Basic Terms

#2 Currency pair

Bid Price of the demand, the price you sell for. Broker The market participating body which serves as the middleman between retail traders and larger commercial institutions. See the complete list of Forex brokers. US dollar. Carry Trade In Forex, holding a position with a positive overnight interest return in hope of gaining profits without closing the position in order to gain from the central banks interest rates difference.

See the carry trade strategy. CFD A Contract for Difference — special trading instrument that allows financial speculation on stocks, commodities, and other instruments without actually buying or selling those assets. See the list of CFD brokers. Commission Broker commissions for operation handling. CPI Consumer Price Index — a statistical measure of inflation based upon changes of prices of a specified set of goods.

EA Expert Advisor or Robot An automated script that is used by the trading platform software to manage positions and orders automatically without or with little manual control. See our free expert advisors for MetaTrader. ECN brokers do not discourage scalping, do not trade against the client, do not charge spread low spread is defined by the current market rates but instead charge commission for every executed order. See the list of ECN brokers. Elliott Waves A set of principles for chart analysis based on 5-wave and 3-wave patterns.

See our daily Elliott Wave analysis videos. Fibonacci Retracements Levels with a high probability of trend break or bounce, calculated as the See the Fibonacci calculator. Flat Square Neutral state when all your positions are closed. Floating Leverage A leverage that changes depending on the total size of open positions.

Fundamental Analysis The analysis based only on news , economic indicators, and global events. Gap A difference between the previous period's close price and the next period's open price. In Forex, usually only occurs during weekends — between the Friday's close and the Monday's open price. See the gap trading strategy. GDP Gross Domestic Product A measure of the national income and output for the country's economy; it is one of the most important fundamental indicators in Forex.

The order is alive good until its execution or cancellation. Hedging Maintaining a market position which secures the existing open positions in the opposite direction. Jobber A slang word for a trader who is aimed toward fast but small and short-term profit from intraday trading. Jobber rarely leaves open positions overnight. Released monthly by the Conference Board.

Limit Order An order for a broker to buy a lot for fixed or lesser price or sell a lot for fixed or better price. Such price is called a limit price. Liquidity A measure of markets that describes relationship between the trading volume and the price change. Long A position which is in a Buy direction. However, in the foreign exchange markets, this is broken down even further and we observe the price as 1.

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The last number — the last 0 — is the pip. If the value of that currency pair moves from 1. Pips are how traders generally measure their profit. Many brokers break the price down even further and will include a 5th number called a fractional pip, or pipette — they publish the price as 1. Do not be surprised to see five figures after the decimal when you are looking at the price of most currency pairs on your trading platform. Japanese pairs are slightly different because their currency is generally devalued against other major pairs, so the pip is the second digit behind the decimal.

The easiest way to understand the term spread is by thinking of it as a fee your broker charges you to trade. Your broker will quote you a slightly higher price of, say, 1. You can see there is a difference between the price of 1. This is what is called the spread. The spread is therefore the difference between the price at which the broker is willing to buy off of you and sell to you.

By buying off of you at a lower price and selling at a slightly higher price the broker makes money. The bid is the best possible price at which the trader can buy the instrument being traded at the current time. In the forex market, the bid price is the highest price the broker will pay to purchase the instrument off of you. The ask is the best possible price at which the trader can sell the instrument being traded at the current time. In the forex market, the ask price is the lowest price that the broker will sell the instrument to you.

A chart is the visual representation of the price action and you use this for your analysis. It is what you use to observe the exchange rate or price of a currency pair over a period of time. On a price chart, the price of the currency pair is on the vertical axis on the right hand side the exchange rate of how many units are needed of the second currency in the pair to buy one unit of the first currency in the pair. The time is on the horizontal axis on the bottom.

A Japanese candlestick is a method of illustrating the price movement. They tell us a certain amount of information. First of all, the candlestick can tell whether the price has moved up or down, simply by the colour. Any colour can be used and the colour is set by the trader depending on their personal preference. The colour will change automatically as the candle either forms as a bearish or a bullish candle. Candlesticks can cover almost any time period from one minute to one month. On a one minute chart, each candlestick takes one minute to form.

After one minute, the candle will finish forming and then a new candle starts to form. On an hourly chart, each candle takes an hour to form and so on. The candlestick also shows us the opening price and the closing price for that period.

Forex Trading for Beginners #4: Common Forex Trading Terminologies by Rayner Teo

So if we are observing a four hour candlestick, then the candle can tell us the opening price at the start of that four hour period and the closing price of that four hour period. Lastly, a candlestick shows the highest and lowest price within the time that the candle took to form.

Speak Forex

So if observing a four hour candlestick, then you can see the highest price and the lowest price for that four hour period. The trading platform is where you place your orders to buy and sell. The platform is effectively your command centre where you open up a trade. You use the platform to tell the broker:. We mostly teach you how to trade using the platform MetaTrader 4 MT4. Funds Refers to hedge fund types active in the market.

Forex Glossary, Forex Terminology, Forex Trading Dictionary

Future An agreement between two parties to execute a transaction at a specified time in the future when the price is agreed in the present. Futures contract An obligation to exchange a good or instrument at a set price and specified quantity grade at a future date.

  • A currency pair has one price.
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G8 Group of 8 - G7 nations plus Russia. Gaps usually follow economic data or news announcements. Gearing also known as leverage Gearing refers to trading a notional value that is greater than the amount of capital a trader is required to hold in his or her trading account. It is expressed as a percentage or a fraction. Given Refers to a bid being hit or selling interest. Giving it up A technical level succumbs to a hard-fought battle. Going long The purchase of a stock, commodity or currency for investment or speculation — with the expectation of the price increasing.

Going short The selling of a currency or product not owned by the seller — with the expectation of the price decreasing. Gold gold's relationship It is commonly accepted that gold moves in the opposite direction of the US dollar. The long-term correlation coefficient is largely negative, but shorter-term correlations are less reliable.

Gold certificate A certificate of ownership that gold investors use to purchase and sell the commodity instead of dealing with transfer and storage of the physical gold itself. Gold contract The standard unit of trading gold is one contract which is equal to 10 troy ounces. Good for day An order that will expire at the end of the day if it is not filled.

Good 'til cancelled order GTC An order to buy or sell at a specified price that remains open until filled or until the client cancels.

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  6. Good 'til date An order type that will expire on the date you choose, should it not be filled beforehand. Greenback Nickname for the US dollar. Gross domestic product GDP Total value of a country's output, income or expenditure produced within its physical borders. Gross national product Gross domestic product plus income earned from investment or work abroad.

    Guaranteed order An order type that protects a trader against the market gapping. It guarantees to fill your order at the price asked. Guaranteed stop A stop-loss order guaranteed to close your position at a level you dictate, should the market move to or beyond that point. H Handle Every pips in the FX market starting with Hedge A position or combination of positions that reduces the risk of your primary position.