Forex Glossary

Learn more about Forex trading

Describes a currency strengthening in response to market demand rather than by official action.
The price at which the foreign exchange pair or other tradable asset is offered.
3Bull market
A market condition in which the market prices arise or are expected to arise, resulting in investor confidence and a trading environment of confidence and positivity.
4Bear Market
A market condition in which the market prices are declining, causing wide pessimism and negative sentiment in the market.
5Base Currency
For foreign exchange, the base currency refers to the first currency in a currency pair. For example, in EUR/USD currency pair, the EUR is the base currency.
6Buy Limit Order
An order to execute a transaction at a specified price (the limit) or lower.
7Bank Rate
The rate at which a central bank is prepared to lend money to its domestic banking system.
The central bank of Japan.
The Central Bank of Germany (nickname Bubba)
Bank of Canada, the central bank of Canada.
Bank of England, the central bank of the UK.
12Central Bank
A government or quasi-governmental organization that manages a country’s monetary policy and prints a nation’s currency. (For example, the US central bank is the Federal Reserve, others include the ECB, BOE, BOJ.)
The exchange rate between two currencies.
14Day Trading
Opening and closing the same position or positions within the same trading session.
A decline in the value of a currency due to market forces.
16Dealing Desk (DD)
Used loosely as the place where dealers facilitate pricing and executing trades.
17ECB - European Central Bank
The Central Bank of the European Monetary Union.
18Economic Indicator
A data release which indicates current economic growth rates and trends such as retail sales and employment. Gross Domestic Product (GDP), Employment Rates, Trade Deficits, Industrial Production, and Business Inventories.
19Fundamental Analysis
Analysis based on information about economic and political factors with the objective of determining future movements on a financial market.
An abbreviation of the Foreign Exchange market.
21Federal Reserve Bank (Fed)
The Central Bank of the United States
Gross Domestic Product (GDP) - a total value of a country's output, income or expenditure produced within the country's physical board.
The seven leading industrial countries; US, Germany, Japan, France, UK, Canada, Italy.
In the forex market hedging constitutes a strategy used by traders to mitigate risk which may occur from the transactions in foreign currencies.
Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
26Interbank Rates
The Foreign Exchange rates at which one international bank quote another international bank.
An economic condition where there is an increase in the price of consumer goods, thereby eroding purchasing power.
28Initial Margin
The initial deposit of collateral required to enter into a position as a guarantee on future performance.
The New Zealand dollar is the currency of New Zealand, informally known as the “kiwi”.
Also called margin. The ratio of the amount used in a transaction to the required security deposit.
The ability of a market to accept large transaction with minimal to no impact on price stability.
32Limit order
A request for buying or selling a foreign currency at a specified price or better.
The Canadian dollar is informally known as the “loonie”.
A unit to measure the amount of the deal (the value of the deal always corresponds to an integer number of lots).
Any transaction that offsets or closes out a previously established position.
36Long Position
Excess of purchases over sales or of foreign currency assets over liabilities.
A form of collateral requested by a broker to cover the investors open trades
38Margin Level
It is the ratio of equity to margin [(Equity/Margin) x 100]. A very important aspect as brokers use it to determine whether the traders can take any new positions or not.
39Margin Call
A request for further collateral to cover a position moving against the investor, which is made by the broker, who will close the position if the additional funds are not deposited
40No Dealing Desk
When traders have direct access to the interbank market and there is no dealing desk involved in their transactions.
41Open Position
An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.
An instruction to execute a trade at a specified rate.
Pip stands for Percentage in Point and it is the smallest price change that can be seen in an exchange rate. In most cases currency pairs are priced to four decimal points and the smallest change can be seen in the last decimal.
44Quote Currency
The second currency of a currency pair is called the Quote currency. In EUR/USD for example, USD is the quote currency.
An indicative market price on a security at any given time.
46Risk Management
The employment of financial analysis and use of trading techniques to diminish its financial risk.
The price or value of one currency in terms of another (exchange rate).
A term used in technical analysis representing an exact price level at which analysis concludes people would further sell.
A process whereby the settlement date of a deal is rolled forward.
The difference between the highest and lowest price of an asset during a given trading session.
The difference between the bid and offer (ask) prices; used to measure market liquidity. Narrower spreads usually signify high liquidity.
52Stop Loss Order
An order placed to buy or sell a security/currency when a certain price is reached. These orders are placed to limit loss on a position.
The simultaneous buying and selling of the same amount of a given currency for two different dates, against the purchase and sale of another currency.
A sudden upward or downward movement in price that happens in a short time period.
It's the experience of not getting filled at your expected price when you place a market order or stop loss.
56Support Levels
A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.
Every quote - any change in price, up or down.
58Technical Analysis
An effort to forecast prices by analyzing market data, e.g., historical price trends and averages, volumes, open interest, etc.
59Take Profit
An order placed with a broker or market maker to close a position once it reaches a specified rate in the market above the current rate. The intention is to lock in a specific profit amount.
A statistical measure of a market or a security's price movements over time and is calculated by using standard deviation. Associated with high volatility is a high degree of risk.
The number, or value, of securities traded during a specific period.