Forex Glossary

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

A

1. Ask (Offer) Price: This is the lowest price a seller is willing to accept for an asset. In the Forex market, the ask price represents the price at which a trader can buy the base currency. It’s the opposite of the bid, which is the price a buyer is willing to pay.
2. Account Balance: This is a straightforward concept, representing the total sum of money present in a trading account before any positions are taken into account. It includes all previous transactions, both profitable and loss-making.
3. Account Statement: This is a periodic summary offered by brokers. It provides an in-depth report detailing all transactions, withdrawals, deposits, fees, and any other charges or credits associated with a trader’s account during the statement period.
4. Accumulation: In trading, accumulation refers to the phase when investors are actively buying (or “accumulating”) shares of an asset, believing that there’s potential for future appreciation. It’s an early phase in a bullish trend.
5. Adjustment: Adjustments in Forex trading can come about due to splits in underlying assets or the distribution of cash dividends. They can influence contract specifications or account balance.
6. ADR (Average Daily Range): This measures the average distance a currency pair travels in a day. It’s often used by traders to assess volatility and potential price movements.
7. Affiliate Broker: This broker acts as an intermediary. They introduce clients to larger brokers or services, and in return, they receive a commission or fee for the introduction.
8. Aggressor: In the context of a trade, the aggressor is the party that actively initiates the transaction. For instance, if a new trade is triggered by a buy order, the buyer is the aggressor.
9. Arbitrage: This is a risk-free trading strategy that allows traders to profit from price differences of a single asset across different markets. For instance, if EUR/USD is trading at 1.2000 on one exchange and 1.2005 on another, a trader could simultaneously buy at the lower price and sell at the higher price to profit from the difference.
10. At Best: This is an instruction given to a broker to trade at the best rate currently available in the market. It doesn’t guarantee a particular price but ensures immediate execution.
11. At or Better: This order specifies that a trade must be executed at a designated price or a more favorable one. For example, if a trader wants to buy EUR/USD at 1.2000 or better, the order will only be executed at that price or a lower one.
12. Aussie: A colloquial term used in the Forex community to refer to the Australian Dollar. It’s akin to calling the British Pound “Cable.”
13. Automated Trading System: This is software that creates and submits orders to a trading platform without human intervention, based on a set of pre-defined criteria. Such systems can trade faster and more efficiently than humans, but they also come with risks if not properly monitored.
14. Average Price: Often used in conjunction with indicators like moving averages, this calculates the mean price of a currency pair over a set number of periods, helping traders identify trends or potential reversals.
15. Appreciation: A fundamental concept in finance and trading, appreciation refers to an increase in the value of an asset over time. In Forex, when a currency appreciates, it means it has increased in value relative to another currency.

B

1. Back Office: Refers to the administrative section of a brokerage that manages trade confirmations, record maintenance, regulatory compliance, and account settlement. It essentially represents all the behind-the-scenes activities that support the trading function.
2. Balance: In a Forex trading account, the balance denotes the amount of money a trader has, taking into account all closed transactions. It doesn’t include unrealized profits or losses from ongoing trades.
3. Base Currency: In a currency pair, the base currency is the first listed currency. For example, in the EUR/USD pair, the Euro (EUR) is the base currency. When you trade this pair, you are essentially buying or selling the base currency against its pair.
4. Bear Market: Refers to a market characterized by declining prices for a prolonged period. In Forex, if a currency is expected to weaken, it is said to be in a bearish trend.
5. Bid Price: This is the price at which the market (or your broker) will buy a specific currency pair from you. As such, at this price, the trader can sell the base currency.
6. Big Figure: Refers to the main digits in a currency quote. For example, in the rate 1.3050 for EUR/USD, the big figure would be 1.30. Traders often refer to the big figure when discussing how much a currency has moved.
7. Binary Option: A type of option where the payoff is either a fixed amount or nothing at all. They are often used for short-term speculation on financial markets, including Forex.
8. Blotter: A record of all transactions made over a certain period.
9. Breakout: In trading, a breakout refers to when the price moves above a resistance level or below a support level on increased volume. Traders might interpret this as a signal to buy (in the case of a breakout above resistance) or to sell (in the case of a breakout below support).
10. Broker: An individual or firm that acts as an intermediary between buyers and sellers, usually for a commission or fee. In the Forex market, brokers provide traders access to the interbank market.
11. Bull Market: The opposite of a bear market, a bull market is characterized by rising prices over a prolonged period. In Forex, when we expect a currency to strengthen, it’s said to be in a bullish trend.
12. Buy Limit Order: An order placed with a broker to buy a set number of shares at a specified price or lower.
13. Buy Stop Order: A type of order which is set above the market price, and becomes active once the market touches or goes through that price. It’s used when a trader believes that the price will increase further after hitting the specified level.
14. Bretton Woods Agreement: Established in 1944, this international system set up fixed exchange rates between major currencies and the US dollar. Each currency was pegged to gold, but only the US dollar was directly convertible to gold. This system lasted until 1971.

