Zealand...
News Trader - is a currency trader who primarily trades around important events...
Noise - refers to price and volume fluctuations resulting from events unrelated...
Noise Trader - is a currency trader who makes trades purely on technical signals...
Norwegian Krone - is the official currency of Norway. It is issued by the Norges Bank...

Narrow Market

A market where there is very little trading going on.

Negative Carry Pairs

A trade where one goes short on the higher interest currency and long on the lower one.

Net Interest Rate Differential

Refers to the difference in interest rates between two currencies.

Net Position

This refers to the positions of a currency that has not been offset by opposite positions.

Non-Client Order

An order on an exchange made by a participant firm (also known as a member firm) or on behalf of a partner, officer, director or employee of the participant firm. Client orders for the same securities are always given priority although these orders are allowed.

Terms #O

Offsetting Position - refers to a trade where equal amounts of the same currency are bought...
Offshore Forex Account - is a trading account that is based in a different country from the...
Offshore Forex Broker - is a broker that is located in a different country than the trader...
Offshore Forex Trading - refers to buying and selling currencies using an account based in a...
Oil - is the common way of referring to petroleum, a mixture of hydrocarbons...
One Cancels The Other Order (OCO Order) - is an combination of two pending market orders for the same...
Online Forex Trading - refers to the buying and selling of currencies over an Internet...
Open Position - is a currency trade that has not been settled. An open position...
Order - is a set of instructions sent by a trader to a broker...
Over the Counter - on the derivatives markets, many products are traded through exchanges...
Overheated Economy - is an economic condition that is usually caused by loose monetary policy...
Overnight Position - refers to a situation where a day trader chooses to keep a position...
Overstay - a situation where a trader has held on to a position for too long...
Overtrading - occurs when a forex trader deviates from the trading plan and begins...

Odd Lot

A transaction size that is not standard (normal lot is 100,000 units of a specific currency).

Options

The obligation-free right to buy or sell an asset.

Overnight

A trade that goes beyond the hours of a normal trading day and continue into the following day.

Overnight Limit

Refers to the maximum amount of net long or short positions that may be carried into the following day by a dealer.


Terms #P

Pending Order - is an order that has been entered into the trading platform...
Political Risk - refers to the possibility of shifts in governmental policy affecting...
Price Action - refers to the change in the value of a currency pair over a period of time...
Price Interest Point - is a basic unit in forex trading that is used to measure the...
Primary Trend - refers to the overall market direction of a currency pair over a long...
Professional Forex Trader - is an individual who earns the majority of their income...
Profit - refers to the the gains made on a trade. In currency trading, profit is most...
Profit Taking - refers to an interruption in a strong trend that represents some traders...
Proprietary Trader - are professional currency traders who are hired by banks...
Pulling In The Horns - is a slang term for when previous bullish indicators weaken or turn neutral...

Par

The official value of a currency.

Partial Lot

Trading in fractions of 100,000 units that are allowed by some brokerages are referred to as partial lots.

Pegged

Is a system where the value of one nation’s currency is tied in with that of another nation’s currency. For example the Hong Kong Dollar is pegged to the United States Dollar.

Price Transparency

This allows everyone partaking in a market to trade at the same price.

Principal Value

The original amount that was used for investment for a particular trade.

Purchasing Power Parity

Refers to the amount of a currency required to purchase a good in one country compared to the amount required to purchase the same good in another. This is one method that is used to create an exchange rate between two nations.

Terms #Q

Quote Currency - is the second currency to appear in a currency pair

Terms #R

Range - is the difference between a currency pair’s high and low over a specific time...
Ranging Market - is a slang term for a market that keeps moving back and forth...
Realized Loss - is a loss on a trade or position after it is closed. The value...
Realized Profit - is the gain on a position or trade after it has been...
Recession - is a prolonged decline in the economic health of a nation...
Regulatory Risk - refers to a potential negative impact on a trader's account...
Relative Strength Index - is a technical analysis indicator that uses the...
Reserve Bank of Australia - is the central bank for Australia. The Reserve...
Reserve Currency - refers to foreign funds that financial institutions and...
Reserves - is a general term used to refer to the foreign currency and...
Resistance - is a specific price level that price action in a currency...
Resource Curse - refers to a nation that is rich in natural resources...
Retail Forex Market - refers to the currency trading activities of...
Reversal Pattern - is a chart formation that precedes a change in...
Risk - possibility that a trade or trading position will have a different...
Risk Capital - is money that a person is prepared to trade for a financial...
Risk Management - refers to the process a forex trader goes through to...
Risk Tolerance - is a measure of how much volatility, uncertainty and...
Rogue Trader - is an individual who circumvents rules or limits and causes...

