Forex Trading Guide

Common FOREX Terms – Trader Language

As a beginner trader it is important for you to learn the basic commonly used terms in FOREX trading. The contents on this page will help you get familiarized, understand the meanings and ensure that you know what you are doing before you make a mistake.

Mistakes need to be avoided as it could lead to loss of money. If you cannot memorize them all at once, which is OK, you can always come back and refresh your memory.

You are welcome to print this page if you wish to do so. Learning the common FOREX terms is important before you start trading with a real trade account. Here are the commonly used terms in the FOREX market among traders.

What are Pips?

Pip stands for percentage in point (or price interest point). It refers to a unit of change in an exchange rate of a currency pair. Most major currencies (but not all) are generally priced to four decimal places. A pip is one unit of the fourth decimal point. For dollar currencies this is to 1/100th of a cent.

Pips are your friend. If you’re making pips, you’re making money. Pip is a minimal measuring unit of one currency change relatively another reflected in quotes released by a broker.

What is Volume?

Volume is used to measure the value of a market move.

What is Margin?

Margin is the required pledge amount for opened positions equaling 1% (with 1:100 leverage) of the opened position size.

What is Free Margin?

Free Margin are assets uncommitted to a pledge for opened positions.

What is Margin Level?

Margin Level is account balance calculated in the following way: (Equity / Margin)*100%.

What is Base Currency?

Base Currency is monetary unit of an account to be nominated in and that of balances, commissions and payments to be calculated.

What is Currency Rate?

Currency Rate is two currencies making an exchange rate come as trading operation object.

What is Currency Dealing?

Currency Dealing is purchase and/or sale of currency assets in the world currency market with a purpose of deriving profit from rate fluctuations with the course of time.

What are “Bulls”?

Bulls is trade slang meaning traders playing for the currency rate upturn.

What are “Bears”?

Bears in trade slang means traders operating with a currency downtrend.

What is “Bull Market”?

Bull Market is a slang meaning the market is in Uptrend (going up).

What is “Bear Market”?

Bear market, the opposite of Bull Market is a slang meaning a market with down-directed rate tendency.

What is Order?

Order is trader’s command to a broker of buying or selling one currency for another at current market price.

What is Equity?

Equity is trading account balance reduced by a current loss of positions opened and increased by a current profit of positions opened.

What is Dealing Center

Dealing Center is an organization offering a prospect of making trading transactions in financial markets without accessing the external trade area.

What is a Forex Broker?

A Forex Broker is an organization granting access to the world financial markets for conducting speculative operations.

What is Transaction?

Transaction in FOREX is aggregate of trading operations with funds switching from base currency into quoted one and vice versa.

What is Diversification?

Diversification is a form of capital aggregation; risk reduction strategy by spreading capital investments to different trading instruments.

What is Cross Rate?

Cross Rate is a ratio between two currency pairs relatively the third one (USD); exchange rate between two currencies, except for USD.

What is Trend Line?

Trend Line is chart direct lines coming through maximum value of up-going and down-going trends determining the current tendency.

What is Margin Trading?

Margin Trading is Buy/Sell operating method using monetary assets provided by a broker as a loan on security of stipulated amount.

What are Market Makers?

Market Makers are big banks and financial companies cooperating with an exchange market. They support the gap between Ask and Bid due to a substantial share in the total market turnover.

What is Non-trading Operation?

Non-trading Operation is deposit/withdrawal of money from a trading account or credit allowance/reimbursement.

What is Open (currency) position?

Open position is mismatch of requirements (assets) and commitments (liabilities) in foreign currency for a currency market participant (banks, companies).

What is Market Opening?

Market Opening is trade start after weekends, holidays, and breaks between trading sessions.

What is Pending Order?

Pending Order is brokerage company command to buy or sell a currency pair in future at a set price.

What is Scalping?

A scalper is a trader earning on a small number of pips and setting a position for several minutes. Quick in, quick out.

What is Accounting Currency?

Accounting Currency is monetary unit used for carrying out deposit and withdrawal transactions.

What is Range?

Range is lack of trend (flat trend) appearing after abrupt rate fluctuations; distance between support and resistance levels.

What is Swap?

Swap is assets held or added to a trading account for prolongation (carrying over) of a position to the next day.

What is Expert Adviser?

Adviser is a trading account managing program in a specialized language, which sends requests and orders to the system using the client terminal. In another words: FOREX Trading Robots.

What is Spike?

Spike is market situation when the next quote differs much from the preceding one. A sudden sharp move/change of market.

What is Spread?

Spread is difference between Ask and Bid prices expressed in pips.

What is Ticket?

Ticket is unique identification number assigned to every open position or pending order in a trading platform.

What is Trading Platform?

Trading Platform is a program solution (computer software) directed to transmit online information on trades, trading transactions execution and recording of mutual commitments between trader and broker. MetaQuotes MetaTrader 4 and MetaTrader 5 are the most popular and widely used trading platforms.

What is Transaction?

Transaction is aggregate of trading operations with funds switching from base currency into quoted one and vice versa.

What is Trader?

Trader is a stock dealer selling and buying currency pairs on FOREX for the purpose of making profits.

What is Trend?

Trend is a clearly defined market direction; general price movement direction.

What is Hedging?

Hedging is execution of buy or sell operations with different financial instruments simultaneously for the avoidance of huge losses in case of sharp price fluctuations.

What is Price Gap?

Price Gap is any of cases: Bid of the current quote is higher than Ask of the preceding one; Ask of the current quote is higher than Bid of the preceding one.

What is Equity?

Equity is trading account balance reduced by a current loss of positions opened and increased by a current profit of positions opened.

What is FOREX (Foreign Exchange Market)?

Forex is foreign currency exchange market; electronic stock exchange for conducting currency transactions.

What is Free Margin?

Free Margin are assets uncommitted to a pledge for opened positions.

What is Ascending Trend?

Ascending Trend is a tendency by which the price moves upwards and most of drops fix above the previous drop.

What is Intraday Trading?

Intraday Trading is trading activity oriented to profit earning during the day; execution of short term trades.

What is Diversification?

Diversification is a form of capital aggregation; risk reduction strategy by spreading capital investments to different trading instruments.

What is Dealing Center?

Dealing Center is an organization offering a prospect of making trading transactions in financial markets without accessing the external trade area.

What is Client Terminal?

Client Terminal is software such as MetaQuotes’ MetaTrader 4/5 program allowing you to get trading session data online, carry out a technical analysis, and trade the FOREX market.

What is Quote?

Quote is one currency unit cost (base currency) expressed in another currency (quoted currency).

What is Leverage?

Leverage is rate of credit given to a trader by broker; a ratio of pledge amount and the given borrowed capital.

What is Lot?

Lot is standard contract measure unit for evaluating the currency volume traded by this contract on Forex.

What is Margin Trading?

Margin Trading is buy/sell operating method using monetary assets provided by a broker as a loan on security of stipulated amount.

What is Normal Market Conditions?

Normal Market Conditions is lack of price gaps, sharp breakdowns of a quote flow in a trading platform, violent price dynamics.

What is Pending Order?

Pending Order is brokerage company command to buy or sell a currency pair in future at a set price.

Written by Accura FX

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