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Home / Beginners / Forex Glossary

Forex Glossary

Forex Glossary is an excellent tool that will be of a great value for both beginners and experienced traders. It contains virtually all the Forex terms providing an easy navigation on the currency market. Due to the Forex Glossary, beginners will be able to understand the market system and its work quickly and easily as well as to learn the most frequently used terms.

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Most popular terms of forex glossary:

Accrual


Adjustment

Adjustment - official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate, which has influence with forex.

Appreciation Currency

A currency is said to 'appreciate' when it strengthens in price in response to online forex market demand.

Arbitrage forex

Arbitrage forex - is the purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related forex market, in order to take advantage of small price differentials between markets.

Ask Price

Ask price - is the price at which the forex trading market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At ask price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.

At Best

At Best - is an instruction given to a dealer to buy or sell at the best rate that can be obtained.

At or Better

At or Better - is an order to deal at a specific or better rates.

Trade Balance

Trade balance - is the value of a country's exports minus its imports.

Bar Chart

Bar Chart it is a type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.

Base Currency

Base Currency - is the first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215 In the online forex trading markets, the US Dollar is normally considered the base currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.

Bear Market

The Bear Market - is a market distinguished by declining prices.

Bid Price


Bid / Ask Spread

Bid / Ask Spread - is the difference between the Bid Price and Offer Price.

Forex Broker

Forex Broker - is an individual or firm that acts as market intermediary, putting together buyers and sellers for a fee or Broker Commission.

Bretton Woods Agreement

Bretton Woods Agreement  it is agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rates for the major currencies.

Bull Market

A Bull Market - is a market distinguished by rising prices.

Cable FX

Cable FX - is a trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 1800's.

Candlestick Chart

Japanese Candlestick Chart - is a chart that indicates the trading range for the day as well as the opening price and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.

Forex Carry Trade

Carry Trade refers to the simultaneous selling of a currency with a low interest rates, while purchasing currencies with higher interest rates. Examples are the JPY crosses such as GBP/JPY and NZD/JPY.

Cash Market

Cash Market it is the market in the actual financial instrument on which Options Contract or  Futures Contract  is based.

Central Bank

Central Bank it is government or quasi-governmental organization that manages a country's monetary policy. For example, the US central bank is the Federal Reserve Bank, and the German central bank is the Bundesbank.

Chartist

Chartist - is an individual who uses charts and graphs and interprets historical data to find trends and predict future movements on online forex market.

Cleared Funds

Cleared Funds - are the funds that are freely available, sent in to settle a trade.

Closed Position

Closed Position exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will 'square' the postion.

FX Clearing

The Clearing - is the process of settling a trade.

Broker Commission

Broker Commission - is a transaction fee charged by a broker.

Counter Currency

Counter Currency - is the second listed Currency in a Currency Pair.

Cross Courses

Cross Courses it is Currency Pair  that does not  include the U.S. dollar. For example: EUR/JPY or GBP/CHF.

Currency Symbols

  • AUD - Australian Dollar
  • CAD - Canadian Dollar
  • EUR - Euro
  • JPY - Japanese Yen
  • GBP - British Pound
  • CHF - Swiss Franc

Currency Pair

Forex glossary term "currency pair" it is two currencies that make up a foreign exchange rate. For Example, EUR/USD.

Currency Basket

Currency Basket - is a selected group of currencies in which the weighted average is used as a measure of the value or the amount of an obligation. A currency basket functions as a benchmark for regional currency movements - its composition and weighting depends on its purpose.

Currency Risk

Currency Risk it is the probability of an adverse change in Exchange Rate.

Forex Day Trader


Forex Dealer


Delivery forex

Forex trade where both sides make and take actual forex delivery of the currencies traded.

Currency Depreciation

Currency Depreciation - is a fall in the value of a currency due to forex market forces.

Direct Quote

Direct Quote - is a foreign exchange rate quoted as the domestic currency per unit of the foreign currency.

Discount Rate

Discount Rate - is an interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank.

Double Bottom

Double Bottom term is used in technical analysis to describe the drop of a stock (or index), a rebound, another drop to the same (or similar) level as the original drop, and finally another rebound.

Double Top

Double Top term is used in technical analysis to describe the rise of a stock, a drop, another rise to the same level as the original rise, and finally another drop.

Downtick

Downtick - is a transaction on an exchange that occurs at a price below the previous transaction.

