Forex Glossary

Account – a record in the database, which contains information about a user and other objects of the system.

Arbitrage – the transfer of funds from one market to another to profit from the difference in interest rates, exchange rates, or commodity prices.

Ask – the price at which one can buy currency. The Ask price is higher than Bid price.

Aussie (AUD) – a slang term for the Australian dollar.

Automated trading – a method of trading when special programs execute orders on the trader’s behalf, based on a particular system, but without the trader’s participation.

Balance – the sum of funds on the trading account after finishing the last transaction at a certain period.

Base currency – a currency that stands first in the currency pair. All transactions are conducted with base currency.

Bear – a trader who counts on the devaluation of a currency.

Bid – the price at which one can sell currency. The bid price is lower than the Ask price.

Broker – an individual or a company that takes responsibility of an agent between a buyer and a seller of financial instruments while charging a fee (commission charges).

Bull – a trader who counts on the rise in the exchange rate.

Buy limit – a pending order for purchasing a currency pair at a price lower than the current one (buy cheaper than now). It is used when a trader expects the price to drop to a certain level and then start increasing again.

Buy stop – a pending order to buy a currency pair at a price higher than the current one (buy more expensive than now). It is used when a trader expects the market price to reach a certain level and continue to grow.

Cable – a slang term for pound. It is called this way because the first quotations were sent to America by a trans-Atlantic cable in the middle of the 19th century.

Candlesticks – one of the methods of displaying charts of financial instruments’ rate changes.

Central bank – a bank that provides financial services to the government and commercial banks of its country.

Cross currency pairs – currency pairs that do not include USD. For example, EUR/JPY.

Currency pair – a financial instrument traded in the foreign exchange market. The currency pair comprises two currencies written as a ratio of one to another, for example, USD/JPY. The result is called the exchange rate or a quotation.

Day trading – a strategy of opening and closing trades within a day.

Dealer – an individual or company that conducts the basics of trading operations. The dealer takes the responsibility to act as a second part of the transaction.

Deposit – funds available on the account for further transactions.

Diversification – a strategy that aims to reduce risks by allocating investments in different financial instruments or objects of investment.

Equity – an indicator that characterizes the trader’s account status at the moment. It is calculated as follows: equity = balance + credit + floating profit – floating loss.

Exchange rate (quotation) – a ratio of the price of one currency to another at a particular point in time. For example, 1 EUR can be bought for 1.3000 USD. The quotation is EUR/USD = 1.3000.

Expert Advisor – an automatic system (script) that executes trades based on the predetermined algorithm without the trader’s participation.

Financial instrument – a market product type of the financial environment (namely currency, shares, futures, options, etc.)

Flat – a situation when the price stays within the same range and does not show signs of growth or decrease.

Fundamental analysis – a type of market analysis, where the forecast is based on news of the financial market and analysis of economic and political information to predict market movements.

Gap – a break on the quotation graph caused by a mismatch between the open price of one trading period and the close price of the previous trading period. This may take place because of unforeseen circumstances (e.g., after the weekend).

Hedging – the use of one financial instrument to reduce risks connected with the influence of unfavorable market factors on the price of another financial instrument, associated with the first one or the cash flows that they generate.

Indicator – an analysis tool used to derive additional information from chart prices.

Instant Execution – a method of order execution. The order is executed at the indicated price. If the price changes while getting to the trading server, the client receives a notification about the price change (requote). The trader can either accept the new price or refuse the order to be executed.

Kiwi (NZD) – a slang term for New Zealand dollar.

Leverage – an instrument that lets one trade bigger sums, having only a part of the sum. For example, with a 1:100 leverage, you can trade a USD 100,000 volume, having only USD 1,000 of your own funds.

Liquidity – the ease at which an asset can be converted into cash. Bigger liquidity allows making a big deal without being affected by a significant change in price.

Lock – the presence of two positions of one financial instrument open in opposite directions at a time.

Long – the position to buy. Its profit increases when the market price grows.

