Master forex terminology with our comprehensive glossary of 200+ essential trading terms, definitions, and practical examples. From basic concepts to advanced strategies"”your complete forex dictionary.
The price at which a trader can buy a currency pair. Also known as the offer price, it's always higher than the bid price. The difference between ask and bid prices creates the spread.
The practice of buying and selling identical assets in different markets simultaneously to profit from price differences. In forex, this might involve exploiting rate differences between brokers or exchanges.
The official currency of Australia, commonly traded against USD, EUR, and other major currencies. Known for its strong correlation with commodity prices, particularly gold and iron ore.
A technical indicator that measures market volatility by calculating the average range of price movements over a specified period. Higher ATR values indicate higher volatility.
The first currency in a currency pair quotation. It represents the currency being bought or sold, and its value is always expressed in terms of the quote currency.
A market condition characterized by falling prices and widespread pessimism. In forex, this refers to a currency that is weakening against other currencies over an extended period.
The price at which a trader can sell a currency pair. It's always lower than the ask price, and the difference between bid and ask creates the spread that brokers charge.
A technical analysis tool consisting of a moving average and two standard deviation bands above and below it. Used to identify overbought and oversold conditions in the market.
A price movement that breaks through an established support or resistance level, often with increased volume. Breakouts can signal the beginning of new trends or continuation of existing ones.
A market condition characterized by rising prices and widespread optimism. In forex, this refers to a currency that is strengthening against other currencies over time.
Trader slang for the GBP/USD currency pair. The nickname originates from the transatlantic cable that was used to transmit exchange rates between London and New York in the 19th century.
The official currency of Canada, commonly known as the "Loonie" due to the loon bird featured on the one-dollar coin. CAD is strongly correlated with oil prices due to Canada's oil exports.
A strategy where traders borrow money in a currency with a low interest rate and invest it in a currency with a higher interest rate, profiting from the interest rate differential.
The primary monetary authority of a country responsible for controlling money supply, setting interest rates, and implementing monetary policy. Central bank decisions significantly impact currency values.
A financial derivative that allows traders to speculate on price movements of an underlying asset without actually owning it. CFDs can be used to trade currencies, stocks, commodities, and indices.
A fee charged by brokers for executing trades, typically calculated per lot or as a percentage of trade value. Some brokers offer commission-free trading but wider spreads instead.
A trading strategy where positions are opened and closed within the same trading day, avoiding overnight exposure. Day traders focus on short-term price movements and technical analysis.
A situation where price moves in the opposite direction to a technical indicator, often signaling a potential trend reversal. Can be bullish (price makes lower lows, indicator makes higher lows) or bearish.
The decline in account value from a peak to a trough, usually expressed as a percentage. Maximum drawdown measures the largest peak-to-trough decline in account equity.
A trading network that automatically matches buy and sell orders from multiple market participants, providing direct market access with transparent pricing and typically tighter spreads.
The official currency of the Eurozone, used by 19 of the 27 European Union member countries. It's the second most traded currency globally after the US Dollar.
Currency pairs that include one major currency and one currency from an emerging or smaller economy. These pairs typically have wider spreads and lower liquidity than major pairs.
A technical analysis tool that uses horizontal lines to indicate areas of support or resistance at key Fibonacci levels (23.6%, 38.2%, 50%, 61.8%, and 78.6%) before price continues in the original direction.
The global marketplace for trading currencies, where participants buy and sell currency pairs. It's the largest financial market in the world with over $7.5 trillion in daily trading volume.
An exchange rate agreed upon today for a currency transaction that will occur at a specified future date. Forward rates are determined by interest rate differentials and current spot rates.
A method of evaluating currencies by analyzing economic, political, and social factors that might affect supply and demand. Includes studying GDP, employment, inflation, and central bank policies.
The use of borrowed capital to increase potential returns on investment. In forex, leverage allows traders to control larger positions with smaller amounts of capital, amplifying both profits and losses.
The ease with which an asset can be bought or sold without significantly affecting its price. High liquidity means many buyers and sellers, resulting in tighter spreads and better execution.
Buying a currency pair with the expectation that its value will rise. When you go long, you're buying the base currency and selling the quote currency.
The standard unit of trading in forex. A standard lot equals 100,000 units of the base currency, while mini lots are 10,000 units and micro lots are 1,000 units.
A technical indicator that shows the relationship between two moving averages of a currency pair's price. Used to identify trend changes and momentum shifts in the market.
The most actively traded currency pairs that include the US Dollar paired with other major currencies. These pairs offer the highest liquidity and lowest spreads.
The deposit required to open a leveraged position. It's expressed as a percentage of the full position size and acts as a good faith deposit to cover potential losses.
A technical indicator that smooths price data by creating a constantly updated average price over a specified time period. Used to identify trend direction and potential support/resistance levels.
The smallest price increment in a currency pair, typically the fourth decimal place for most pairs (0.0001) or the second decimal place for JPY pairs (0.01).
The amount of currency units bought or sold in a trade. Proper position sizing is crucial for risk management and determines potential profit or loss amounts.
A price level where selling pressure is expected to emerge, preventing further upward price movement. Resistance levels are identified through historical price action and technical analysis.
The relationship between potential loss (risk) and potential profit (reward) on a trade. A 1:2 risk-reward ratio means risking $100 to potentially make $200.
A momentum oscillator that measures the speed and change of price movements, ranging from 0 to 100. Values above 70 suggest overbought conditions, while values below 30 suggest oversold conditions.
A high-frequency trading strategy that aims to profit from small price movements, typically holding positions for seconds to minutes and making many trades per day.
Selling a currency pair with the expectation that its value will fall. When you go short, you're selling the base currency and buying the quote currency.
The difference between the bid and ask prices of a currency pair. It represents the cost of trading and is how many brokers generate revenue.
An order to close a position automatically when the price reaches a predetermined level, limiting potential losses. Essential for proper risk management.
A price level where buying interest is expected to emerge, preventing further downward price movement. Support levels are identified through historical price action and technical analysis.
The interest rate differential between two currencies in a pair, paid or received for holding positions overnight. Also known as rollover charges or financing costs.
A medium-term trading strategy that holds positions for days to weeks, aiming to profit from price swings within larger trends. Popular among part-time traders.
An order to automatically close a position when it reaches a predetermined profit level. Used to lock in gains and remove emotion from profit-taking decisions.
A method of evaluating currencies by analyzing statistical trends gathered from trading activity, such as price movement and volume. Uses charts, patterns, and indicators.
The general direction of price movement over time. Trends can be upward (bullish), downward (bearish), or sideways (ranging). Identifying trends is fundamental to technical analysis.
The degree of variation in a currency pair's price over time. High volatility means larger price swings, while low volatility indicates more stable, range-bound movement.
The total number of shares or contracts traded in a security during a given period. In forex, volume indicates market activity and strength of price movements.
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