European Monetary Union

The principal goal of the EMU Union is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. On Janaury1, 1999 the transitional phase to introduce the Euro Currency began. The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros. This transition period will last for three years, at which time Euro notes an coins will enter circulation. On July 1,2002, only Euros will be legal tender for EMU participants, the national currencies of the member countries will cease to exist. The current members of the EMU Union are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

EURO Currency


European Central Bank

The European Central Bank (ECB) - is the Central Bank for the new European Monetary Union (EMU Union).

Exchange Rate

Exchange Rate it is the price of one country's currency expressed in another country's currency.

Federal Reserve Bank

The Federal Reserve - is the Central Bank for the United States.

FIFO

Open positions are closed according to the FIFO accounting rule. All positions opened within a particular Currency Pair are liquidated in the order in which they were originally opened.

Flat forex

Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.

Floating profit / loss

Profit/loss on open positions at the current prices.

Foreign Exchange

FX (Forex) - is financial market for the trading of currencies.

Forward Contract

Glossary forex term "Forward Contract" - is the pre-specified Exchange Rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.

Forex Fundamental Analysis

Fundamental Analysis - is an analysis of economic and political information with the objective of determining future movements in the financial market.

Futures Contract

A Futures Contract from forex glossary - an obligation to exchange a good or instrument at a set price on a future date. The primary difference between  Future (forex) and  Forward (forex) is that the Futures are typically forex online traded over an exchange (Exchange-Traded Contracts - ETC), versus fx forwards, which are considered (OTC) Over the Counter Contracts. An forex glossary term OTC is any contract NOT traded on an exchange.

Free margin

Forex Free Margin it is funds on the trading account, which may be used to open a position. It is calculated as equity minus Necessary Margin.

Good Till Cancelled

Good Till Cancelled (GTC) order, also called open order, is an order to buy or sell a security at a set price that is active until the investor decides to cancel it or the trade is executed.

Gross Domestic Product

Gross Domestic Product (GDP) - is a total value of a country's output, income or expenditure produced within the country's physical borders.

Gross National Product

(GNP) Gross National Product  it is Gross Domestic Product plus income earned from investment or work abroad.

Greenback Dollar

Greenback Dollar - is a slang term for U.S. paper dollars.

Hard Currency

Hard Currency - is a currency in which investors have confidence, such as that of an economically and politically stable country.

Head and Shoulders Chart

Head and Shoulders Chart - is a technical analysis term used to describe a chart formation in which a stock's price: rises to a peak and subsequently declines, then, the price rises above the former peak and again declines, and finally, rises again, but not to the second peak, and declines once more. The first and third peaks are shoulders, and the second peak forms the head.

Hedged Margin

Hedged Margin it is the required amount sufficient to open and maintain Locked Positions.

A Hedge Fund

A Hedge Fund - is an aggressively managed portfolio of investments that uses advanced investment strategies such as Financial Leverage, Long Position, Short Position and derivative position in both domestic and international markets with the goal of generating high returns.

Hit the Bid

Hit the Bid - is an acceptance of purchasing at the offer or selling at the Bid Price.

Hong Kong Dollars

Hong Kong Dollars - is the currency of Hong Kong.

Indicative Quote

In forex trading, a currency quote that is provided by a Market Maker to a trading party but that is not firm.

Initial Margin

Forex glossary term "Initial Margin" - is the initial deposit of collateral required to enter into a position as a guarantee on future performance.

Indirect Quote

Indirect Quote - is a foreign exchange rate quoted as the foreign currency per unit of the domestic currency.

Instant Execution

Instant Execution - is the mechanism of providing quotes to the client without prior request. The client receives the Quotes Flow in real-time and can send an instruction to make a Transaction forex anytime.

Currency Intervention

Action by a Central Bank to effect the value of its currency by entering the forex trading market. Concerted intervention refers to action by a number of central banks to control the exchange rates.

Japanese Yen

Japanese Yen - is the official currency of Japan.

The Kiwi

The Kiwi - slang for the New Zealand dollar forex.

Leading Indicators

Economic Leading Indicators - the statistics that are considered to predict future economic activity.

Financial Leverage

Forex Leverage - the ratio in respect of Margin and Transaction Size: 1:33, 1:100, 1:200, 1:300, 1:400, 1:500. e.g. the ratio 1:100 means that in order to make a deal the required amount on the trading account is hundred times less than transaction size.

