Forex Terms Glossary - FxBrokerSearchCommonly Used Terms in Forex Trading

If you plan on getting into Forex trading, then you are going to need a Forex glossary.

It is critical that you are fluid in the lingo of the trader so that you can understand the information you read and to help you communicate with people within the currency trading industry.

- A -

Accrual The accumulation of interest or points on a transaction over a specific period of time.

Adjustment An official action taken by a central bank, or some other official financial entity, to correct an interest rate or some other indicator on a form of currency.

Appreciation When a currency increases in value, it is said to appreciate.

Arbitrage The act of setting up a simultaneous buy and sell on a currency to take advantage of a very small profit window.

Asian Central Banks A set of monetary institutions that dictate currency policy for Asian countries. Over the past few years, Asian central banks have had a significant influence on the value of world currencies.

Ask This is the price at which an exchange is prepared to sell a currency to a trader. It can also be called the offer.

AUS 200 The listing of the top 200 companies on the Australian stock exchange based on financial position.

At-Best When a trader gives a broker an at-best command, it is a command to buy or sell a currency at the best market price currently available.

At-Better This is an order instruction given by a trader to a broker to buy a particular currency at a predetermined price, or at a better price if it is available.

Aussie The nickname of the AUD/USD Forex currency pair.

- B -

Balance Of Trade The difference in value between the exports of a country and its imports. This is a strong factor in indicating the strength of a currency.

Barrier The price point at which the instructions for a Barrier Option are to be executed in a trade. 

Barrier Option A trading strategy that is based on a specific price point and utilizes a series of indicators. There are several types of Barrier Options.

Base Currency When looking at a Forex currency pair, the base currency is the first currency listed to the left.

Base Rate The rate a country’s central bank will assign to any money that banks in that country lend.

Basing This is a trending method that is used to chart the times when the supply of a product is nearly equal with the demand. It can be an extremely powerful profit indicator.

Basis Point A unit of measurement used to describe the minimum change in the price of a product.

Bears In Forex and stock trading, Bears are traders who project that values will drop and the persistently hold short positions to sell off their inventory.

Bid Price This is the value a market assigns to a currency and represents the value a trader can go short on his Base Currency.

Big Figure Every currency quote is preceded by a three-digit number to indicate the pips involved in the transaction. That three-digit number is the Big Figure.

BIS In Switzerland, the Bank for International Settlements is the arbitrator for all of the world’s central banks.

Black Box A slang phrase used to describe traders who utilize a lot of technology in their trading processes.

Blow-Off The end result of an action taken when a large contingency of traders go short on a particular transaction.

Bollinger Bands A trading trend tool developed by a trader named John Bollinger in the 1980’s. The Bollinger Bands are utilized to find deviations in moving averages.

Book The sum total of all of a trader’s transactions and holdings.

BRC Shop Price Index The British Retail Commission’s reporting of inflation among British retailers. This is a tool used regularly by traders to determine how the British pound will fare against other world currencies.

Broker The intermediate party who executes trades for currency traders.

Bulls A slang term used to describe currency traders who sustain long-term hold positions in the hopes that values will rise.

Buy Another term used to describe going long on a currency.

- C -

Cable This is an industry nickname applied to the GBP/USD Forex pair. CAD The universal financial symbol for the Canadian dollar.

Call Option A transaction that allows the trader to go short on a currency with a low interest rate while going long on a currency with a higher interest rate. The profit is the difference in the interest rates.

Candlestick When a sharp change in currency value happens in an instant, the result on a Forex chart is a straight line. That straight line on the chart is a Candlestick. This can occur when a currency suddenly increases and decreases in value.

Capitulation When a long and extreme trend in a Forex transaction comes to an end, this is the point where those traders who went long finally liquidate their positions.

Carry Trade A Forex trade that takes advantage of a currency pair made up of two currencies with significantly varying interest rates.

Cash Market This is the foundation market used to determine the value of a derivatives contract.

Cash Price A cash price indicates the value of a transaction at that instant in time. CB The abbreviation used to indicate any central bank in any country.

Central Bank The central bank in any country is the bank that is responsible for establishing currency policies such as maintaining the currency interest rate. As an example, the U.S. Federal Reserve Bank is the central bank of the United States.

Cleared Funds These are funds that have been approved to use in a transaction and are currently available. Clearing Prior to closing out a trade, the trade must first be cleared before it can be settled.

