If you have come across a forex term that
you are unfamiliar with then you have come to the right place. The FP Markets trading glossary
includes a comprehensive list of definitions that will help you understand even the most complex
forex trading terms.
'Bears' and 'bulls' may be wild animals in
the wild but they mean something completely different in the world of forex. The glossary includes
common day trading terms such as 'bid' and 'ask' along with in-depth explanations on a range of
forex strategies, tools and indicators.
The benefits of expanding your vocabulary
should not be underestimated. Forex analysts and industry experts constantly use jargon when
presenting educational materials such as eBooks and video tutorials. An example is the nickname
given to major currency pairs. The AUD/USD currency pair is nicknamed the 'Aussie' while the USD/CAD
pair is commonly referred to as the 'Loonie'. When in need of an explanation, look no further than
the FP Markets trading glossary.
Exchange rate regimen
where a currency’s conversion rate is ‘pegged’ (fixed) in relation to a stronger
currency (such as the US dollar or Euro). The pegged rate is adjusted occasionally
in an attempt to improve the country’s competitive position.
Altcoins are the
alternative cryptocurrencies launched after the success of Bitcoin. Generally, they
project themselves as better substitutes to Bitcoin. At the time, cryptocurrencies
other than bitcoin were referred to as altcoins (or alternative coins). The term has
stuck among cryptocurrency traders and is still used to refer to lower cap
Bids and offers that are
present on the financial markets without disclosing the identity of the market
participants. Many stock exchanges, such as the London Stock Exchange, Toronto Stock
Exchange, and NASDAQ, as well as dark pools offer anonymous trading.
Appreciation, in general
terms, is an increase in the value of an asset over time.The increase can occur for
a number of reasons, including increased demand or weakening supply, or as a result
of changes in inflation or interest rates. A currency is said to ‘appreciate’ when
it strengthens in price in response to market demand.
A financial entity that
has received authorization from a relevant regulatory body to act as a dealer
involved with the trading of foreign currencies. Dealing with authorized forex
dealers ensures that your transactions are being executed in a legal and just way.
Is an expression that is
used in two different scenarios when a buy or sell price deviates from a specific
related benchmark. A situation in which the bid on a limit order is lower than the
present market price or the offer price is more than the present market price for a
System of recording a
country’s economic transactions. A statement of all transactions made between
entities in one country and the rest of the world over a defined period of time,
such as a quarter or a year.
A common type of
charting method which consists of four significant points; Each bar typically shows
the open, high, low, and close (OHLC) prices for that period. This may be adjusted
to only show the high, low, and close (HLC). Technical analysts use bar charts—or
other chart types like candlesticks or line charts—to monitor the price performance
of assets which aids in making trading decisions.
difference between the buy (bid) and sell (ask) price of a foreign exchange pair.
The BID represents the price at which the forex broker is willing to buy the base
currency in exchange for the counter currency. Conversely, the ASK price is the
price at which the forex broker is willing to sell the base currency in exchange for
the counter currency. “
“Big figure’ is the stem,
or whole dollar price, of a price quote. The term “”big figure”” is most often used
in international currency markets, where it is often abbreviated to “”big fig.”” If
AUD/USD is 1.04553, the big figure is 4. If GBP/USD is 1.58852, the big figure is
Shares of large and
well-established organizations.Typically, the term ‘blue chips’ is used to refer to
the constituents of the major stock indices. The term derives from the high value of
blue casino chips
A block refers to a
collection of data related to transactions that are bundled together with a
predetermined size and are processed for transaction verification which eventually
becomes part of a blockchain. There is no official size designation constituting a
block of securities, but a commonly used threshold is more than 10,000 equity shares
or a total market value of more than $200,000.
A blockchain is
decentralized, digital ledger where transactions made in bitcoin or other
cryptocurrencies are recorded chronologically and publicly. They are the underlying
technology of all cryptocurrencies and allow users to transact with each other
without the need for trusted third parties (like banks, PayPal, Western Union etc).
Bollinger bands are a
popular form of technical price indicator. The bands were designed to gauge whether
the prices are high or low on relative basis. They are plotted two standard
deviations above and below a simple moving average. The bands look like an expanding
and contracting envelope model.
The total number of
currency positions a dealer has at any given moment. Typically, the dealer aims to
have a net position of zero in terms of risk.The book shows the total amount of long
and short positions that the trader has undertaken.
A price gap which occurs
in the beginning of a new trend, many times at the end of a long consolidation
period. A gap is the difference between the open price and prior close price, where
no trading activity takes place. The price breaks away from the support or
resistance via a gap, as opposed to an intraday breakout.
