Arbitrage
It refers to using the difference in currency prices in multiple markets and turning it into a profitable selling strategy to make small profits. Purchasing currency in one market at a lower price and selling it in the opposite, yet the equally related market for a higher price will reap profits from the difference in the price.
Ask
Ask is also known as ‘Ask Price.’ It is referred to the price of a specific currency offered to and accepted by a trader in the market.
Asset
Any item or product with immense value is considered an asset, which people can quickly own and view as a prized possession. A currency or a currency pair are great examples of assets.
Base Currency
When two different currencies are quoted against each other as a currency pair, the former is considered the ‘base currency.’ An example of the base currency would be USD in a currency pair of USD/GBP.
Bear Market
Bear Market is also known in its short form as ‘bear.’ It refers to an asset’s value or price while it is decreasing. It applies to any asset, security, or currency which is declining. Hence, when the forex market’s state falls, it is also termed’ bearish.’ The Bull market is the complete opposite of the Bear market.
Bull Market
The state of a rise in the price or value of any currency, asset, or service is known as ‘Bull Market,’ which is termed as ‘Bull’ or ‘Bullish’ about the rising condition of a forex market. The controversial trend of a bull market is known as a bear market.
Bid
The price at which a trader sets his specific currency or asset to be sold is known as Bid or Bid price.
Buy Limit Order
The price threshold is specifically known as the ‘limit.’ A dedicated price or lower than that is the threshold at which an order is pushed via a transaction. This kind of order is known as a buy-limit order.
Carry Trade
This concept refers to a strategy used to profit based on the differences between two or more interest rates. The investor borrowing buys assets or currencies at a lower interest rate, and later, these assets or currencies are converted to other currencies that pay higher interest rates.
Closed Position
When an end is put to any transaction, regardless of the losses or profits accompanying it, this is called closing a position.
Closing Market Rate
The terminal price or value at which a currency trades is the closing price or market rate. It applies to trading conducted on any day or during any particular time.
Currency Appreciation
Currency Appreciation refers to the rise in the value of any currency against another currency.
Currency Futures
Currency Futures are popular trading tools used amongst traders and are pretty standard. These are specific contracts that mention the price of any currency at which it can be bought or sold. The agreement also contains a future date previously selected for this purpose.
Currency Pair
Currency pairs are also considered the nuclei of the forex market as, within the forex transactions, the trading of the two mentioned currencies occurs. Different types of currency pairs fall under the categories of ‘exotic,’ ‘major,’ and ‘minor.’ An example of a major currency pair is GBP/USD.
Daily Chart
All the activities that have taken place centered around a specific currency in one trading day are highlighted on a detailed graph known as the ‘Daily Chart.’
Day Trade
When a forex trade is opened and closed on the same day, it is known as a day trade.
Demo Account
When virtual funds are used instead of real capital by any forex trading account, that account is called a ‘Demo Account.’ It has various other common names, such as ‘virtual currency account’ or a ‘dummy account,’ its purpose is to provide a way for traders to make trades using only virtual funds and, therefore, explore the market more thoroughly.
Depth of Market
The depth of the market is a measure of the volume of the number of orders for a currency’s buying and selling. It includes multiple price ranges for both buying and selling.
Drawdown
Drawdown is the term used for the difference in the price of currency from its peak price to its currently lower price when there has been a notable dip.
ECN Broker
ECN stands for ‘Electronic Communications Network,’ and the work of an ECN broker is to provide robust access to liquidity providers for all clients.
Exchange Rate
The cost price at which various currencies are traded for one another is known as the exchange rate, and this represents the necessary foundation of the forex market.
Execution
Mobilizing a trade and finally completing it is known as the execution of the trade.
Exposure
When dealing with a currency, the investment amount and all the market risks concerning this particular currency are collectively addressed as its’ Exposure.’
Fill Price
The fill price is the terminal price at which an order has been successfully closed and completed.
Fill or Kill
A fill or kill order applies to completing an order at a predetermined price, which the investor has selected in a forex market. In the case of failure to fulfill the order at that particular price, the order will then be terminated. Hence the name ‘fill or kill.’