Majors – main currency pairs: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, GBP/JPY, EUR/JPY, and USD/CAD.

Margin – a deposit required to execute a trade with the use of leverage. For example, if the leverage is 1:100 and the volume of the order is USD 10 000, the margin is USD 100.

Margin call – a notification that shows that a tiny amount of funds is left on the trading account and that in case of unfavorable market movement, stop out may take place. This notification is sent when the remaining funds on the trading account equal a certain percent from the margin (for example, 40%).

Market Execution – a method of order execution, where the order is executed at the current market price. If the price changes at the moment of order execution, it will be performed at an updated price.

Market-maker – a large bank or financial organization that has a huge influence on currency rates because of its large exchange volumes.

News trading – a trading strategy that implies receiving profit on the price gaps during important economic news releases.

Order (position) – client’s instruction to execute a trade at a specified rate (to exchange one currency for another one). After the order is opened, it must be closed to fix the profit or loss.

Order (position) closing – the process of reverse selling/buying such volume of financial instruments, which compensates for the bought/sold volume of the opening position.

Order (position) opening – a process of buying or selling a certain volume of financial instruments for profit because of the changes in quotations in the favorable direction. To fix trading results, one needs to close the order.

Pending order – an order to buy or sell financial instruments in the future when the price reaches the level indicated in the order.

Pips – units of measurement of a financial instrument’s price change (0.0001). For example, if the quotation changes from 1.30000 to 1.30010, it gains 1 pip. Please note that point and pip are different units, take into consideration that 1 pip = 10 points.

Point is the smallest measurement of a financial instrument’s price change (0, 00001). For example, if the quotation changes from 1.30000 to 1.30001, it gains 1 point.

Profit – a positive increase in balance resulting from investment or trade after deducting all expenses.

Quoted currency – a currency that stands second in the currency pair. The price of the base currency is reflected with the help of it.

Resistance level – a term of technical analysis, which determines the price level at which market participants often start selling.

Requote – a notification in the trading terminal about price changes during the process of placing an order. You can either accept a new price or cancel the execution of the order. Requotes can appear in the accounts with Instant Execution.

Scalping – a trading strategy where a trader executes a large number of orders during a short period (even a couple of seconds) and fixes profit in several points.

Short – a position to sell. Its profit increases with the decrease of the currency pair’s price.

Slippage – the amount of the price movement from the time of placing an order until its execution. It is when an order is executed at a better/worse price than the one indicated in the order. For example, this might happen during high market volatility.

Sell limit – a pending order to sell at a price higher than the current price level (sell more expensive than now). It is used when the market price is expected to increase up to a certain level and then begin to fall.

Sell stop – a pending order to sell at a price lower than the current price level (sell cheaper than now). It is placed when the market price is expected to decrease to a certain level and then continue to fall.

Spread – a real-time difference between the Bid and Ask prices of a given currency pair.

Stop out – a process of automatic order closing. This procedure takes place when the remaining funds on the trading account decrease to a certain percent from the margin (for example, 20%).

Stop loss – a type of pending order that helps limit losses.

Support level – a term of technical analysis, which determines the level at which market participants often start buying.

Swissy (СHF) – a slang term for the Swiss franc.

Swap – a fee for the transfer of open trading position through the night. Funds may be deducted or added from/to the account.

Take profit – a type of pending order that helps fix (take) profit while trading.

Technical analysis (graphical analysis) – a type of market analysis, where the forecast is based on the fact that the market has memory and future changes will be influenced by patterns of its behavior in the past.

Тrailing stop – an instrument that “pulls” stop loss level to the current price at a certain distance until the market turns and passes it. It is helpful during a strong one-way price movement.

Trading platform (trading terminal) – a trader’s software that enables executing trades from the computer or another device.

Тrend – a clearly seen market movement in one direction (upwards – bullish, down – bearish, sideways – flat).

Volatility – the strength of the exchange rate variation.

Volume – the amount of a financial instrument traded during a certain period.