Reciprocal Currency

This term includes any currency pair where the US Dollar is not quoted as the first currency symbol. An example of this is GBP/USD.

Terms #S

Safe Haven Currency - is a currency that investors and traders believe is stable enough...
Scalping - is a method of forex trading where the trader tries to capture profits from small fluctuations...
Secondary Trend - refers to short term market movements that deviate from the primary...
Sell Limit Order - is a forex trading order that opens a new short position or adds to an existing short...
Sentiment Analysis - is a type of forex analysis that focuses on identifying and measuring the overall...
Short Position - refers to a trade that will profit if a specific currency declines in value relative to other...
Short Term Trader - is a currency trader who enters and exit trades within the day...
Shorting - is a forex trading practice where the trader takes up a position that will profit...
Simple Moving Average - is a technical analysis tool used by forex traders to summarize...
Singapore Dollar - is the official currency of Singapore. The Singapore dollar is issued...
Slippage - is the difference between the price a trader expected a trade to go through...
Social Trader - is forex trader who shares information about the market and his...
Social Trading - is when a group of traders share their live account trades in real time...
Soft Landing - is a strategy by which the Federal Reserve tries to keep economic growth high...
South Korean Won - is the official currency of South Korea. The won was one of many Asian currencies...
Sovereign Debt - refers to government bonds that are issued in an international currency in order to raise funds from...
Speculative Attack - refers to relentless shorting of a particular currency by forex market participants...
Speculator - is an individual who takes on higher than average risks in hopes of collecting higher...
Spike - refers to a larger than normal movement in a currency pair’s price action...
Spread - is the difference between the bid price and the ask price...
Spread Betting - is a type of speculation that involves betting on the price movement...
Squaring Up - is a slang term for when a trader closes an open position. If a position is at a loss...
Stagflation - refers to a period of weak economic growth coupled with high inflation...
Stoller Average-Range Channels (STARC) - is a technical volatility indicator that is used to create a statistical...
Stop Loss Orders - is a forex market order that is designed to automatically close out a trade once...
Straddle - is a forex strategy that uses limit orders to place a trade that will profit on a strong...
Strong Yen - is a slang term for a period of time during which the Japanese yen trades at...
Support - is a specific price level that price action in a currency pair hasn’t gone...
Swing Trader - swing trader is a type of forex trader who attempts to profit from short to medium term...
Swing Trading - is a forex trading strategy that seeks to profit from the short to medium term trends...
Swiss Franc - is the official currency of Switzerland and Liechtenstein. The Swiss franc...
Swissy - is a slang term for the Swiss franc (CHF). In regular usage it, it actually...
Synthetic Cross Currency Pair - is an artificial currency pair that is created by taking offsetting position...
Systematic Risk - refers to the risks that are an inevitable part of the market and cannot be eliminated...

Same Day Transaction

A postion that, within the same day, is both opened and closed.

Stocky

Dealer slang for the Swedish Krona.


Terms #T

Take Profit Order - is a forex trading order that is executed when a preset level is reached...
Technical Analysis - is the study of historical changes in price action in order to recognize predictable...
Technical Analysis Software - refers to applications that are designed for recognizing patterns and trend...
Thai Baht - is the official currency of Thailand. The Thai baht is issued by the Bank of...
Thin Market - refers to situation where a currency pair is receiving a relatively low number of bid...
Three Black Crows - is a nickname given to a bearish reversal pattern on a candlestick chart where...
Three White Soldiers - is a nickname given to a bullish reversal pattern on a candlestick chart...
Tick - is the smallest unit of time between two currency trades. Ticks are not a consistent...
Tight Money - is a slang term for an economic situation where credit has been constrained, making it very...
Time Frame - refers to the period that a forex trader chooses to operate in. The time frames...
Trading Desk - is a division within a financial institution that is dedicated to buying and selling...
Trading Indicator - is any data or series of data points that helps a trader to predict the future movement...
Trading Journal - is a record of all the trades a currency trader makes. Entries in a trading journal...
Trading Model - refers to a computer generated forecasting tool that is used to predict future price...
Trading Naked - is a trading strategy that encourages the use of few carefully chosen indicators...
Trading Plan - is a formal document that outlines a forex trader’s strategy, including the trading system...
Trading Platform - is the basic program or online interface that allows a trader to manually enter and exit positions...
Trading Position - is directional trade on a currency pair that a forex trader holds longer term...
Trading Signal - is a sign produced by the analysis of a currency pair's price action. Trading signals...
Trading Signal Generator - are a type of software that applies technical analysis techniques to price action charts...
Trading Software - is a computer application that is designed to help forex traders identify trends...
Trading Strategy - is a set of defined rules that tell a trader how to enter and exit a trading position...
Trailing Stop Loss - is a forex trading order that closes a losing position when it moves a set number...
Trend - is a continued directional movement in the price of a currency pair...
Trend Analysis - is the use of technical analysis to try and spot patterns in market data that indicate...
Trend Breakout - refers to a movement in a currency pair’s price action that is significantly above...
Trend Indicators - are a collection of mathematically derived technical analysis tools that are used to...
Trendlines - is a technical analysis tool where a line is drawn to connect a series of data...