The Bretton Woods
Agreement, negotiated in July 1944, established a new international monetary system.
It was developed by delegates from 44 countries at the United Nations Monetary and
Financial Conference held that month in Bretton Woods, N.H. Under the agreement,
other currencies were pegged to the value of the U.S. dollar, which, in turn, was
pegged to the price of gold. The agreement lasted until 1971, when President Nixon
overturned the Bretton Woods agreement and established a floating exchange rate for
the major currencies.
Broken date is a term
used to describe a nonstandard maturity date for any type of financial deliverable.
Broken dates can occur with options, futures, bonds and other trading instruments.
Terms also used are odd dates,cock dates and broken period.
“An agent, who executes
orders to buy and sell currencies and related instruments either for a commission or
on a spread and works as an intermediary between the traders and the liquidity
providers. It facilitates in the execution of clients’ orders. “
Buying on margin is the
purchase of an asset by using leverage and borrowing the balance from a bank or
broker. The word margin refers to the portion the investor puts up rather than the
portion that is borrowed.
Also known as a “High
option.” Call options are agreements that give the option buyer the right, but not
the obligation, to buy a stock, bond, commodity or other instrument at a specified
price within a specific time period.
A candlestick is a type
of price chart used that displays the high, low, open, and closing prices of a
security for a specific period. The body (jittai) of the candlestick bar is formed
by the opening and closing prices. To indicate that the opening was lower than the
closing, the body of the bar is left blank. If the currency closes below its
opening, the body is filled. The rest of the range is marked by two “shadows”: the
upper shadow (uwakage) and lower shadow (shitakage).
“A carry trade is a
trading strategy that involves borrowing at a low interest rate and investing in an
asset that provides a higher rate of return. In the Foreign exchange, interest is
debited or credit from a trader’s account everyday on open positions. The most
popular Carry Trade in recent history has been to sell Japanese Yen and buy higher
yielding currencies such as the Australian Dollar, New Zealand Dollar, and British
Commodity Channel Index. It is a technical oscillating indicator used for measuring
when a financial instrument has been overbought or oversold.It is also used to
assess price trend direction and strength.
A central bank is a
financial institution given privileged control over the production and distribution
of money and credit for a nation or a group of nations. It implements the
Government’s monetary policy, as well, by changing interest rates.
An index that measures
the change in price of a representative basket of goods and services such as food,
energy, housing, clothing, transportation, medical care, entertainment and
education.It is calculated by taking price changes for each item in the
predetermined basket of goods and averaging them.
Correlation, in the
finance and investment industries, is a statistic that measures the degree to which
two securities move in relation to each other. In Forex for example, one could argue
that the Euro and the Sterling have a higher correlation than, for example, the Euro
and the Brazilian Real.
The customer or bank with
which a foreign exchange deal is executed. More specifically, every buyer of an
asset must be paired up with a seller who is willing to sell and vice versa. For
example, the counterparty to an option buyer would be an option writer.
To take out a forward
foreign exchange contract or to close out a short position by buying currency or
securities which have been sold.Cover can also be used without context to simply
mean the act of protecting overall portfolio value, as in providing cover against
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 exmaple, USDCAD is
an example of a currency pair in which the U.S. dollar (USD) is the base currency,
and the Canadian dollar (CAD) is the counter currency.
Model of pricing and
execution where an order is placed directly, or virtually directly, into an Exchange
without any broker intervention. In practice, there are many variations to the
general model and brokers always retain the right to filter orders for regulatory or
The volume of buy and
sell orders waiting to be transacted for a particular currency pair at a particular
point in time.The depth of market measure provides an indication of the liquidity
and depth for that particular security or currency.
Model of execution where
an order is placed at a price sourced from a number of liquidity counterparties. In
practice, there are many variations to the general model and brokers always retain
the right to filter orders for regulatory or compliance reasons.
Established in Frankfurt
in 1998, the ECB is the central bank responsible for monetary policy of those
European Union (EU) member countries ECB’s main responsibility is to ensure the EURO
A software that enables
the analytical and trading processes in the trading platform to be carried out with
little or no manual control. Expert advisors are most often deployed on the
MetaTrader 4 or 5 forex trading platforms.
Also commonly referred to
as Fed. It is the central bank of the U.S. and the organization responsible for
monitoring and maintaining the United States currency supply. It oversees the
monetary and financial system in the U.S.
Fiat money is
government-issued currency that is not backed by a physical commodity, such as gold
or silver, but rather by the government that issued it. In a fiat currency system,
the currency value rises and falls on the market in response to demand and supply
First In, First Out,
commonly known as FIFO, is an asset-management and valuation method in which assets
produced or acquired first are sold, used, or disposed of first. All positions
opened within a particular currency pair are liquidated in the order in which they
were originally opened.
