The most important terms related to Forex trading are presented in this glossary:
|Forex Trading Terms
|Method of recording and outlining the financial dealings, income/earnings, and operations of an entity.
|Purchase of majority or all of the target’s firm controlling stakes by an acquiring entity. Not to be confused with merger.
1. A relation where one of the companies own less than a majority of the other firm’s stock.
2. An inter-company connection in which at least two different entities are subsidiaries of a bigger company.
1. Individual authorized to sell an insurance in a state.
2. Person or company facilitating securities transactions for clients.
3. Securities salesperson representing an issuer or broker-dealer when selling derivatives to the public.
|Trading system where a computer has advanced mathematical structures to make and facilitate transactions in the market.
1. Repaying a debt obligation on a regular basis over a certain time period.
2. Distributing the capital cost of an intangible asset over a specific time period.
|Financial professional knowledgeable in assessing investments and making recommendations for securities.
|Financial product designed to grow funds, which will give an income stream to the holder in the future upon amortization.
|Increment in a security’s value over time.
|Act of purchasing and selling a financial instrument simultaneously in order to generate profit from its price differences.
|Price of the offer, the price you buy for.
1. A section in the balance sheet outlining the items owned by a company.
2. An economic resource owned by a person, entity, or country, hoping to gain economic benefits in the future.
|A group of securities with the same behavior in the market, characteristics, and adherence to laws and regulations.
|Internal or external assessment of the financial statement of a firm or organization by looking into their records.
|Australia’s official currency and the legal tender of Kiribati, Nauru, and Tuvalu. The currency, presented with the symbol A$, is comprised of 100 cents.
|Average Annual Yield
|Aggregate yield of an investment or portfolio within a year. It is computed by adding all the interest accrued, dividends, or other income earned from the investment, and obtaining the median of all investments for that year.
|An entity, normally a financial institution or company, which accepts and facilitates deposits from clients.
|Bank of Canada
|Canada’s central bank and banknote issuing authority established in 1935. Its duties include managing the country’s financial system and monetary policy to ensure economic stability.
|Bank of England
|United Kingdom's central bank, it acts as the government's bank and the lender's last resort. It issues currency and oversees monetary policy.
|Bank of Japan
|Japan's central bank is responsible for issuing and handling currency and treasury security, implementing monetary policy, maintaining the stability of the Japanese financial system.
|The percentage rate at which central bank of a country lends money to the country's commercial banks.
|Bank Stress Test
|An evaluation administered internally by banks or supervisory authorities to gauge whether a bank has sufficient capital to withstand the effect of adverse developments.
|A legal procedure where a federal court liquidates a borrower’s assets to settle debts, relieving the individual or entity of additional liability.
|An investor who believes that a financial instrument or the overall market will decline.
|Price of the demand, the price you sell for.
|A digital currency that follows the ideas outlined in a whitepaper by Satoshi Nakamoto. Introduced in 2009, it offers lower transaction fees and is managed by a decentralized authority.
|A debt instrument released by a firm or government, which seeks to generate capital to fund their activities or projects by borrowing. In exchange of capital, the entity needs to repay the principal plus interest within a specified time period (maturity).
|The United Kingdom’s official currency. Also referred to as the pound, the currency is presented with the symbol £ and is comprised of 100 pence.
|The market participating body which serves as the middleman between retail traders and larger commercial institutions.
|A fee charged by an agent or a company to execute a client’s financial transaction.
|An investor who believes that a financial instrument or the overall market will rise.
|Canada’s official currency first used in 1858. Presented with the symbol C$, the currency is comprised of 100 cents.
|In Forex, holding a position with a positive overnight interest return in hope of gaining profits, without closing the position, just for the central banks interest rates difference.
|A national bank mandated by the government to ensure low inflation, currency stability, and full employment. Some of its responsibilities include implementing monetary policy, serving as a lender of last resort, and monitoring the financial system.
|Certified Public Accountant
|Designation to professionals who passed the examination, as well as completed education and work requirements set forth by the American Institute of Certified Public Accountants.