C

1. Cable: A colloquial term used in the Forex market to refer to the GBP/USD currency pair. The term originated from the transatlantic cable that used to transmit currency prices between the US and Europe.
2. Call Option: A financial contract giving the buyer the right, but not the obligation, to purchase a specified quantity of an asset at a predetermined price within a set period.
3. Carry Trade: A strategy that involves borrowing in a currency with a low-interest rate and investing in a currency with a higher interest rate. The trader aims to capture the difference between the rates, known as the carry.
4. Central Bank: A national institution designed to oversee the monetary system and policy of a country or group of countries. Examples include the Federal Reserve (US), European Central Bank (EU), and the Bank of Japan (Japan). Their actions, such as interest rate changes, can significantly influence currency values.
5. Chartist: An individual who uses charts and graphs to analyze and forecast price movements, often referred to as a technical analyst.
6. Clearing: The process of settling a trade after the transaction has been made, which involves transferring funds and ensuring all contract obligations are met.
7. Closed Position: A traded position that has been terminated by either selling or buying, effectively offsetting the position and realizing any profit or loss from the trade.
8. Commission: A fee charged by a broker for executing a trade. This can be based on a flat fee, a percentage of the transaction, or a combination.
9. Commodity Currencies: Currencies from economies that are largely dependent on the export of certain raw materials for income. Examples include the Australian Dollar (gold), the Canadian Dollar (oil), and the New Zealand Dollar (dairy products).
10. Confirmation: A document exchanged by counterparts at the end of a trade, detailing the specifics of the transaction to ensure both parties agree with the terms.
11. Contagion: The likelihood that significant economic changes in one country or region will spread to other countries or regions, affecting their economic and financial status.
12. Contract: A standardized agreement between two parties to buy or sell a specific quantity of a financial instrument at a predetermined price.
13. Contract for Difference (CFD): A financial instrument that allows traders to invest in an asset class without actually owning the asset. It’s a contract between a buyer and a seller that stipulates the seller will pay the buyer the difference between the current value of an asset and its value at contract time.
14. Counter Currency: The second currency in a currency pair. For example, in the EUR/USD pair, USD is the counter currency. Sometimes it’s also called the “quote currency.”
15. Cross Currency Pair (Cross Rate): Any currency pair that doesn’t include the US Dollar. Examples include EUR/GBP or GBP/JPY.
16. Currency Pair: The quotation of two different currencies, with the value of one currency being quoted against the other. The first currency of the pair is called the base currency, and the second is the counter currency.

D

1. Day Trading: Refers to a strategy where traders open and close positions within a single trading day. The goal is to profit from short-term price movements without holding positions overnight, thus avoiding potential adverse price moves.
2. Dealer: An individual or firm that acts as a principal or counterpart to a transaction. Dealers buy and sell for their own account and risk, as opposed to brokers who only act as intermediaries.
3. Deficit: Represents a negative balance in trade, budgets, or payments. In economic terms, when a country imports more than it exports, it has a trade deficit.
4. Depreciation: A decrease in the value of a currency in terms of other currencies. It’s the opposite of appreciation.
5. Derivative: A financial contract whose value derives from the performance of an underlying asset, index, or interest rate. Common derivatives include futures, options, and swaps.
6. Direct Quote: A foreign exchange rate quoted as the domestic currency per unit of the foreign currency. For example, in the US, a direct quote for the British pound might be 1.25 USD/GBP.
7. Discount Rate: The interest rate charged to commercial banks and other depository institutions for loans received from the central bank’s discount window. It can influence monetary policy and currency value.
8. Divergence: In technical analysis, divergence occurs when the price of an asset and an indicator, like the moving average convergence divergence (MACD), are moving in opposite directions. This can be a sign of a potential price reversal.
9. Dovish: Refers to an economic outlook or policy stance suggesting that an economy needs lower interest rates to stimulate growth or combat inflationary pressures. When central banks are dovish, it can lead to a depreciation in the currency’s value. The opposite stance is “hawkish.”
10. Drawdown: Represents the decline in account value after a series of losing trades. It’s a measure of downside risk over a specific period.
11. Dual Currency Service: A forex trading service that allows an investor to speculate on exchange rate movements between two specific currencies.
12. Durable Goods Order: An economic indicator that measures the amount of investment in goods that last for an extended period. Significant increases may indicate economic growth, potentially influencing currency value.

E

1. Economic Indicator: Statistics about economic activities. They help analysts and traders assess the health of an economy. Common indicators include GDP, unemployment rates, inflation rates, and consumer confidence.
2. ECN Broker (Electronic Communication Network): Brokers that provide and display real-time order book information, showing all the buy and sell orders. ECN brokers typically offer tighter bid-ask spreads but may charge a commission for trading.
3. End of Day (EOD): Refers to the end of the trading day. Many traders will close out positions at EOD to avoid overnight risk, while others might use EOD data for analysis.
4. Equity: In a trading context, equity represents the residual interest in the trading account’s assets after liabilities are deducted. It’s the real-time value of the account and fluctuates as market prices change.
5. European Central Bank (ECB): The central bank responsible for monetary policy within the Eurozone. Actions and announcements by the ECB can have significant impacts on the Euro’s value.
6. Exotic Currency: A currency that is not widely traded in the global Forex markets. Exotic currencies are usually from emerging or smaller economies, such as the South African Rand (ZAR) or the Thai Baht (THB).
7. Expiry Date: The specified date on which a trading contract becomes invalid. After this date, the trader can no longer hold the position.
8. Exposure: Represents the amount of risk a trader is exposed to when they enter a trade. It can refer to the amount of capital invested or the potential loss that might arise from adverse price movements.
9. Extension: In technical analysis, particularly when using tools like Fibonacci, an extension refers to the portion where the price moves beyond the initial move. It’s used to project potential price targets.
10. Elliott Wave Theory: A method of technical analysis that looks for recurring patterns in market prices and behavior. The theory suggests that markets move in specific and predictable patterns formed by a series of waves.
11. Entry Order: An order placed to enter the market at a specific price. It can be a limit order (to buy below or sell above the current price) or a stop order (to buy above or sell below the current price).