A Market where foreign
currencies are traded internationally. Participants are able to buy, sell, exchange
and speculate on currencies. Foreign exchange markets are made up of banks, forex
dealers, commercial companies, central banks, investment management firms, hedge
funds, retail forex dealers and investors.
The value of the interest
rate differential for a currency pair over the period from the spot settlement date
to the forward settlement date, When points are added to the spot rate this is
called a forward premium; when points are subtracted from the spot rate it is a
Futures are derivative
financial contracts that obligate the parties to transact an asset at a
predetermined future date and price. The difference between a Forward and a Future
is that forwards are traded over the counter (OTC) while Futures are typically
traded over an exchange.
Fundamentals include the
basic qualitative and quantitative information that contributes to the financial or
economic well-being and the subsequent financial valuation of a company such as
inflation, interest rates, commodity prices and economic activity.
Fundamental analysis (FA)
is a method of measuring a security’s intrinsic value by examining related economic
and financial factors, and other qualitative and quantitative aspects that affect
the performance of a particular financial instrument.
Financing is applicable
on all CFD positions held overnight. The financial rate is applied to the full value
of your position. If you hold a long ‘buy’ position you will be charged a financial
interest, if you hold a short ‘sell’ position you may receive interest.
Abbreviation for Good
Till Cancelled. It is an order to purchase or sell a particular financial instrument
at a set price but this order is only valid and remains active until either the
order is filled or the investor cancels it.
A gold certificate is a
paper document that represents a claim on a specified amount or value of gold that
investors use to purchase and sell the commodity instead of dealing with transfer
and storage of the physical gold itself.
The golden cross is a
candlestick pattern that is a bullish signal in which a relatively short-term moving
average crosses above a long-term moving average. This is considered a favourable
sign that the underlying currency will move in the same direction.
To steal a line from the
popular children’s story Goldilocks and the Three Bears. A term that describes an
economy that has steady growth and acceptable inflation. In this sense, the economy
is not too hot and not too cold.
The Head and Shoulders
chart pattern is considered by many traders and analysts to be one of the most
reliable and accurate of all reversal patterns. In technical analysis, a head and
shoulders pattern describes a specific chart formation that predicts a
bullish-to-bearish trend reversal.
is a quantitative
measure of the rate at which the average price level of a basket of selected goods
and services in an economy increases over a period of time. This is sometimes
referred to as an excessive movement in such price levels.
The interest rate is the
amount a lender charges for the use of assets expressed as a percentage of the
principal. An interest rate is expressed as an annual percentage of the principal.
Interest rates often change as a result of inflation and Central Bank policies.
Every trader in the ASX
CFD market is required to put up an Initial Margin (deposit) for each contract they
trade. This applies to both buyers and sellers. This Initial Margin is returned when
the contract is closed out. The amount is normally set at a level designed to cover
reasonably foreseeable losses on a position between the close of business on one day
and the next. The amount of Initial Margin for each contract varies according to the
It’s a stable currency,
one that doesn’t fluctuate too wildly and provides the foundation for exchange rates
for international transactions. Because of their global use, key currencies tend to
set the value of other currencies.
Statistics that change
after the economy has already started to change or has started to follow a
particular direction or trend. They can be useful for gauging the trend of the
general economy, as tools in business operations and strategy, or as signals to buy
or sell assets in financial markets.
A liquidation is forced
closure of positions due to the equity in your account not being able to support the
margin requirements of the open positions – A position can also be Auto liquidated,
your GLV is 50% of your margin requirement
Maximum leverage is the
largest allowable size of a trading position permitted through a leveraged account.
At a leverage of 50, one could enter a maximum leveraged position of $100,000 by
depositing $2,000 worth of margin.
A trade with which serves
to eliminate or cancel some or all of the market risk of an open position, it can
mean closing a transaction or taking another position in the opposite direction to
cancel the effects of the first.
The smallest increment by
which a unit of currency (such as for an FX FPM OTC contract) changes and is quoted
depending on the number of decimal places in which the currency is quoted. For
example a USDJPY margin FX is quoted with only two decimal places (meaning one Pip
Value (or “Point”) = JPY 0.01).
A currency pair involving
the US Dollar in which the US Dollar is not the first currency quoted. An example is
the Euro, which is the base currency when paired with the US Dollar. EUR/USD is the
way of quoting these two currencies.
The process by which a
trade is entered into the books and records of the counterparts to a transaction.