|A Contract for Difference - special trading instrument that allows financial speculation on stocks, commodities and other instruments without actually buying.
|Checks and Balances
|Act of implementing several measures aimed at curbing discrepancies or improper behavior within an entity.
|Chicago Board Options Exchange
|An exchange focusing on options contracts for indices, interest rates, and stocks. Founded in 1973, CBOE is the biggest options market worldwide.
|Chicago Mercantile Exchange
|The exchange for futures and options on futures, which mostly entails futures on currency, equities, interest rates, stock indexes, and a small portion on agricultural products.
|An exchange member acting as a mediator between a trader and a clearing corporation. This broker ensures a transaction is processed between the parties involved.
|Fee levied by a clearing house for processing unsettled dealings.
|Primary business source of an entity made up of their current customers who avail their products and services, as well as prospective clients which have a high possibility of becoming customers.
|The fee paid to a broker to execute a trade.
1. In commerce, any good swapped on a commodity exchange.
2. A basic good which can be exchanged with other commodities of the same type.
|An asset’s capability to bolster its value by reinvesting the earnings from previous dealings.
|Consumer price index, a statistical measure of inflation based on changes of prices of a specified set of goods.
|Money issued by a government that is circulated within an economy.
|In foreign exchange, the quotation and pricing structure of the currencies being traded in the market.
|A swap that involves the exchange of principal and interest in one currency for the same in another currency.
|Amount of money borrowed by an individual or company.
1. Failure to fulfill terms of a futures contract, as per exchange.
2. Borrower’s failure or unwillingness to pay interest or principal on time.
|Intended decrement to the value of a currency, a group of currencies or standard.
|Risk management technique which combines different investments within a portfolio in order to neutralize losses and maximize gains.
|Disbursement of a firm’s earnings to a class of its investors.
|Dow Jones Industrial Average
|An index that measures the daily price movements of 30 stocks on the Nasdaq and the New York Stock Exchange.
|Dealing in an exchange which takes place when the price is lower than the past transaction.
|EA (Expert Advisor)
|An automated script which is used by the trading platform software to manage positions and orders automatically without (or with little) manual control.
|Amount of profit generated by a company during a given time period.
|ECB (European Central Bank)
|The main regulatory body of the European Union financial system.
|A type of forex broker that uses electronic communications networks to give clients direct access to other market participants.
|Economic state of a region or country influenced by various factors such as exchange rates, overall condition of the global economy, inflation, monetary and fiscal policy, and unemployment levels.
|Natural flow of the economy between periods of growth and recession.
|Expansion in the economy’s capability to manufacture products and services, compared from one period to another.
|Consumption and production activities which gives a picture of a country’s resource.
|Account used to allocate a particular amount of money for emergency cases, such as a job loss, aimed at improving financial security of an individual.
|Asset’s value minus all its liabilities.
|The eurozone’s official currency unveiled in 2002. Used by majority of EU member countries, the currency is presented with the symbol €.
|A political and economic union, with most of the member states sharing a common currency, the euro. The European Union is responsible for ensuring a barrier-free trade zone and improving economic wealth in the region.
|Also called the euro area and Euroland, it is a monetary union that consists of all the European Union (EU) countries that have adopted the euro as their national currency.
|The value for which a country’s currency can be swapped for another nation’s currency. An exchange rate, which can be quoted directly or indirectly, are influenced by numerous factors including the overall economy, events, and inflation.
|A security tracing the overall performance of an index, a commodity, bonds, or an index fund. ETFs, having lower fees and higher liquidity, experience price change since the funds are bought and sold during the day.
|Sending of goods produced in a country to another nation for exchange, sale or trade. Exports, considered one of the oldest types of economic transfer, take place among countries with minimal trade restrictions or charges.
|The worth of a derivative or instrument as declared by the issuer. Also referred to as nominal value, par value, or par.