F

1. Face Value: The nominal or dollar value of a security stated by the issuer, also known as “par value” or “par.” For currencies, it’s the base value or the denomination on a note.
2. Federal Reserve (Fed): The central banking system of the United States, responsible for setting monetary policy, including interest rates. Its decisions can have profound effects on the USD and global financial markets.
3. Fibonacci Retracement: A technical analysis tool used to identify potential support and resistance levels. It’s based on the key numbers identified by mathematician Leonardo Fibonacci in the 13th century.
4. Fill: The execution of an order. When an order is fully executed, it is said to be “filled.”
5. Fixed Exchange Rate: An exchange rate regime where the value of a currency is pegged or fixed to another currency or a basket of currencies. Contrasts with a floating exchange rate.
6. Floating Exchange Rate: An exchange rate regime in which the value of a currency is allowed to fluctuate in response to foreign exchange market mechanisms, such as supply and demand.
7. Foreign Exchange: Often referred to as Forex or FX, it’s the global marketplace for trading national currencies against one another.
8. Forward: A contract that specifies the price and date for the future sale of a specific amount of a currency. It’s used to hedge against future exchange rate fluctuations.
9. Forward Points: The difference between the spot rate and the forward rate for a particular currency pair, often used to calculate a forward rate.
10. Free Margin: Funds available in a trading account that can be used to open new positions. It’s the difference between the equity and the margin currently used to hold open positions.
11. Fundamental Analysis: A method used to evaluate a currency’s intrinsic value by examining related economic, financial, and other qualitative and quantitative factors. It contrasts with technical analysis.
12. Futures Contract: A standardized contract to buy or sell a particular commodity or financial instrument at a predetermined price in the future. Unlike forwards, these are traded on exchanges and are standardized in terms of contract size and expiration date.
13. FX: An abbreviation for foreign exchange.
14. FX Swap: A simultaneous purchase and sale of identical amounts of one currency for another with two different value dates. It consists of two legs: a spot foreign exchange transaction and a forward foreign exchange transaction.

G

1. Gap: Refers to a situation where there is a noticeable space or break between two price levels on a chart, typically caused by a significant event that happens when the market is closed or due to a sudden surge in buying or selling interest. Gaps can be upward (bullish) or downward (bearish).
2. Gearing: Also known as leverage, gearing refers to the ability to control a large position with a relatively small amount of capital.
3. GDP (Gross Domestic Product): Represents the total monetary value of all goods and services produced within a country’s borders in a specific time period. It’s a primary indicator of a nation’s economic health.
4. Going Long: The act of buying a currency or an asset with the expectation that its value will rise. Opposite of “going short.”
5. Going Short: The act of selling a currency or an asset with the expectation that its value will fall. This can be done with assets not currently held, using derivative products. Opposite of “going long.”
6. Gold Standard: A monetary system where a country’s currency or paper money has a direct and fixed value in terms of gold. Countries under the gold standard would fix their currencies in terms of a specific amount of gold.
7. Good ‘Til Cancelled (GTC): An order to buy or sell a currency at a fixed rate or worse. The order remains in place until it’s executed or the trader decides to cancel it.
8. Grid Trading: A type of trading strategy that aims to profit from market volatility in many directions, especially when price moves sideways in a range. It involves placing several limit orders at incremental distances above and below a set price.
9. Gross Margin: In the context of Forex, it refers to the total amount of margin equity in an account.
10. Gross National Product (GNP): Measures the value of goods and services produced by a country’s residents, regardless of the production location. It differs from GDP, which measures production based on location rather than citizenship.
11. Growth Rates: Statistical measure indicating the percentage change of a specific economic variable within a specific time frame. It’s often used to assess the health of an economy.
12. Guaranteed Stop: An order to close a trade at a level chosen by the trader, regardless of market conditions. Brokers may charge a premium for this service since it guarantees the stop level despite gaps or market slippages.

H

1. Hawkish: Refers to a stance or viewpoint suggesting that economic conditions might warrant tighter monetary policy, often in the form of higher interest rates. A hawkish stance can lead to appreciation in a currency’s value. The opposite stance is “dovish.”
2. Head and Shoulders: A chart pattern in technical analysis which can signal a reversal in trend. The pattern is characterized by three peaks: a higher peak (head) between two lower peaks (shoulders).
3. Hedge: An investment made to reduce the risk of price movements in an asset or currency. For instance, traders might use a hedge to protect themselves against potential losses from adverse currency movements.
4. High Frequency Trading (HFT): A type of algorithmic trading where large numbers of orders are executed at extremely fast speeds, often in fractions of a second. HFT strategies use complex algorithms to analyze and react to market conditions.
5. Historical Data: Past data on currency price movements and traded volumes. Traders and analysts use historical data to backtest strategies and forecast potential future price movements.
6. Holdings: The assets or securities owned by an individual, corporation, or fund. In Forex, holdings can refer to the various currency positions held by a trader.
7. Horizontal Level: In technical analysis, a horizontal level is a price level indicating either a support or resistance in the market where there’s a significant amount of buying or selling activity, respectively.
8. Hybrid Broker: A broker that combines the characteristics of market maker brokers and ECN/STP brokers. They might offer both dealing desk and non-dealing desk execution models to their clients.