LIBOR Rates

LIBOR Rates - London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

Limit Order

Limit Order - is an Order forex with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 117.00/05, then a limit order to buy USD would be at a price below 102. (ie 116.50)

Liquidations

Liquidations - the closing of an existing position through the execution of an Offsetting Transaction.

Liquidity forex

Liquidity forex - is the ability of online forex trading market to accept large Transaction forex with minimal to no impact on price stability.


 

Long Position


The Lot

The Lot - a unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.

Locked Positions

Locked Positions - Long Position and Short Position of the same size opened on the trading account for the same instrument. For example, if the client opens two buy lots, and three sell lots for the same instrument, then two buy lots and two sell lots are identified as locked positions, and one buy lot is identified as non-locked position.

Lot Size

Lot Size - the number of Securities forex or the Base Currency in one lot.

Manifest Error

Manifest Error - is an error of Forex Dealer who opens/closes a position or executes an Order forex at the price which significantly differs from the price of this instrument in the Quotes Flow at the moment of performing this action, or any other dealer’s act or omission in respect of the prices which are significantly different from online forex market prices.

Margin

Margin - is the required equity that an investor must deposit to collateralize a position.

Forex Margin Trading

FX Margin Trading - the leverage trading when the client may make Transaction forex having far less funds on his/her Trading Account.

Margin Call

Margin Call - is a request from Forex Broker or Forex Dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.

Margin Level

Margin Level - is the ratio of equity to the Necessary Margin expressed in percentage. It is calculated as (equity/margin)*100%.

Forex Market Maker

Glossary term "FX Market Maker" - it is Forex Dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

Market Risk

Financial Market Risk - exposure to changes in forex market prices.

Market Opening

Market Opening - time when the forex market opens after weekends, holidays or time gaps between the trading sessions.

Necessary Margin

Necessary Margin is demanded by the company, this is the sum of money that needs to support Opened Positions. For each tool this sum will be determined by credit holder and the value of the opening position.

Net Position

Net Position - is the amount of currency bought or sold which have not yet been offset by opposite Transaction forex.

Nontrading Operation

An operation of depositing/withdrawing assets to/from the Trading Account or operation of lending /reimbursement of the credit.

Offer Price

Offer Price - the rate at which a Forex Dealer is willing to sell a currency. See Ask Price.

Offsetting Transaction

A trade which serves to cancel or offset some or all of the Maret Risk of an Open Position.

Open Order

Open Order - is an order that will be executed when online forex trading market moves to its designated price. Normally associated with Good Till Cancelled Orders.

Open Position

Open Position - is an active trade with corresponding unrealized Profit/Loss, which has not been offset by an equal and opposite deal.

Overnight Position

A trade that remains open until the next business day.

Order forex

Order forex - is a client's order to buy or sell a certain amount at a given rate.

Order Level

Order Level - the price indicated in the Order forex.

OTC market

The term over-the-counter market is used to describe any Transaction forex that is not conducted over an exchange.

Personal Area


Pending Order

Pending Order - is a client's order to open a position when a price reaches a certain level.

Pip forex

Pip forex (point) - the minimum value of the change in the cost of currency. Usually it is the second or the fourth decimal sign after the point, that is 0,01 or 0,0001 accordingly. See also: Tick forex.

Point-and-Figure Chart

Point-and-Figure Chart - is a chart that plots day-to-day price movements without taking into consideration the passage of time.

Price Transparency

Price Transparency describes Quotes forex to which every market participant has equal access.

Profit /Loss

Profit /Loss - the actual "realized" gain or loss resulting from trading activities on Closed Position, plus the theoretical "unrealized" gain or loss on Open Position that have been mark-to-market.

Quote forex

Quote forex - is a security price considered while buying and selling. It is expressed in Ask Price and Bid Price.

Quotes Base

Quotes Flow information stored on the Server forex.

Quote Currency

Quote Currency - is the second currency in the Currency Pair which can be bought or sold by the client for the Base Currency.

Quotes Flow

The stream of prices for each instrument in the online forex trading platform.

Range Market

The difference between the highest and lowest price of a future recorded during a given online forex trading session.

Forex Resistance

Forex Resistance it is term used in Technical Analysis indicating a specific price level at which analysis concludes people will sell.

Rollover forex

Rollover forex - is the process of extending the settlement Value Date on an Open Position forward to the next valid value date.