|Fed (Federal Reserve System)
|The central bank of the United States. Its main monetary policymaking body, the Federal Open Market Committee (FOMC), is responsible for monetary policy decisions, including setting the target for the federal funds rate.
|A term describing how money is managed by people, organizations, and countries. Some opt to divide finance into three categories: personal finance, corporate finance, and public finance.
|A professional which provides guidance or recommendation to a client in exchange for compensation or fee.
|Neutral state when all your positions are closed.
|A leverage that changes depending on the total size of open positions.
|Act of purchasing and selling foreign currencies or converting a country’s currency for another. Currency trading occurs in a decentralized global market 24 hours a day and five days a week. Also called forex.
|A product or service is offered at no cost, in which some parties (and even the recipient) shoulder the real cost of that offering. The concept primarily seeks to gain new customers and increase revenues. In investment, it describes instances where investor cannot make huge profits without the risk of a likely loss.
|The analysis based only on news, economic indicators and global events.
|Transferable financial contract that includes an obligation to buy. It stipulates the details of purchasing (or selling) an asset such as the predetermined price and date in the future. It can be used to speculate or hedge on the underlying asset’s price movement.
|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.
|GDP (Gross Domestic Product)
|Is a measure of the national income and output for the country's economy; it's one of the most important Forex indicators.
|In the Forex market, gold is a form of currency traded against US dollars. It is known to be a safe-haven asset, which rises in value amid volatility and economic uncertainty.
|GTC (Good Til Canceled)
|Order to buy or sell of a currency with a fixed price or worse. The order is alive (good) until execution or cancellation.
|Short-term trading strategy seeking to generate small, quick profits gains while minimizing risks. This type of trading technique normally lasts for a few minutes.
|A document outlining a company’s projection of its earnings in the future. Also known as expected results, a corporation releases their guidance to shareholders and market watchers.
|Maintaining a market position which secures the existing open positions in the opposite direction.
|Product or service transported from one country to another country for sale.
|Indicator gauging the change in an economy or securities market. Frequently used as a benchmark or measurement for a particular industry or market, every index has differing computing methods that is normally expressed as a change from a base value.
|Categorization of businesses or entities based on their primary activities. If a corporation engages in different business activities, that company belongs to an industry where most of its revenues are earned.
|Consistent price increase of all products and services in an economy, normally gauged using the Consumer Price Index.
|Initial Public Offering
|First stock sale by a private firm to the general public. IPOs are normally done by smaller and newer companies to generate capital for expansion.
|Purchasing and selling of stocks by an individual who trades based on the nonpublic information from the insider.
|Contract indicating a policyholder (person or business) receives financial compensation against losses from an insurance firm.
|Nonphysical asset categorized as definite or indefinite based on its specifications. Some examples of intangible asset include brand recognition, corporate intellectual property, and goodwill.
|Fee paid by a borrower to a creditor for using the institution’s assets. It is expressed as annual percentage of principal.
|Internal Revenue Service
|US government agency tasked to collect and implement tax laws. Formed in 1862, the IRS manages income and employment taxes, as well as other types of taxes.
|International Monetary Fund
|Global organization responsible for formalizing exchange rates and financial relations worldwide. Seeking to strengthen their member nations as well, the IMF ensures monetary and exchange stability by monitoring the global economy.
|Putting capital or money, as well as exerting time and effort, into a venture to earn an additional income or profit.
|An asset obtained for future income or value increment. In economics, investment is the purchase of products not consumed but can be used to generate wealth. In finance, it refers to the monetary asset hoping to gain income or greater value and be sold at a higher rate.
|Japan’s official currency introduced by the Meiji government in 1872. The currency, presented with the symbol ¥, is comprised of 100 sen or 1000 rin.
|Any financial ratio that is especially important in analyzing the current financial condition of a company.
|Law of Supply and Demand
|Theory outlining the relationship between the supply of a good and the desire for the said good. In essence, the law of supply and demand shows how the availability and demand for a product affects its selling price.
|A composite index (year 1992 = 100%) of ten most important macroeconomic indicators that predicts future (6-9 months) economic activity.