I

1. Ichimoku Cloud (Ichimoku Kinko Hyo): A comprehensive technical analysis tool that provides information about support and resistance, momentum, and direction of the market. It consists of five lines: Tenkan-sen, Kijun-sen, Senkou Span A, Senkou Span B, and Chikou Span.
2. Illiquid Market: A market or trading environment where there’s a lack of market participants and volume, making the trading of assets more challenging and often leading to larger bid-ask spreads and price volatility.
3. IMF (International Monetary Fund): An international organization that aims to promote global monetary cooperation, financial stability, and economic growth. The IMF can influence Forex markets through its assessments, forecasts, and programs.
4. Implicit Interest Rate: The interest rate that is not directly stated or evident. It’s calculated by considering the difference between the spot rate of an asset and its forward rate.
5. Inflation: The rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power of money. Central banks monitor inflation closely as it influences monetary policy decisions, which can impact currency values.
6. Initial Margin: The minimum amount of equity a trader must deposit to open a position in the market.
7. Interbank Market: The top-tier Forex market where banks exchange different currencies. It’s the highest level in the Forex market, and most of the transactions in the broader Forex market originate here.
8. Interest Rate: The amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of assets. Interest rates are key determinants of currency strength and value.
9. Intervention: Actions taken by a central bank or a government in the Forex market to stabilize or increase the value of their currency, typically by buying or selling their own currency.
10. Inverse Head and Shoulders: A chart pattern in technical analysis which signals a potential bullish reversal after a downtrend. It’s characterized by three troughs: a deeper trough (head) between two shallower troughs (shoulders).
11. Investment Bank: A financial institution that assists corporations, governments, and other large entities in raising capital, managing mergers and acquisitions, and providing advisory services. Some investment banks are also active in the Forex market.
12. ISM Manufacturing Index: An index based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. The index monitors employment, production inventories, new orders, and supplier deliveries. It’s considered a significant economic indicator in the U.S.

J

1. Japanese Candlesticks: A popular charting method that displays the high, low, opening, and closing prices for a specific time period. Each candlestick represents a single time frame (like a day, hour, or minute), and the color typically indicates whether prices moved up or down during that time.
2. Jobber: A trader who buys and sells financial instruments, such as bonds, stocks, and currencies, aiming to profit from short-term price movements. This term is more common in the UK.
3. Joint Account: A trading or investment account that is owned by two or more individuals. All account holders are granted equal access to the account and share its associated rights and responsibilities.
4. JPY: The currency code for the Japanese Yen, the official currency of Japan and one of the major currencies traded on the Forex market.
5. J-Curve: A theory that postulates that following a devaluation or depreciation of a currency, a country’s trade deficit will initially worsen before it improves. The J-Curve effect is graphically represented as a J shape, where the trade balance deteriorates and then recovers over time.
6. Junk Bonds: High-yield or non-investment grade bonds with a rating of ‘BB’ or lower by major rating agencies. They carry a higher risk of default compared to investment-grade bonds but offer higher yields to compensate for the additional risk.
7. Jurisdiction: The territory or domain where specific rules, rates, or laws apply. In terms of Forex, different jurisdictions may have different regulatory standards and protections for Forex traders.

K

1. Key Currency: A major currency that is widely used in international transactions and often considered a benchmark or source of stability in the Forex market. Examples include the US Dollar (USD), Euro (EUR), and Japanese Yen (JPY).
2. Kiwi: Slang term for the New Zealand Dollar (NZD). Often traders use “kiwi” when discussing the NZD’s performance or potential trades involving the currency.
3. Knock In: A type of option contract that doesn’t become active until a certain price level is reached. Once the specified price is achieved, the option “knocks in” and becomes a standard option.
4. Knock Out: The opposite of “knock in.” It’s an option that is rendered null and void if the underlying asset reaches a specific price level. If this price is reached, the option is “knocked out” and is no longer valid.
5. Keltner Channel: A volatility-based technical analysis indicator. It uses bands that are derived from a moving average and the Average True Range (ATR). These bands can help traders identify potential buy and sell signals.
6. Krugerrand: A gold coin minted by the Republic of South Africa. While it’s not a currency, the Krugerrand’s value is linked to the price of gold, which in turn can influence Forex markets due to gold’s role as a safe-haven asset.
7. KYC (Know Your Customer): Refers to the process financial institutions and other regulated entities use to verify the identity of their customers. In the context of Forex, brokers will often have a KYC procedure in place to prevent fraud and money laundering.

L

1. Lagging Indicator: An indicator that follows price movements and has less predictive qualities. It typically confirms long-term trends after they have started. Examples include moving averages.
2. Last Look: A practice where liquidity providers can have a final review of an order before deciding to accept or reject a trade. This can provide an opportunity for the liquidity provider to reject orders they don’t like, which has been a topic of debate in the industry.
3. Leverage: A tool offered by brokers that allows traders to control a larger position with a smaller amount of money. It’s expressed as a ratio. For example, if a broker offers 100:1 leverage, a trader can control a $100,000 position with just $1,000.
4. Limit Order: An order placed by a trader to buy or sell a currency pair at a specific price. The trade is only executed if the market reaches that predetermined price.
5. Liquid Market: A market where there are many buyers and sellers and high volumes of trading. In such a market, orders can be executed easily without causing significant price changes.
6. Liquidity: Refers to the ability of an asset to be quickly bought or sold without causing drastic price changes. Major currency pairs, like EUR/USD, have high liquidity, meaning they can handle large trade volumes without substantial price shifts.
7. Liquidity Provider: Institutions that offer bid and ask prices in a currency pair and are ready to make a deal at those prices. They play a vital role in ensuring that the market remains liquid. Examples include big banks and financial institutions.
8. Long Position: Refers to buying a currency with the expectation that its value will rise. If a trader believes the US Dollar will strengthen against the Euro, they would take a long position on USD/EUR.
9. Lot: A standardized quantity in which currencies are traded. The standard lot size in Forex is usually 100,000 units of the base currency.
10. Leading Indicators: Economic factors that typically change before the economy starts to follow a particular trend. They are used to predict changes in the economy.
11. LIBOR (London Interbank Offered Rate): An interest rate at which banks offer to lend funds to one another in the international interbank market. It’s used as a reference rate for many financial instruments worldwide.

