Forex Glossary

Account – the record in the database, which contains information about 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 you can buy currency. Ask price is bigger than Bid price.

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

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

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

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

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

Bid – the price at which you can sell currency. Bid price is lower than Ask price.

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

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

Buy limit – pending order to buy at a price lower than the current price level (buy cheaper than now). It is placed with the expectation that the price will drop to a certain level and then will start increasing again.

Buy stop – pending order to buy at a price higher than the current price level (buy more expensive than now). It is placed with the expectation that the market price will reach a certain level and will continue to grow.

Cable – the 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 the commercial banks of its country.

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

Currency pair – financial instrument, that is traded on the foreign exchange market. Currency pair is formed by two currencies, which are written as a ratio of one to another. For example, USD/JPY. The result is called the exchange rate or a quotation.

Day trading – trading operations that are completed within a day.

Dealer – an individual or company, with whom a trader has an agreement, governing the basics of trading operations. The dealer takes the responsibility to act as a second part of the transaction.

Deposit – funds put 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 time. For example, 1 EUR can be bought for 1.3000 USD. It looks like: EUR/USD = 1.3000.

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

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

Flat – a period, when the price stays within the same range and does not express the direction of growth or decrease.

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

Gap – the breaks on the quotation graphs 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 unforseen circumstances (e.g., after the weekend).

Hedging – the use of one financial instrument to reduce risk, which is 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 – the tools of the computer analysis of price movements on the basis of statistical data used in technical analysis.

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

Kiwi (NZD) – the slang term for New Zealand currency (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 conduct a trade of a USD 100 000 volume, having only USD 1 000 of your own funds.

Liquidity – the feature of one asset to change for another one. A bigger liquidity gives an opportunity to make 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 market price grows.

Lot – a certain amount of units or the sum of assets used for executing the trade of a certain instrument (for currency pairs, one standard Forex lot is 100 000 units of the base currency).

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

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

Margin call – a notification that shows that little 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 at the moment when the remaining funds on the trading account is a certain percent from the margin (for example, 40%).

Market Execution – the method of order execution, where the order is executed in any case. If the price changes at the moment of order execution, it will be executed at a new, changed price.

Market-maker – a large bank or financial organization, that determines current currency rates because of the major part of its operations in the whole market's volume.

News trading – a type of trading system, the essence of which is in receiving profit on the price gaps at the moments of important economic news release.

Non-market quotation – a quotation that matches the following conditions:
  • the presence of significant price gap;
  • the return of price within a short period to the initial level with price gap formation;
  • the absence of fast price dynamic before the appearance of this quotation;
  • the absence of important economic news, which considerably influence the rate of the financial instrument, at the moment of the appearance of the quotation.

Order (position) – client's instruction to execute trade at a specified rate (to buy or sell 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 – the process of buying or selling certain volume of financial instruments, for profit because of the changes in quotations in the favorable direction. To fix trading results, you need 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 – the unit of financial instrument price change (0.00001). For example, if the quotation changes from 1.30000 to 1.30001, this means that it changes for 1 pip. Please do note that point and pip are different units, take into consideration that 1 point = 10 pips.

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

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

Resistance level – the term of technical analysis, which determines the 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 on the accounts with Instant Execution.

Scalping – a trading strategy, where a trader executes a big amount of orders during a short period (even a couple of seconds) and fixes profit in several pips.

Short – a position to sell. Its profit increases with the decrease of the market price.

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

Sell limit – pending order to sell at a price higher than the current price level (sell more expensive than now). It is placed in with the expectation that the market price will increase up to a certain level and then will begin to fall.

Sell stop – pending order to sell at a price lower than the current price level (sell cheaper than now). It is placed with the expectation that the market price will decrease up to a certain level and will continue to fall.

Spread – the real time difference between the Bid and Ask prices of one currency for another one.

Stop out – the process of automatic order closing. This procedure takes place at the moment when the remains on the trading account is a certain percent from the margin (for example, 20%).

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

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

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

Swap – 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 forecast is based on the fact that the market has memory and future changes will be influenced by patterns of its behavior in past.

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

Trading platform (trading terminal) – a trader's software, that lets execute trade from the computer or another telecommunication device.

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

Volatility – strength of the exchange rate variation.

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