Floating Exchange Rate
An unfixed exchange rate is a floating exchange rate subject to various fluctuations. It is highly based on multiple factors, such as the demand and supply of a specific currency concerning several other currencies.
Forex Chart
Forex charts are digital graphs covering the movements and activities of a currency pair over weeks, months, years, or just a few days. It mentions all the highlights and lowlights and is similar to daily charts.
Forex Scalping
Forex scalping is a prominent trading strategy that uses the ‘little and often’ approach. Instead of conducting trades through massive price movements, there are better chances of making more profits if you only open and close trades for a limited time frame. It applies to the buying and selling any asset or currency in the forex trading market.
Forex Signal System
All the subscribers are provided signals by the Forex signal system, which intends to alert the traders regarding the best time to perform buying or selling trades in the market.
The forex signal system is designed to help traders make healthy trading decisions, and the system can manually or automatically trigger trades. It benefits traders to make reasonable profits at the most appropriate times.
Forex Spot Rate
Any currency’s exchange rate at which it is usually sold or bought is known as the Forex Spot Rate.
Forex Trading Robot
The Forex Trading Robot is a well-designed software that is a practical, automated guide that helps traders make improved profits based on the best time to purchase or sell their currency pairs. It functions as an automatic robot, hence the name.
Fundamental Analysis
To achieve better direction regarding the future of the trading market for their portfolios, traders perform fundamental analyses that recognize and predict the effects that economic and political events may have on the forex market. These could depend on multiple factors, such as the announcements on the variability of interest, unemployment rates, etc.
Hard Currency
Simply put, the most dependable form of currency is hard currency. Examples include Euros (EUR), US Dollar (USD), and Great Britain Pound (GBP). These currencies are referred to as hard currencies because regardless of the political and economic situation worldwide, these remain buoyant and never lose their value. The opposite of hard currency is soft currency.
Hedge
As many unpredictable fluctuations in asset and currency prices occur frequently, hedge trading is the strategy investors use to deal with such uncertain markets.
This kind of trading allows the traders to invest in two diverse assets such that any losses or profits incurred will balance out each other effectively. By doing so, all the achieved losses can be made up for.
Intervention
When the central bank of any nation enters the market to have more strengthening and effective control over the currency exchange rate, such action is termed as an intervention. The bank will have a direct means of altering the currency’s value through intervention.
Leverage
Forex brokers offer traders the chance to increase their buying power as much as possible. This way, the traders can then make massive volumes of trade currencies, with only having to deposit a first and minor capital sum.
This service is known as leverage, and it is merely represented by a ratio such as a leverage of 1:50, meaning that the purchasing power of the trader is improved by 50 times.
Limit Order
Limit orders refer to those orders that require purchasing or selling trade at a particular price or better than that. Taking an example of a currency pair exchange rate of EUR/USD at 1.08503/1.08523, the limit order would equate to buying the EUR at a lesser price, which would amount to 1.08522 or lower than this.
Liquidity
Liquidity refers to the available amount of any current currency which can be actively used for trading.
Long Position
Taking a long position for any investor means that he is trying to profit from the increase in the market price of the base currency, which he has bought initially. The controversy of a long position is a short position.
Lot
This is a standard quantity measure of the trading currencies. For example, 10,000 units of a specific currency will equal one lot.
Margin
Maintaining an open position requires a minimum amount of account balance, known as the ‘margin.’
Margin Call
To maintain the open positions and keep them active, traders are usually notified through an alert system which requires them to deposit an additional amount in the balance account. This alerting signal is known as the margin call.
Market Order
Instant trading requires a market order, allowing the trade to be conducted immediately at the best price. It is mandatory when traders want to make quick and prompt transactions.
Micro Lot
Around 1000 units of any base currency are termed a micro lot in a pair.
One Cancels the Other (OCO)
OCO consists of two limit orders. When one of the limit orders is conducted, the other one will get automatically canceled based on the principles of OCO.