M

1. Macro: Refers to macroeconomic factors and large-scale economic data that can influence the financial markets, including the Forex market. Examples include GDP growth, employment figures, and inflation rates.
2. Major Pairs: The most widely traded currency pairs in the Forex market. These pairs are generally associated with the largest economies and include pairs like EUR/USD, GBP/USD, and USD/JPY.
3. Margin: The amount of money required in a trader’s account to open a leveraged position. It’s essentially a deposit or collateral to cover potential losses.
4. Margin Call: A broker’s demand for a trader to deposit additional money into their trading account to meet the required margin. This usually occurs when a trader’s open positions move against them, and their account equity falls below the required margin level.
5. Market Maker: A firm or individual that provides liquidity by constantly buying and selling securities or currencies at publicly quoted prices, profiting from the bid-ask spread.
6. Market Order: An instruction given to a broker to buy or sell at the best available price immediately.
7. Market Risk: The risk of experiencing losses due to factors that affect the overall performance of the financial markets.
8. Maturity: The date on which a financial obligation must be repaid. In the context of the Forex market, it can refer to the date a contract ends.
9. Micro Lot: Equivalent to 1,000 units of the base currency in a Forex transaction. It’s a smaller lot size, ideal for those new to Forex or for those wanting to trade with lower risk.
10. Minor Pairs: Currency pairs that aren’t traded as frequently as the major pairs and don’t include the US dollar, such as EUR/GBP or GBP/AUD.
11. Monetary Policy: Actions taken by a country’s central bank to control the supply and demand for its currency, typically by adjusting interest rates and buying/selling government securities. It plays a pivotal role in influencing the value of a nation’s currency.
12. Moving Average (MA): A commonly used technical analysis tool that helps to smooth out price data by creating a single flowing line. It’s calculated by taking the average price over a certain number of periods.
13. Momentum: Refers to the speed or force behind a price movement in the market. Momentum indicators in technical analysis help determine the strength of a trend.
14. Money Supply: The total amount of monetary assets available in an economy at a specific time. Central banks can influence money supply to enact monetary policy.

N

1. Naked Position: This refers to a position, either long or short, without any offsetting positions to protect against adverse price movements. For example, holding a naked short position means selling a currency without owning it or having any protection in place.
2. Net Position: The amount of currency bought or sold which has not been offset by opposite transactions. For instance, if a trader buys $100,000 USD/EUR and then sells $60,000 USD/EUR, their net position is a long of $40,000 USD/EUR.
3. News Trading: A trading strategy where decisions are made based on news releases or other major events. Economic announcements can lead to significant price movements, and traders can try to capitalize on these swings.
4. NFP (Non-Farm Payrolls): Refers to the monthly change in employment in the U.S., excluding the farming sector. It’s a significant indicator of the U.S. economy’s health and can lead to high volatility in the Forex market upon release.
5. Noise: Refers to the seemingly random price movements within the market. It’s the opposite of a clear and identifiable trend.
6. No Dealing Desk (NDD): A system that provides immediate access to the interbank market without passing orders through a dealing desk. In this model, brokers source their quotes from multiple liquidity providers.
7. Nominal Exchange Rate: The rate at which one currency can be exchanged for another, usually used in contrast to real exchange rates, which account for inflation differences between countries.
8. Note: A financial instrument that specifies a promise of repayment. In the context of central banks, notes are typically short-term securities or instruments.
9. NZD: The currency code for the New Zealand Dollar, also colloquially known as the “Kiwi.” It’s one of the commonly traded currencies in the Forex market.

O

1. Offer (Ask) Price: The price at which the market or your broker is willing to sell a specific currency pair to you. Thus, at this price, you can buy the base currency.
2. One-Cancels-the-Other (OCO) Order: A combination of two orders. If one order is executed, the other order is automatically cancelled. This tool is useful for traders who wish to set both stop-loss and take-profit targets for their trades.
3. Open Order: Any order that has been entered into the market and not yet been executed or cancelled.
4. Open Position: Any position that hasn’t been settled by a physical payment or closed by an equal and opposite deal for the same date.
5. Option: A contract that gives the buyer the right, but not the obligation, to buy or sell a certain amount of an underlying asset (in this context, a currency) at a set price before or at a certain time.
6. Outright Forward: A foreign exchange contract that locks in the exchange rate for a future date beyond the normal spot delivery date (two business days). It is used by those wishing to hedge against adverse exchange rate movements.
7. Over-the-Counter (OTC): Refers to trading that occurs directly between two parties, without any supervision of an exchange. The Forex market operates OTC, meaning there’s no centralized exchange, and participants trade directly with one another.
8. Overbought: A technical analysis term used to describe a situation when, based on recent trading data, the price of an asset has risen to such a degree and so quickly that it’s moved above its true value, suggesting a downward correction is likely.
9. Oversold: The opposite of overbought. It indicates a situation where, based on recent trading data, an asset’s price has dropped significantly and swiftly, implying an upward correction might be in order.
10. Overnight Position: A trading position that remains open until the next trading day.
11. Overnight Rate: The interest rate at which large banks lend and borrow from one another in the overnight market. Central banks, like the Federal Reserve in the U.S., use this rate as a key tool to implement monetary policy.
12. Oscillator: A technical analysis indicator that varies over time within a band (above and below a centerline, or between set levels). Oscillators are used to discover short-term overbought or oversold conditions.