Security forex

Any share, Futures Contract, option or Forward Contract, commodity, precious metal, interest rate, debt instrument or stock index.

Sell Limit Order

Sell Limit Order - is an order to execute a Transaction forex only at a specified price (the limit) or higher.

Server forex

Software product MetaTrader Server 4.

Short Position


Spike

The comparatively large upward or downward movement of a price  in a short period.

Spot Price

Spot Price - is the current online forex market price. Settlement of spot transactions usually occurs within two business days.

Spread forex

Spread forex - is the difference between the Bid Price and Offer Price.

Square forex

Purchase and sales are in balance and thus Forex Dealer has no Open Position.

Sterling Currency

Sterling Currency - slang for British Pound.

Stop Loss Order

Stop Loss Order - ia an order type whereby an Open Position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.

Stop out

An instruction to close the client's Open Position without the consent of the client or any prior notice in case of insufficient funds required for maintaining open positions.

Support Levels

Term in Technical Analysis that indicates a specific price ceiling and floor at which a given Exchange Rate will automatically correct itself.

Swap forex

Swap forex - is a currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward Exchange Rate.

Swissy

Swissy - is a market slang for Swiss Franc.

Take Profit Order

Take Profit orders are used to lock in profits in the event the rate moves in a favorable direction.

Technical Analysis

Technical Analysis - is an effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.

Tick forex

Tick Forex- the minimum value of the change in the cost of currency. Usually it is the second or the fourth decimal sign after the point, that is 0,01 or 0,0001 accordingly. See also: Pip forex.

Thin Market

Thin Market - is the market in which Quote forex in forex trading platform are rare as opposed to the normal market conditions. Such conditions are usual for Christmas, national holidays in G7, from 20:00 till 00:00 GMT etc.

Tom-Next

Tom-Next - the simultaneous buying and selling of a currency for Delivery forex the following day.

Forex Trader

Forex Trader - is a market participant, who makes deals in order to gain profit.

Forex Trading Account

Forex Trading Account - is the unique personified registration system of all completed Transaction forex, Open Position, Order forex and deposit/withdrawal transactions in the metatrader trading platform.

Transaction forex

Transaction forex - is an operation of buying or selling a financial instrument.

Transaction Date

Transaction Date - the date on which forex trade occurs.

Transaction Size

Transaction Size - Lot Size multiplied by number of lots.

Tool Forex

Tool Forex - is a Currency Pair or a contract for difference.

Trend Forex

Trend Forex - is a direction of forex trading market movement: up, down or sidewise.

Turnover

Turnover - the total money value of all executed Transactions forex in a given time period,  volume.

Two-Way Quote

When both a bid and offer rate is quoted for a Transaction forex.

Unrealized Gain / Loss

The theoretical gain or loss on Open Position valued at current market rates, as determined by the Forex Broker in its sole discretion. Unrealized Gains Losses become Profit/Loss when position is closed.

Uptick

Uptick - is a new price quote at a price higher than the preceding quote.

Uptick Rule

The Uptick Rule - in the U.S., a regulation whereby a Security forex may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.

US Prime Rate

US Prime Rate - is the interest rate at which US banks will lend to their prime corporate customers.

Value Date

Value Date - is 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.

Variation Margin

Variation Margin - funds Forex Broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements.

Volatility forex

Volatility forex - is a statistical indicator which characterizes the tendency of forex market price change.

World Trade Organization WTO

The WTO - International government organization (with over 120 members) designed to shape an international trade system; it was created in 1994 as the GATT successor. WTO headquater is in Geneva. Although the Soviet Union was a member of the GATT, Russia is not a member of WTO yet.

ECN broker

Forex ECN broker provide access to an electronic trading network, supplied with streaming quotes from the top tier banks in the world. By trading through an ECN broker, a currency trader generally benefits from greater price transparency, faster processing, increased liquidity and more availability in the marketplace.

Straight Through Processing STP

Straight Through Processing (STP) in our forex glossary - is a direct order execution. In this model, the brokerage company is an intermediary between clients and providers of liquidity. Clients orders in the STP model are automatically sent to the provider of liquidity, while Forex Broker gets a commission and a portion of the spread. In this model, the brokerage company is interested in increasing the volume of trades, because it makes profit by taking commission for each Transaction forex. There is no conflict of interest between the broker doing STP and his client.

Gap Forex (Gap Forex)

Price range, within which there were no quotations.