Closed Position When your account is liable to exposure to a currency transaction or an individual currency that no longer exists, then your position is said to be closed.

Closing In order to cease all activity in a particular trade, you must place a new trade that is the exact opposite. When you place an opposite trade to stop an existing trade, you are said to be closing that trade.

Closing Price This is most commonly used to refer to the value of a currency after a trade has been executed.

Commission The percentage of your transaction that goes to a broker as payment for services.

Commodity Currencies The most commonly traded currencies are referred to as commodity currencies. For example, the U.S. dollar is a very commonly traded currency and has earned the designation of being a commodity.

Component Each currency in a currency pair is referred to as a component. For example, the USD and EUR currencies are components of the USD/EUR currency pair.

COMPX The universal indication for the values on the NASDAQ Composite Index.

Confirmation The agreement reached by two parties in a transaction that indicates that certain terms of the transaction have been satisifed.

Construction Spending This is a very important financial indicator released by the United States Census Bureau that indicates the amount of spending done on new construction in a predetermined period.

Contagion A slang term assigned to a situation where it appears that a failing currency is affecting other currency values around the world.

Contract In Forex trading, a contract is a standard unit.

Contract Note The guidelines used to confirm the structure of a currency trade.

Controlled Risk A currency investor can limit their exposure to loss by executing a Controlled Stop. Utilizing this method is referred to as a controlled risk.

Convergence Of Moving Averages (MAs) An industry term used to describe the result of several moving averages trending towards each other on a Forex chart.

Counter Currency This is one of the many names given to the second currency in a Forex pair. This would be the currency listed to the right.

Counterparty Each transaction in the financial world has a party and counterparty. In most cases, the counterparty is the entity that accepts a financial contract, while the party initiates the contract.

Country Risk The assumed challenges associated with doing trade across international borders.

CPI The universal symbol for the Consumer Price Index, which measures inflation in any given country.

Crater A Forex industry slang term used to indicate a market where traders are preparing to go short on a significant amount of transactions.

Cross Any Forex currency pair that does not have the U.S. dollar as part of the transaction.

Crown Currencies A universal term for the currencies of the current and former British commonwealth. They include the British Sterling Pound, the Canadian Dollar, the Australian Dollar and the New Zealand Kiwi.

Currency When a government uses its central bank to issue legal tender to be used as cash, that tender is referred to as currency.

Currency Pair In the Forex world, a currency pair is how a Forex transaction is executed. For example, a Forex transaction with the U.S. and Canadian dollars would use the Forex currency pair USD/CAD.

Currency Risk The persistent notion that a currency could rapidly decrease in value.

Currency Symbol These are the common designations for the currency that is traded on the Forex exchange. For example, EUR is the currency symbol for the euro.

Current Account The sum value of all transactions in an account. In the Forex world, the balance of trade is often used as an indicator for a current account.

- D -

Day Trader This type of trader usually deals in volatile commodities that they are bought and sold in the same day for a profit.

Day Trading A form of trading where each transaction is open and closed in the same trading day.

Deal This is a word associated with a trade that is done in real time as opposed to being the result of a placed order.

Dealer A term that is used interchangeably with the term Trader. This is an individual or entity that orders traders or executes deals on its own behalf.

Defending Trade Level When a trader, or traders, utilizes a trading tool such as a barrier option to help prevent movement on a currency deal.

Deficit Any type of negative account or transaction balance.

Delivery This is a term used to indicate the completed transaction between a buyer and seller.

Depreciation When a currency shows a tendency to lose value over a predetermined period of time, then this is referred to as depreciation.

Derivative This is a financial transaction that relies on the fluctuation value of an asset such as currency. Devaluation When a central bank decides to deliberately decrease the value of a currency, then that is called Devaluation.

Discount Rate The U.S. Federal Reserve Bank will sometimes lend financial institutions money at a lower interest rate than the prime. That lower interest rate is the discount rate.

Divergence In Forex trading, value trends can gain momentum and start to move away from the pricing that has the market has assigned. This creates a divergence.

Diverging Moving Averages (MAs) When a divergence happens among moving averages, it means that the moving average is not in line with the current value trend.

Dovish Dovish refers to currency policies that are non-aggressive, such as lower interest rates established by central banks. It refers to being like a dove.