P

1. Pair: Refers to a quotation of two different currencies, with the value of one currency being quoted against the other. The first listed currency is called the ‘base currency’, and the second is the ‘quote currency’. Examples include EUR/USD and GBP/JPY.
2. Pip (Percentage in Point): The smallest price movement in the Forex market, typically the fourth decimal place in most currency pairs. For example, if the EUR/USD moves from 1.1050 to 1.1051, that 0.0001 change is referred to as one pip.
3. Pipette: Represents a fraction of a pip, and is equivalent to a tenth of a pip. It’s the fifth decimal place in most currency pairs.
4. Position: Refers to a trader’s exposure in the market, indicating the amount of a security or currency bought or sold.
5. Position Trading: A style of trading characterized by holding onto trades for weeks or months. Position traders are less concerned with short-term fluctuations and focus more on long-term price movements.
6. Portfolio: A collection of investments held by an individual or institution, which might include various assets like stocks, bonds, and currencies.
7. Profit/Loss or P/L: The actual “realized” gain or loss from trading activities. Once a position is closed, the profit or loss is realized.
8. Pullback: A temporary reversal of a prevailing trend in price. It’s a short-term move in the opposite direction of the longer-term trend.
9. Purchasing Power Parity (PPP): An economic theory that, in the long term, exchange rates should move towards the rate that would equalize the prices of an identical basket of goods and services in any two countries.
10. Put Option: A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying security at a pre-determined price within a specified time frame.

Q

1. Quote: An indicative market price, usually two-sided, representing the price at which one can buy and the price at which one can sell a currency pair. For example, in the quote for EUR/USD at 1.1100/1.1103, 1.1100 is the bid, and 1.1103 is the ask (or offer).
2. Quote Currency: The second currency in a currency pair. It is used to determine the value of the base currency. For instance, in the EUR/USD pair, the USD is the quote currency.
3. Quarterly Review: Financial statements released by public companies every three months. These reviews can have an impact on a nation’s currency if they reveal significant changes in profitability or financial health.
4. Quantitative Easing (QE): An unconventional monetary policy used by central banks to stimulate the economy when standard monetary policy becomes ineffective. A central bank implements QE by buying specified amounts of financial assets from private sector banks, thus raising the prices of those financial assets and lowering their yield, while simultaneously increasing the money supply.
5. Quotation: A representation of the current or historical value of a currency against another currency. The first currency in the pair is the base currency, and the second is the quote or counter currency.
6. Q-Measure (or Risk-Neutral Measure): A probability measure under which the discounted asset prices are martingales. In simpler terms, it’s a mathematical approach used in financial mathematics to determine the risk-neutral world from the real-world probability measure.

R

1. Rate: The price of one currency in terms of another. For example, if the EUR/USD pair is quoted at 1.1200, it means 1 Euro is equivalent to 1.1200 US dollars.
2. Rally: A sustained upward movement in price after a period of decline or consolidation.
3. Range: Refers to the difference between the highest and lowest prices traded for a currency pair during a given period. A market that’s not making new highs or lows is considered to be “ranging.”
4. Rate Decision: Refers to the interest rate set by central banks. A central bank will raise interest rates to combat inflation and decrease them to stimulate borrowing. Rate decisions can have significant effects on currency valuation.
5. Resistance: In technical analysis, a price level at which rising prices are expected to stop or meet increased selling activity. This is due to an overwhelming level of supply for the asset at that price.
6. Retracement: A short-term reversal in the price of a currency pair from a previous trend, either up or down. It’s a pullback before the original trend resumes.
7. Risk Management: The process and strategies used by traders to control risk and protect their trading capital. Common risk management techniques in forex trading include setting stop-loss and take-profit levels and only risking a small percentage of one’s capital on a single trade.
8. Risk-On/Risk-Off: Refers to the market sentiment where investors choose either to risk their money in more volatile investments (risk-on) or choose less risky investments (risk-off). When the sentiment is risk-on, investors might buy higher-yielding currencies and sell safe-haven currencies, and vice-versa for risk-off sentiment.
9. Rollover: In the spot forex market, trades need to be settled in two business days. If a trader extends their position beyond one day, they will deal with a swap or rollover fee, which could be earned or charged depending on the differential in interest rates between the two currencies in the pair.
10. Round Trip: The act of buying and selling or selling and then buying, a certain amount of currency.
11. RSI (Relative Strength Index): A momentum oscillator used in technical analysis to measure the magnitude of recent price changes, thereby evaluating overbought or oversold conditions in the price of a currency or other assets.

