- ADI Abbreviation for Average Directional Index. It is a technical indicator that measures the strength of a trend in the forex market.
- Appreciation A state in which a currency’s price strengthens in response to the demand in the market
- Anonymous Trading The bids and offers that appear in the forex market without the identity of the seller or buyer being exposed.
- Arbitrage A rare opportunity to make profit in forex especially when a price difference occurs
- Ask Rate Also known as offer, it is the lowest price at which shares are offered for sale
- Authorized Dealer A financial institution or a bank that has the mandate or authority to deal in foreign exchange
- Attorney in charge A person given the authority to trade in the forex market on behalf of another trader
- Away from the market A situation in which a bid is lower than the current market price
- Asset allocation The process of putting one’s assets into different sectors in order to maximize the potential of making more profit and also to minimize risk of loss.
- Bank Rate The percentage rate that central banks use to lend money to commercial banks in different countries
- Balance of Payments An account of all the transactions that one country has had with another. Often includes foreign investments and investments by foreigners.
- Balance of trade The difference of exports and imports of a given country
- Bear An investor who has a strong belief that the market or the market prices will decline
- Bear Market A kind of market where prices are likely to decline
- Bull An investor who believes that the market or market prices will rise
- Bull Market A kind of market where prices are always rising or are always expected to rise
- Bid The selling price of a given currency
- Broker The person who serves as a link or bridge between retail traders and large financial firms the same time
- Liquidity The ability of a market to accept large transactions with minimal or no impact at all on the price stability
- Breton Woods Agreement A universally acceptable system for monetary and exchange rate management that was established in 1944 in the USA.
- Counter Currency The second currency in a currency pair that is being traded
- Cross Currency The situation in which one foreign currency is traded for another currency without first having to change it into US dollars
- CCI Abbreviation for Commodity Channel Index. It is a technical indicator that is used to know the currencies that have either been overbought or oversold
- Commission The money charged by a broker for handling a currency exchange
- Currency Trading A money market where different currencies are exchanged everyday
- Cross Currency Transaction Involves the trading of more than two different currencies at the same time
- Commodity Pairs Three pairs of currencies from countries that have the largest amounts of commodities. These three pairs of currencies are: USD/CAD, USD/AUD, and USD/NZD
- CPI Initials for Consumer Price Index. It is the statistical measure of inflation based upon changes in price of a specified set of goods.
- CFD Initials for Contract for Difference. It is a trading instrument that allows financial speculation on stocks, commodities and other instruments even without buying or selling currencies
- Day Trading The process of opening and closing trade within the same day or the same trading session.
- Deficit Too much liabilities compared to assets or too much losses compared to profits
- Depreciation A state in which a currency’s price weakens according to the demands of the market
- Demo Trader A trading account that allows a potential forex trader to test the trading systems using fake money before indulging in real trading
- Expert Advisor A script within the trading platform software to manage the market positions and place orders with little or no manual control.
- ECN Broker A brokerage firm that provides its forex clients with direct connections to other forex market participants.
- Federal Reserve Also known as Fed, it is the central bank of USA that is responsible for making monetary regulations and policies.
- Forex An acronym for foreign exchange
- Forex Trader A person who engages in trading currencies
- Forex Robot An automated trading software that is programmed with trading signals to determine when to place an order on behalf of a human trader
- Fundamental Analysis A market analysis that involves taking a keen look at the forex market situation and interpreting the statistics appropriately in order to help a trader to trade wisely.
- Flat A condition in which all possible trading positions are closed
- GDP Initials for Gross Domestic Product. It is one of the most important forex indicators. It looks into the income and output of a given economy.
- GTC Initials for Good Till Cancelled. It is an order to buy or sell a currency at a fixed price but this order only stands, said to be good, until it is cancelled.
- Gap The difference between the closing price of one trading session and the opening price of the next trading session
- Hedging A risk management strategy in which a trader comes up with ideas of minimizing, eliminating or avoiding huge losses is a forex market
- Inflation Increase in price levels and decrease in wages leading to a decrease in purchasing power
- Interbank Rate The rate at which major banks trade in foreign exchange
- Leading Indicators Statistics used to predict the economy of a given country
- Leverage Use of borrowed funds to increase the probability of making huge returns
- Margin The amount of money that a trader sets aside to trade in the forex market
- Margin Account The account where the trading capital is kept
- Margin Call Demand for additional funds at a minimum level in order to cover a movement in market price.
- Market Price The current price at which the currencies are being traded in the forex market
- Money Market Markets for short-term investing in monetary instruments and debts.
- Mine and Yours Terminologies used by traders when they want to sell (Mine) and buy (Yours) currencies
- Market Risk The risk associated with investing in the forex trade. A risk that cannot be hedged
- Order An instruction to a broker or a trader to trade at a given market price
- Open Order A trading order that remains valid until it is cancelled by a trader
- Open Position A trading position that is open but yet to be used by a trader
- Overnight A trading position that remains open and valid until the next business day
- Overtrading Deviating from the initial trading plan and trading based on emotions
- Principal Value The initial amount of money that a trader invested in the forex market
- Pip The smallest increase in the exchange rate that a currency can make
- Rate The price of one currency against the other. Also known as the exchange rate
- Risk Capital The amount of money that a trader is willing to invest in the forex market
- Spot A transaction that occurs immediately though money usually changes hands after two days the moment the transaction deal is struck.
- Spread A platform used to measure liquidity. It is often the difference between bid and offer prices.
- Stop Loss Order An order to buy or sell a currency when a market reaches a certain fixed price. This is often used to stop extra losses when the market moves to a different direction.
- Scalping A form of trading that involves many openings for short-term profits
- Swap The situation in which a trader exchanges one currency for another but only holds it for a period of time. This is often done to determine the interest rate levels between two currencies
- Technical Analysis Interpretation of statistics for the technical market data with the help of other technical market indicators.
- Transaction Date The date in which a trade occurs
- U.S Prime Rate The standard rate at which most major banks use to lend money to clients
- Variation Margin An additional fund that a broker requires from a trader when the market fluctuates.
- Volatility The tendency of market prices to fluctuate over time
- Value Date The settlement date for a given trade either spot trade or future trade
- XE Initials for Xpress Engine, it is the most visited currency site that offers a currency converter together with other tools