Downward Trend When currency low and high values follow a decreasing trend, they are creating a downward trend.

- E -

ECB This is the symbol for the European Central Bank that dictates policy for the currency known as the euro.

Economic Indicator Central banks and governments will try to improve the status of their currencies by releasing Economic Indicator information such as the Gross Domestic Product (GDP) or rate of inflation.

EURO The symbol for the currency that has been adopted by the Eurozone and administered by the European Central Bank.

Eurozone Labor Cost Indicator A monitor of the annual rate of inflation of wages paid to workers in the Eurozone.

Exporters These are large corporations that tend to export a great deal of product to countries around the world. These companies are very concerned with the rate of change in Forex currency pairs.

- F -

Factory Orders A comprehensive report issued by each government that shows the rate of progress for all production goods.

Fair Value This usually indicates the value of a derivative contract when compared to the actual cash value in the exchanges. When the contract and the cash value are close, then the contract is said to have fair value.

Fill The term given to the process of successfully and completely closing an order.

Fill Or Kill When a trader or broker fears that a deal may not be able to be filled, then they will give a fill or kill order which will immediately cease the order if it cannot be filled.

FIFO The symbol for a First In, First Out situation where all trades attached to a Forex currency pair are closed in the same order in which they were received.

Fix In the Forex currency exchange, there are five designated times set aside for filling large orders from financial institutions and central banks by buying or selling a significant amounts of currency. The volatility of the market in a given day dictates when these times take place, but they must occur throughout the course of the day.

Flat Readings Currency exchange data that remains unaltered from one designated period to the next.

Flat Trade This is slang to indicate a trade that was quickly executed with no profit.

Follow-Through Sustaining new buying or selling actions after a Forex chart indicates a change in direction for a currency’s value.

FOMC This is the symbol for the Federal Open Market Committee, which is the internal organization for the U.S. Federal Reserve Bank that actually sets currency policy.

Forex The exchange where currency from all over the world is bought and sold. It is short for Foreign Exchange. It can also be shorted to FX.

Forward Exchange This is an exchange rate that is set for a contract that will be executed at some point in the future. It is based on the differences in interest rates for the two currencies in the Forex currency pair being traded.

Forward Points When a Forward Exchange is calculated, there are pips that are either added to or taken from the current rate to determine the Forward Exchange.

Fund A common slang term used to identify the USD/CAD Forex currency exchange pair.

Future For a Future, the price is negotiated now for a trade agreement that is scheduled to take place at a later date.

- G -

Gaps Upon the announcement of financial news from a central bank or a country’s government, currency may start to jump or drop in value rapidly and skip past normal levels. That is called gapping or gaps.

GDP This stands for Gross Domestic Product. It is a financial report issued by a government that indicates all of the production of products by the country’s domestically-based industry.

GFD This stands for Good For The Day and it indicates a transaction that will expire by the end of the day if it is not filled.

Given When bids hit their projected price, this is called a given.

GNP This stands for the Gross National Product and it is the GDP with the addition of any financial investments as well as any income from outside the country’s borders.

GTC A trade that will remain open until it is filled using its original pricing criteria, or until the trader or broker cancels it.

GTD This is a GTC that has an expiration date.

Guaranteed Order When a trader wants an order to be filled at a specific value, then that trader will place a guaranteed order.

- H -

Handle In the Forex market, pips are usually measured in three-digit numbers. Each level of 100 pips is referred to as a handle.

Hawkish The opposite of dovish. Hawkish policies from a central bank are aggressive in an attempt to strengthen the country’s financial position.

Hedging Taking a combination of different and/or opposing positions to lower risk and create insurance, i.e. 'hedging your bets'.

- I -

Illiquid When the Forex market holds little value for a period of time, it is said to be illiquid.

Industrial Production A focused report issued by governments that lists the sum value of production done by the country’s product manufacturers, mines and utility companies.

Inflation In the Forex market, the cost of consumer goods rising versus the dropping value of currency is called inflation.

Initial Margin Requirement The amount of capital a trader needs to get involved in a transaction.

Interbank Rates Banks tend to operate inside and outside of the Forex market. Interbank rates are the currency and transaction interest rates that international and domestic banks will quote to each other.