S

1. Scalping: A trading strategy that involves making a large number of small profits on minor price changes throughout the day.
2. Settlement: The process by which a trade is entered into the books and records of the counterparts to a transaction. It includes the payment of monies and the transfer of ownership.
3. Short Selling: Selling a currency pair that you do not own, with the hope of buying it back later at a lower price to generate a profit.
4. Spot Market: A market where commodities or securities are traded for immediate delivery and payment. In the forex market, it refers to the buying and selling of currency pairs for immediate delivery.
5. Spot Price: The current market price at which a particular currency pair can be bought or sold for immediate delivery.
6. Spread: The difference between the bid (selling price) and ask (buying price) of a currency pair.
7. Stop Loss Order: An order placed with a broker to sell or buy a specific stock once the stock reaches a certain price. It’s a way to prevent large losses in volatile markets.
8. Support: In technical analysis, a price level where a currency pair tends to stop and reverse on its way down. This happens due to an overwhelming level of demand or interest at that price level.
9. Swaps: Typically, a swap in forex is a two-part or two-legged transaction where you simultaneously buy one currency and sell another to take advantage of the difference in interest between the two currencies.
10. Sterling: Slang term used to refer to the British Pound (GBP).
11. Slippage: The difference between the expected price of a trade and the price at which the trade is executed. It can occur during periods of higher volatility.
12. Speculator: An individual or entity that buys or sells assets with the hope of making a profit from short or medium-term fluctuations in its price, rather than buying it for long-term investment purposes or for its income (such as dividends or interest).
13. Stochastic Oscillator: A momentum indicator that compares a particular closing price of a security to a range of its prices over a certain period. It generates values between 0 and 100 and is used to predict price turning points.
14. Supply: The amount of a particular currency available for trading.
15. Swap Rate: The interest rate differential between the two currencies of the pair you have taken the position in, calculated according to whether your position is long or short.

T

1. Take-Profit Order (T/P): An order that closes a trade once it reaches a certain level of profit. It locks in profits by automatically closing the position once the desired price is reached.
2. Technical Analysis: A method of evaluating securities or currencies by analyzing statistics generated by market activity, such as past prices and volume. It uses charts and other tools to identify patterns that can suggest future activity.
3. Tick: The minimum upward or downward movement in the price of a security.
4. Tick Chart: A chart that displays every price movement or tick for a security or currency pair.
5. Tight Market: A market with narrow bid-ask spreads.
6. Tomorrow Next (Tom-Next): Refers to a forex deal that matures on the day after the spot date, thus being for two business days ahead.
7. Trade Balance: The difference between a country’s imports and exports. A positive trade balance indicates more exports than imports (a trade surplus), while a negative balance indicates more imports than exports (a trade deficit). The trade balance can influence a nation’s currency.
8. Trader: An individual or entity who buys and sells financial instruments with the aim of making a profit.
9. Trading Desk: A desk where transactions for buying and selling securities occur. This is the place in an investment bank or a financial institution where they execute trades.
10. Trading Platform: Software provided by brokers to their clients to conduct trading activities. It provides traders with access to the Forex market and includes tools for analyzing prices, managing and executing trades, etc.
11. Transaction Cost: The cost associated with buying or selling a currency pair, which can include commissions, spreads, and slippage.
12. Trend: The general direction in which a currency or market is moving. Trends can be upward (bullish), downward (bearish), or sideways (ranging).
13. Turnover: The volume of trades in a market over a given period.
14. Two-Way Price: A type of quote that gives both the bid and the ask price of a currency pair, indicating the price at which you can buy the pair and the price at which you can sell it.

U

1. Unconvertible Currency: A currency that cannot be exchanged freely for foreign currencies due to exchange controls or other barriers. Also known as a “blocked currency.”
2. Underlying: Refers to the base value or primary asset that an investment is based upon. In Forex, the underlying would be the currency pairs.
3. Unemployment Rate: A key economic indicator that measures the percentage of the total workforce that is unemployed and actively seeking employment. Higher unemployment rates can have a negative impact on a country’s currency.
4. Uptick: A new price quote at a price higher than the preceding quote. For example, if a currency pair was previously quoted at 1.1200 and then subsequently quoted at 1.1205, the 0.0005 price increase represents an uptick.
5. Uptrend: A market trend characterized by rising prices. In an uptrend, each successive peak and trough is higher than the ones found earlier in the trend.
6. USD: The abbreviation for the United States Dollar, which is the official currency of the United States and its territories. It’s one of the most traded currencies in the Forex market.
7. USDX (U.S. Dollar Index): A measure of the value of the U.S. dollar relative to a basket of foreign currencies. It’s an index that gauges the dollar’s strength against six other major currencies.
8. Useable Margin: The amount of money in an account that can be used for trading. It’s the difference between the equity in an account and the margin used for open positions.
9. Usury: Charging exorbitant or excessive interest on money lent. It’s an illegal and unethical practice in many jurisdictions.
10. Utility: The capacity of a good or service to meet the demand or desire of consumers. In the context of Forex, it often pertains to the usefulness or value derived from holding a currency.
11. Unwind: The process of closing out a position. For example, if a trader has taken a long position in a currency pair, they would “unwind” that position by selling it.

