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Forex Glossary
Ask Rate - The rate at which a financial instrument is offered for sale (as in bid/ask spread).
Bear Market - A market distinguished by declining prices.
Bid Rate - The rate at which a trader is willing to buy a currency.
Bid / Ask Spread - The difference between the bid and offer price, and the most widely used measure of market liquidity.
Bull Market - A market distinguished by rising prices
Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
Choice Market - a market with no spread. All trades buys and sells occur at that one price
Cross Rate - The exchange rate between any two currencies that are considered non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/JPY quote would be considered a cross rate, whereas in UK or Japan it would be one of the primary currency pairs traded.
Currency Risk - The probability of an adverse change in exchange rates.
Day Trading - Refers to positions which are opened and closed on the same trading day.
Dealer - An individual who acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
Economic Indicator - A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
Foreign Exchange - (Forex, FX) - the simultaneous buying of one currency and selling of another.
Fundamental analysis - Analysis of economic and political information with the objective of determining future movements in a financial market.
Hedge - A position or combination of positions that reduces the risk of your primary position.
Inflation - An economic condition whereby prices for consumer goods rise, eroding purchasing power.
Initial margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance.
Interbank rates - The Foreign Exchange rates at which large international banks quote other large international banks.
Leading Indicators - Statistics that are considered to predict future economic activity.
Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received.
Long position - A position that appreciates in value if market prices increase.
Margin - The required equity that an investor must deposit to collateralize a position.
Offer - The rate at which a dealer is willing to sell a currency.
Pips - Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.
Rate - The price of one currency in terms of another, typically used for dealing purposes.
Resistance - A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.
Risk Management - The employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.
Short Position - An investment position that benefits from a decline in market price.
Spread - The difference between the bid and offer prices.
Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position.
Support Levels - 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.
Technical Analysis - An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.
Volatility (Vol) - A statistical measure of a market's price movements over time.
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