The City

Refers to an area in London, England that has not only the largest currency trading center but also one of the largest business and financial firms within the same area.

Ticker

A streaming display used in a variety of markets that involve real-time changes in prices. In terms of forex, the Ticker shows both history and current currency pair prices.

Trade Date

The specific date within which the position is opened.

Tradable Amount

The minimum transaction size allowed by a broker in order to consider trading. Dependent upon broker this can range from 1 to 100,000 units of a currency.

Transaction

Refers to the purchase or sale of a currency pair.

Terms #U

U.S. Dollar Apocalypse - refers to the various speculative scenarios that have been predicted to arise...
U.S. Dollar Canadian Dollar - is a currency pairing whereby the U.S. dollar and the Canadian dollar...
U.S. Dollar Japanese Yen - is a currency pairing whereby the U.S. dollar and the Japanese yen...
U.S. Dollar Mexican Peso - is a currency pairing whereby the U.S. dollar and the Mexican peso...
U.S. Dollar Swiss Franc - is a currency pairing whereby the U.S. dollar and the Swiss franc...
U.S. Treasury - is the department within the United States Government that is responsible for the creation...
Unemployment Report - is a basic economic release that states a countries unemployment rate in the last time...
United States Dollar - is the official currency of the United States of America. The USD is the world...
United States Prime Rate - is the benchmark interest rate for loans issued by banks in the United States...
Unrealized Loss - is a negative balance on a trade that hasn’t been closed. The value of any position...
Unrealized Profit - refers to a gain in an open position. Until the position is closed...
Unsterilized Intervention - refers to a situation where a nation’s central bank directly buy...
Unsystematic Risk - refers to a risk that affects a particular currency pair or set of currency pairs...

Unconvertible Currency

This term refers to certain currencies that cannot be exchanged with another currency due to regulations.

Undervalued

This is terms used to describe a currency that is under its expected purchasing power parity.

Unit

This is a measurement figure that is representative of the amount of a currency being traded on the market. Normally, one unit equates to one currency unit. For example: one unit of GBP is equal to one British Pound.


Terms #V

Virtual Balance - refers to the potential account value a trader would have if he...
Volatility - is a measure of the degree of change in the value of a currency...
Volume - is a measure of the total value of a market move. Volume is used...

Value Date

The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date.

Terms #W

Weak Shorts - is a slang term for a group of traders who are quick to exit their short positions...
Weekly Chart - is a chart that displays the price action of a currency pair in one week intervals...
Whipsaw - is a slang term for any sharp move in price action that is quickly followed by an...
World Currency - is a theoretical trade currency that would replace national currencies...

Whisper Number

Confidential predictions by analysts that pertain to earnings and economic indicators. They are referred to as whispers because although they are not intended to be public, they often do make it out into the public arena due to being leaked; however, they tend to receive the same treatment by recipients as a rumour would.

Working Day

Also known as a business day and refers to they days of the week during which the banks in the country from which a currency originates are open. In the case of a currency pair, this term is adjusted to reflect the requirement of both banks (in the country of each currency in the pair) are open.

World Trade Organisation

Also known at the WTO, this is the global institution comprised by the countries that conduct trade with each other. This organisation also sets trade laws and rules into play that must be followed by its members.

Terms #Y

Yard - is trading slang for 1 billion units of a particular currency...

Yield

This is the measurement for the return made on a particular investment and is normally calculated as a percentage of the initial investment.


Terms #Z

Zombie Currency - is a legal currency that is...

ZAR

This is the symbol for South Africa’s currency, the South African Rand.