The settlement of currency trades may or may not involve the actual physical
exchange of one currency for another.
A simple average of a
pre – defined amount of price bars. For example, a 50 period Daily chart SMA is the
average closing price of the previous 50 daily closing bars. Any time interval can
be applied here.
A technique used in
technical analysis that indicates a specific price ceiling and floor at which a
given exchange rate will automatically correct itself. Opposite of resistance.
A limit order that is
placed above the market with a long position or below the market with a short
position. When the market reaches the limit price, the position is closed thereby
locking in a profit.
Is concerned with past
price and volume trends and often with the help of chart analysis in a market in
order to be able to make forecasts about future price developments of the commodity
Measures the difference
in value between imported and exported goods and services. Nations with trade
surpluses (exports greater than imports), such as Japan, tend to see their
currencies appreciate, while countries with trade deficits (imports greater than
exports), such as the US, tend to see their currencies weaken.
The cost involved in
buying or selling a currency pair. Some consider the transaction cost to be the
actual value of the contract, while others feel it is the price of facilitating the
trade, such as commissions and spreads.
A widely used quantity of
currency. In forex trading, one unit of USD is equal to one United States dollar,
while one unit of EUR is one Euro. For JPY, one unit is equivalent to one Yen. One
unit is the smallest trade size in Forex trading.
The theoretical gain or
loss on Open Positions valued at current market rates, as determined by the broker
in its sole discretion. Unrealized Gains’ Losses become Profits/Losses when position
For exchange contracts
it is the day on which the two contracting parties exchange the currencies which are
being bought or sold. For a spot transaction it is two business banking days forward
in the country of the bank providing quotations which determine the spot value date.
The only exception to this general rule is the spot day in the quoting centre
coinciding with a banking holiday in the country(ies) of the foreign currency(ies).
The value date then moves forward a day. The enquirer is the party who must make
sure that his spot day coincides with the one applied by the respondent. The forward
months maturity must fall on the corresponding date in the relevant calendar month
If the one month date falls on a non-banking day in one of the centres then the
operative date would be the next business day that is common. The adjustment of the
maturity for a particular month does not affect the other maturities that will
continue to fall on the original corresponding date if they meet the open day
requirement. If the last spot date falls on the last business day of a month, the
forward dates will match this date by also falling due on the last business day.Also
referred to as maturity date.
Your current potential
account balance that can be realized by closing all your open trades. For example,
if your actual account balance is $925 and you have an open trade for $50 with a $25
profit, your virtual account balance will show $1,000.
Shows the market’s
expectation of 30 – day volatility. It is constructed using the implied volatilities
of a wide range of S&P 500 index options. The VIX is a widely used measure of market
risk and is often referred to as the “investor fear gauge”.
A virtual private server
(VPS) is a virtual machine sold as a service by an Internet hosting service. Traders
use this to host their MT4 platform so that their trading strategies i.e. EAs can
run 24 hours 5.5 days a week.
A day on which the banks
in a currency’s principal financial centre are open for business. For FX
transactions, a working day only occurs if the bank in both (all relevant currency
centres in the case of a cross) are open.
A wallet is simply
somewhere that you can keep your cryptocurrency holdings. Crypto wallets are divided
into: Software wallets, which can be installed on your computer. Mobile wallets,
which are available for mobile devices. Web wallets, which are hosted online and are
available through any web browser. Paper wallets, which are made by printing your
public and private keys (or QR codes) on a piece of paper and securing it the old
fashioned way. Hardware wallets, which are small USB devices that hold your private
keys and so must be plugged into your computer for you to be able to sign a
Chart formation that
shows a narrowing price range over time, where price highs in an ascending wedge are
incrementally less, or in a descending wedge, price declines are incrementally
smaller. Ascending wedges typically conclude with a downside breakout, and
descending wedges typically terminate with upside breakouts.
A currency symbol of
silver. It is precious metal with the highest electrical conduction properties of
any metal. It is used mainly in jewellery, photography, and for scientific and
industrial purposes. It has been used as the basis for currencies in the past.
Silver is traded as a commodity on various security exchanges. Like many precious
metals, silver is volatile but generally maintains relatively high prices.
XAU is the currency code
for gold. By popular demand, here are live gold bullion prices in eleven major
currencies, US Dollars XAU/USD, Pounds Sterling XAU/GBP, Euros XAU/EUR, Australian
Dollars XAU/AUD, Canadian Dollars XAU/CAD, Hong Kong Dollars, Rands XAU/ZAR, Rubles
XAU/RUB, Rupees XAU/INR, Swiss Francs XAU/CHF, Yen XAU/JPY.
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