1. Amount of debt used in funding a company’s assets.
2. Usage of borrowed capital or financial instruments to bolster an investment’s potential return.
|ICE LIBOR or LIBOR, acronym for Intercontinental Exchange London Interbank Offered Rate, is an interest rate utilized by world’s top banks for charging short-term loans. Regulated by the ICE Benchmark Administration, LIBOR refers to the following currencies for computation: the Japanese yen, the Swiss franc, the British pound, the euro, and the US dollar.
|Order for a broker to buy the lot for fixed or lesser price or sell the lot for fixed or better price. Such price is called limit price.
|An asset’s capability to be easily purchased or sold without reducing its initial value.
|An act in which an institution lends asset (money, property, etc.) to another party in return for future repayment plus interest rates and other fees.
|Refers to the purchase of an asset with the hope that it will increase in value. On Forex, traders are always long one currency and short the other.
|The loss from closing long position at a lower rate than opening or a short position with a higher rate than opening, or if the profit from a position closing was lower than a broker's commission on it.
|Definite amount of units or amount of money accepted for operations handling (usually it is a multiple of 100).
|Perils caused by underperforming, inefficient, or faulty management, affecting the company (or fund) being administered and its shareholders.
|Money, the investor needs to keep at broker account to execute trades. It supplies the possible losses which may occur in margin trading.
|Account which is used to hold investor's deposited money for FOREX trading.
|Demand of a broker to deposit more margin money to the margin account when the amount in it falls below certain minimum.
|Total value of all of the corporation’s outstanding shares. Also called market cap, it is determined by multiplying the aggregate number of stocks outstanding by the current stock price per share.
|Order to buy or sell a lot for a current market price.
|The price for which a currency is traded on the market.
|A specific time period in which a financial instrument will end its existence and the principal is paid with interest.
|The combining of at least two entities to become one where the acquiring company purchases the stocks of shareholders and the resources of companies are collated for the new firm.
|Mergers and Acquisitions
|Unification of at least two entities.
|The measure of the currency's ability to move in the given direction.
|Sum of a country’s currency either stored in commercial bank deposits in the central bank’s vaults or circulated publicly.
|A debt instrument in which the borrower receives cash upright and makes future repayments within a specific time period. Obtained by the collateral of a particular real estate property, individuals and companies use mortgages to purchase huge real estate properties without paying the entire value of that property right away.
|A financial instrument which collects money of shareholders and invests in a pool of securities such as bonds and stocks. Supervised by money managers, mutual fund seeks to generate capital gains and provide income for their holders.
|Computerized marketplace which provides an avenue for traders to purchase and sell securities. Established by the National Association of Securities Dealers, Nasdaq also serves as the benchmark index for US technology shares.
|Total worth of a company which is computed by deducting its total assets by total liabilities. Also called book value or shareholders’ equity.
|New York Stock Exchange
|Largest stock exchange worldwide, referring to the NYSE’s total market capitalization of all listed securities. The exchange, also referred to as Big Board, is situated in New York City.
|New Zealand Dollar
|Official currency of New Zealand presented with the symbol NZ$. Also called kiwi, the currency is comprised of 100 cents.
|Price of the offer, the price you buy for.
1. Cutting an investor’s net position to zero for an investment to no longer accrue gains or losses.
2. Liquidating a futures position by making an opposite dealing in order to remove the delivery obligation.
|Open Position (Trade)
|Position on buying (long) or selling (short) for a currency pair.
|Contract giving in which a seller renders the right, not the obligation, to purchase (call) or sell (put) a particular security at a predetermined price within a specific time period.
|Order for a broker to buy or sell the currency with a certain rate.
|Over the Counter
|Decentralized market in which securities are dealt via a dealer network. Derivatives being traded in this market are not included on an exchange’s listing.
|Face or nominal value of an investment instrument including bonds, currencies, and stocks. Also called par value, the world is mostly applicable in bonds.