Interest A financial indication of the effects of owning or trading currency. Intervention At certain points, central banks sometimes feel the need to get directly involved in the valuation of their currency on the Forex market. When central banks get directly involved in affecting values on the Forex market, that is called an intervention.

- L -

Level A pricing tier that is created by interest in a particular currency or based on actual activity in trading that currency.

Limits A trader will set buy or sell levels that are higher or lower than the current market conditions. These are used in futures and other trading strategies and are called Limits.

Liquid Market This is a condition of significant market activity that allows values and pricing to move as dealers and traders want it to.

Liquidation When a trader goes short on their entire interest in a transaction or currency pair, then they have liquidated their position.

Liquidity When a market is particularly active and has a significant amount of trades, it can absorb larger transactions without affecting the overall pricing trends. This situation is known as liquidity.

Long (Going Long) Forex market slang used to indicate when a trader buys into a currency pair. Lot A term of measurement that is used by traders and brokers to indicate the size of a particular transaction.

- M -

Manufacturing Production A very well-defined portion of the Industrial Production numbers that deals only in manufacturing.

Margin The ability for a trader to execute a trade without using all of their own cash. Also known as Leverage.

Margin Call When a trade starts to get away from a trader, the broker or trader may try to get more collateral put against the trade to solidify their position.

Market Maker This is a slang term for a trader or broker who quotes bid and sell prices simultaneously in an attempt to get involved in either side of a transaction.

Market Order This is when a broker buys currency pair shares at the current market value.

Market Risk This is the potential for a market to fluctuate up or down at a moment’s notice. Anytime a trader does not take the necessary steps to deflect any changes in the market, then they are exposing themselves to market risk.

Mark To Market This is the process a trader takes to re-evaluate their trades and compare the original values of the trades to the current market value.

Maturity This is the date on which a financial transaction or purchase is finalized.

Momentum In Forex, momentum is the projections associated with the coming changes in a currency’s value.

Momentum Players Day traders who attempt to go short on deals that bring in a Handle with each deal.

Month Over Month This is more commonly abbreviated as MoM. It is a designation of the activity for a particular trade, set of trades or currency trend based on monthly averages.

- N -

Net Position This is the amount of purchased currency a trader owns that has yet to be part of an outgoing transaction.

- O -

Offer When a trader looks to buy into a currency pair, the offer (or ask) price is the price at which the market is willing to sell a position in that currency pair.

Offered A currency pair that is seeing a significant amount of trading activity is said to be an offered pair.

Offsetting This is the process of creating a currency trade that offsets positions in trades that are currently being held. On Top This is a term applied to a trader who tries to go short at the current market value.

One Cancels Other Also referred to as an OCO, this is an order done in two parts where one part is canceled if the other part is satisfied first.

Open Order This is a term that is sometimes assigned to GTC orders.

Open Position When a trader initially invests in a position that is not immediately resolved by a counter-position, then that position is said to be open.

Option This is a trade format that allows traders to express an interest in investing in a position without the obligation to actually buy into the transaction.

Order The term commonly associated with the process of placing a trade request with a broker.

OTC This is the symbol for Over The Counter trades. These are trades conducted outside the normal confines of an exchange.

- P -

Pair In the Forex market, every transaction consists of two currencies that are used to sell or buy each other. The two currencies together are called a pair.

Paneled This is a slang term used to apply to a particularly heavy volume of short transactions.

Parabolic This is a term that is used to describe a particular financial market that shows a significant amount of movement in a very short time span.

Partial Fill This is the term applied to trade orders that are not completely executed.

Personal Income This is a critical financial indicator that indicates how much money a worker generates versus their expenses.

Pips A pip is represented by the number 0.0001. It represents the very smallest amount of movement up or down a currency’s value can have.

Position This is a term used to describe a trader’s full holding in a transaction.

Price Transparency These are market pricing levels that are equally accessible by all traders and brokers.

Profit The positive gains on a transaction that come from the selling price being higher than the buying cost.

Pullback When some currency markets start to trend in ways that are concerning investors, then there are actions taken to go back to a certain point in the trading and essentially start over.

- Q -

Quote This is an estimated and non-binding price given to indicate how much a currency will be worth.

Quantitative Easing Some central banks will slowly inject currency into their economies to try and bring up their financial indicators. This process is referred to as quantitative easing.

- R -

Range The area between the highest and lowest values for a currency at a given moment.