Open Position
Irrespective of the losses or profits achieved from the trading of a currency pair, open position refers to the position of the trader’s active status of trading.
Over the Counter
‘Over the Counter’ trades are now obsolete. They composed,d conducting, and pushed orders over electronic devices and telephones, which was the old and traditional way. This form of trading is hardly used now as online forex trading has advanced tremendously in the technological world.
Overnight Position
Instead of closing an open trade during the same day, carrying the trade onto the next trading day by keeping the position open throughout the night is known as an overnight position.
Pip
Percentage in point, also known in its shortened form as Pip, amounts to the least possible variation in a currency’s exchange rate. The final decimal point is subject to alterations as currencies are usually measured in decimals up to four decimals points.
Profit Taking
Profit-taking refers to collecting the final profits when a forex position is closed.
P&L
Profit and Loss are also abbreviated as P&L more commonly.
Quote Currency
Currency pairs include two different currencies listed together. Just like the former is known as the base currency, the latter is called the quote currency. Taking GBP/USD as an example, here, the quote currency will be USD.
Rally
After a currency has undergone a decline, irrespective of the time duration of the fall, the price’s recovery phase is known as ‘Rally.’
Resistance
When a currency cannot rise beyond a specific price level, that level is termed resistance. Unfortunately, the currency will keep trying to break the barrier and rise above that level but fall back to its decline.
Risk Management
Risk management aims to use innovative strategies and resourceful tools that can help reduce financial risk in such unpredictable and variable forex market trends. Via risk management, traders try to limit their losses and protect capital as much as possible.
Rollover Rate
While keeping an overnight position, traders must pay or earn interest, which is calculated based on the rollover rate. The word ‘rollover’ indicates how the positions are kept open from one day to another.
Short Position
When the decline of a currency is used to make profits, this position is known as a short position. The position is considered short when the currency pair’s base currency is traded off. The controversy of a short position is a long position.
Slippage
The conduction of trade at more than the expected or predicted price is described as ‘Slippage’ and is usually seen during severe market fluctuations. Market orders and stop-loss orders are used by investors, which leads to the occurrence of slippage.
Soft Currency
Soft currencies are often called unstable currencies subject to diverse, unpredictable, and massive variations in volatile political and economic events. The opposite of a soft currency is a hard currency. Examples of soft currencies include the North Korean Won (KPW) and the Zimbabwean Dollar (ZWD).
Speculator
A trader who openly takes more significant risks in the trading market based on the hope and chance of making higher profits through these higher trading risks is known as a speculator.
Spike
The term spike is used to refer to any sudden shifts in the price of currency during a time frame of relatively short duration. Usually, spikes are associated with upward trends, but in the forex trading market, all upward and downward sharp trends or movements are referred to as spikes.
Spread
The currency pair’s bid and ask prices differ, which is commonly referred to as the spread. Presented in pips, the spread covers all the costs of service brokerage and is responsible for replacing transaction fees. There are three significant forms of spread, a fixed spread, a variable spread, and a fixed spread with an extension.
Stop-Loss Order
The purpose of a stop-loss order lies in its name as well, which is to prevent any losses from occurring by setting in position a stop-loss order. This order allows the trading of a currency when the currency is parked at a specific cost.
Take Profit Order (T/P)
The moment when a position in the market arrives at a preselected price range or a certain price threshold, the position has to be closed, leading to the collection of all the profits. Therefore, this order is merely known as the Take-Profit Order.
Technical Analysis
Investors conduct thorough technical analyses to understand forex market trends better and predict their future variations. To perform such in-depth studies, investors adequately review the old and newly available data using advanced analysis tools, charts, and other trading indicators.
Volatility
The fluctuations and unpredictable spikes in the forex market are addressed regarding its volatility. It applies to all the market’s assets, currencies, currency pairs, etc. The term is also generally used to describe the uncertain forex market.
Yield
When a forex trading investment is made, any return from it is known as the ‘Yield.’ It is represented as “Percentage.”