V

1. Value Date: Also known as the “maturity date,” it is the date when counterparties to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot forex transactions, the value date is typically two business days forward.
2. Variation Margin: Additional funds a trader must deposit to their trading account to cover any potential losses from adverse price movements.
3. Volatility: A statistical measure indicating the tendency of sharp price changes within a period. High volatility means that a security’s price can change dramatically over a short period, making it potentially more risky. In Forex, volatility often increases around major economic announcements or geopolitical events.
4. Volume: The number of shares or contracts traded for a security or a market during a given period. In the context of forex, it’s the amount of a currency that is traded in a day.
5. Vostro Account: An account held by a foreign bank with a domestic bank. For instance, if a bank in Italy (the foreign bank) has an account with a bank in the U.S. (the domestic bank), then from the Italian bank’s perspective, the account in the U.S. is a vostro account.
6. Vanilla Option: A financial instrument that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a given timeframe. “Vanilla” denotes that the option has no special features and is more straightforward than exotic or more complex options.
7. Value at Risk (VaR): A measure used to assess the potential loss an investment portfolio could face over a specific period for a given confidence interval. It provides a worst-case scenario loss based on historical data.
8. Vega: In options trading, Vega represents the rate of change in an option’s price for a one-unit change in the implied volatility of the underlying asset.
9. Vertical Spread: An options strategy in which the investor holds a position in both a call and put with different strike prices, but with the same maturity and underlying asset.
10. Volatility Skew: The difference in implied volatility (IV) between out-of-the-money options, at-the-money options, and in-the-money options. It’s the disparity of volatility across different strike prices.

W

1. Whipsaw: Refers to a condition where a security’s price heads in one direction, but then is followed quickly by a movement in the opposite direction. For traders, being caught in a whipsaw means they might end up seeing a potential profit turn into a loss rapidly.
2. White Label: A service provided by one firm, which is rebranded and resold by another company. In Forex, it refers to a broker who outsources the technological infrastructure of a bigger broker and places their own brand on it.
3. Wholesale Prices: Prices paid by retailers to manufacturers or wholesalers. Changes in wholesale prices can be an indicator of inflationary pressures.
4. Window Dressing: A strategy used by mutual fund and portfolio managers near the quarter or year end to improve the appearance of the portfolio/fund performance before presenting it to clients or shareholders.
5. World Bank: An international organization dedicated to providing financing, advice, and research to developing nations to aid their economic advancement.
6. World Trade Organization (WTO): An international institution that oversees the global trade rules among nations. It’s mainly tasked with ensuring that trade flows as smoothly, predictably, and freely as possible.
7. Wedge: In technical analysis, a wedge pattern is a series of tight price consolidations moving within two converging trendlines. Wedges can be indicative of a continuation or reversal of the current trend.
8. Weighted Moving Average (WMA): A type of moving average where more recent prices are given greater weight in the calculation, and older prices are given less weight.
9. Working Day: A day when the financial markets are open for business. This excludes weekends and public holidays.
10. Writer: In the context of options, a writer is the seller of an option, whether it’s a call or a put. The writer has the obligation to either buy or sell a security depending on what type of option they’ve written.

X

1. XAG: The currency code for one ounce of silver. It’s often used in the Forex market, similar to how XAU stands for one ounce of gold.
2. XAU: The currency code representing one troy ounce of gold. In the Forex market, traders can trade gold (XAU) against currencies, especially the U.S. Dollar, typically represented as XAU/USD.
3. XBR: The currency code for a barrel of Brent Crude, which is a major trading classification of sweet light crude oil that serves as a benchmark price for purchases worldwide.
4. XPD: The currency code for one troy ounce of palladium.
5. XPT: The currency code for one troy ounce of platinum.
6. XR (Exchange Rate): The value of one currency for the purpose of conversion to another. It determines how much of one currency is needed to purchase a unit of another currency.

Y

1. Yard: Trader’s slang for a billion. In the financial markets, especially forex, if someone trades a “yard” of currency, it means they have traded 1 billion units.
2. Yield: Represents the earnings generated and realized on an investment over a particular period of time, and it’s expressed as a percentage based on the investment’s cost or its current market value.
3. Yield Curve: A graphical representation of the interest rates on debt for a range of maturities. It shows the relationship between the interest rate (or cost of borrowing) and the time to maturity of the debt. A normal yield curve is upward sloping, where longer maturities have higher yields compared to shorter ones.
4. Yield to Maturity (YTM): The total return expected on a bond if it is held until it matures. YTM is expressed as an annual percentage rate.
5. Yuan (CNY): The official currency of the People’s Republic of China. The yuan’s value is determined by the People’s Bank of China.
6. Yen (JPY): The official currency of Japan. It’s one of the most traded currencies in the Forex market and is seen as a safe-haven currency.
7. YoY (Year-over-Year): A comparison of a statistic for one period to the same period the previous year. The YoY description is often used in financial statements to compare the performance of businesses on a yearly timeframe.

Z

1. ZAR: The currency code for the South African Rand, which is the official currency of South Africa.
2. Zero-Bound Interest Rate: When interest rates are close to 0%, they are said to be at the “zero lower bound”. This can limit the effectiveness of monetary policy because central banks can’t lower nominal interest rates below zero.
3. Zig Zag: In technical analysis, a tool used to filter out minor price movements, making it easier to identify trends. It’s particularly useful in markets that move in relatively clear trends.
4. Z-Score: In statistical analysis, it represents the number of standard deviations by which the value of an observation or data point is above the mean value. It’s sometimes used in trading systems to measure how current conditions compare to past conditions.
5. Zone of Support: Refers to a price zone reached when a currency’s price has fallen to a predicted low point, signaling a buy opportunity in technical analysis.
6. Zone of Resistance: Contrary to the Zone of Support, this term refers to a price zone reached when a currency’s price has risen to a predicted high point, signaling a sell opportunity in technical analysis.