Real Money This is a term applied to currency traders that deal in very large transactions.

Resistance Level The very top level of the value of a currency that a trader is willing to trade at.

Retail sales An economic indicator that deals with the sales of goods within a particular country.

Revaluation This is the opposite of devaluation. This is when a central bank takes actions aimed at improving the value of its currency.

Risk The potential for unseen losses.

Rollover At the end of a Forex trading day, all open trades are revalued the next day to reflect the new currency values.

Running Loss This is a monitor that indicates any potential losses in open positions.

Running Profit This is a monitor that indicates any potential gains in open positions.

- S -

Scalping Short term trading to extract - 'scalp' - small profits by exploiting the bid-ask spread, dozens or hundreds of times over the daily trading session. Read more here.

Settlement This is the term used to indicate the completion of a transaction. In the Forex market, a settlement does not always need to be accompanied by the transfer of cash.

Short Position The process of selling a currency pair.

Short Squeeze When there is an overabundance of traders going short, it can cause an imbalance in the market. A Short Squeeze is when those traders go long in an attempt to correct the market.

Slippage If a trader waits to execute a Forex transaction, then the price they were quoted may not be the price they buy at because of a change in the market. This change is known as slippage.

Slippery This is a slang term applied to a currency market that looks as though it could move up or down in an instant.

Sloppy This is a slang term applied to a currency market that does not follow any trends and shows no way of doing reliable projections.

Spread This is a term applied to the gap between bid prices and offer prices.

Square When a dealer does not have any outstanding positions, then that dealer is said to be square.

Stop-Loss Hunting This is the process of looking for a market filled with stops and stop orders in an attempt to capitalize on the market changes caused when those stops are executed.

Stop Order Traders can issue instructions for a stop order, which is an order that is executed the moment the predetermined price is reached.

Stop Entry Order When a trader wants to go long on a price above the current market price or go short on a price that falls below the market price, then they would place a Stop Entry Order.

Stop Loss Order These are orders placed to offset the losses of a potential shift in the market. The trader would indicate the price that would trigger the Stop Loss Order, and the order would be executed to allow the trader to go short.

Stops Building An accumulation of Stop Loss Orders.

Support When doing price projections, the support is a reliable price trend that is used as the lowest possible pricing level for that projection.

Swap When a particular currency is bought and sold instantaneously at the current market rate, it is said to be a swap.

- T -

Technicians This is a term applied to Forex traders who utilize charts and graphs to do their trading.

Trade Balance This is a critical financial indicator that helps to show the gap between a country’s imports and exports. A positive trade balance means that a country exports more than it imports and can significantly affect the value of that country’s currency.

Trading Offered This is a term applied to a situation where sell orders continue to flow in for a currency pair that is persistently dropping in value.

Trend When a trader uses tools to track the behavior of a currency value over a period of time, then that trader is tracking a trend.

Turnover This is a term applied to the value of all executed transactions in a given space of time.

Two Way Price This is a term applied to a situation where a bid and offer value is quoted.

- U -

Unemployment Rate A percentage of the number of workers estimated to be available for a workforce versus the actual number of employed workers. The official unemployment rate for a country is calculated by the country’s government, but the final figure is usually contested by Forex trading experts.

Unrealized Gain If a trader determines that their current position could bring a profit, then they have an unrealized gain. In order to cash in on the gain and turn it into an actual profit, the trader would need to close the transaction.

Unrealized Loss This is when a trader determines that their open position is sitting at a loss. The actual value cannot be determined until the position is closed.

U.S. Prime Lending Rate A publicly published interest rate that the U.S. Federal Reserve Bank offers to its larger borrowers.

- V -

Variation Margin The Forex market has values that fluctuate on a regular basis. The amount of funds that a trader holds in their account to offset any market value changes that occur during a trade is known as the Variation Margin.

Volatility Index Also known as the VIX, this is an indication of how volatile a financial market is expected to be over the coming 30 day period.

Volatility This is a term used to describe the instability of a market over time.

- W -

Wholesale Prices A financial indicator that shows the total value of finished products in a given country. An increase in wholesale prices is often used as an indicator for an increase in inflation.

Working Order This is a term applied to an order that is in the process of being completed.

- Y -

Yard A unit measurement used to indicate one billion parts.

Yield A term commonly used to indicate the income realized from an investment.

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