|Collaboration in which two or more persons or entities share responsibilities, profits, and liabilities of a business venture. Not every partner is involved in daily operations and management of the venture. In some instances, partnerships obtain beneficial tax treatment.
|Payment or return from an investment within a certain time period, expressed as the actual amount or a percentage on a regular or annual basis.
|Percentage Allocation Management Module (PAMM)
|A broker-side system that allows investor to invest with traders, and allows traders to manage investors funds using the broker's platform.
|The primary support/resistance point calculated basing on the previous trend's High, Low and Close prices.
|The last digit in the rate (e.g. for EUR/USD 1 point = 0.0001).
|The amount of a security held or borrowed by an entity (trader or dealer). In simplest terms, it is the current open trade of an investor.
1. Periodic payment being paid by a policyholder for an insurance company to provide compensation within a certain time period.
2. Aggregate cost of an option.
3. The difference between the derivative’s selling price and face value.
|Metric appraising a company. It is determined by dividing the company stock’s market value per share by earnings per share. Also known as earnings multiple.
|Positive amount of money gained for closing the position.
|Producer Price Index
|Economic indicator gauging the median change in the overall price levels from the seller’s point of view.
|The initial amount of money of the invested.
|Dealings made by a financial institution to profit from the market using its own account, not their clients.
|Legal document outlining the information about an investment that is sold to the general public. Also called offer document, prospectus helps an investor make a sound investment decision.
|Purchasing Managers’ Index
|Economic indicator measuring the overall condition of the manufacturing sector according to the following factors: production, employment environment, new orders, supplier deliveries, and inventory levels. A reading lower than 50 denotes contraction while higher than 50 indicates expansion.
|Gain/loss for already closed positions.
|Reserve Bank of Australia
|Australia’s central bank and banknote issuing authority established in 1960. Its responsibilities include the country’s economic progression and full employment rate, as well as securing the Australian dollar’s steadiness by implementing the necessary monetary policies.
|Reserve Bank of New Zealand
|New Zealand’s central bank and banknote issuing authority formed in 1934. Its duties include ensuring the stability of the country’s financial system, keeping the country’s monetary policy, supporting services of other banks, and meeting the currency needs of its people.
|Price level for which the intensive selling can lead to price increasing (up-trend).
|The chance an investment may wipe out some or all of its worth. It also refers to a lower than anticipated returns.
1. Movement of a retirement plan’s holdings to another without incurring tax.
2. Shift of a forex position to another delivery, resulting in additional charge.
3. Reinvestment of funds from one derivative into a new issue of a similar instrument.
|The top index provider worldwide which gives independent credit scores as well. For over 150 years, the company has been rendering financial market intelligence to market players.
|A style of trading notable by many positions that are opened for extremely small and short-term profits.
|Securities and Exchange Commission
|Federal agency primarily tasked to safeguard investors and uphold their interests. Founded in 1934, its duties include bolstering capital formation, managing the securities markets, and overseeing the takeovers in the United States.
|Settled (Closed) Position
|Closed positions for which all needed transactions has been made.
|Shanghai Stock Exchange
|A non profit organization run by the China Securities Regulatory Commission. Established in 1990, the exchange is responsible for forming business regulations, accepting and organizing listing, providing an avenue, processing, and monitoring securities trading, and overseeing and disseminating market details.
|A commodity generally used in coins, electronic devices, jewelry, and photography. Because of having the highest electrical conductivity, silver is considered a highly significant element.
|Execution of order for a price different than expected (ordered), main reasons for slippage are - "fast" market, low liquidity and low broker's ability to execute orders.
|Difference between ask and bid prices for a currency pair.
|100,000 units of the base currency of the currency pair, which you are buying or selling.
|Security exhibiting ownership of an individual or group in a firm. The stock also signifies shareholders’ right on the portion of a company’s assets and revenues. Common stock and preferred stock are the two main classifications of stock.
|An order to sell or buy a lot for a certain price or worse.
|Stop-Loss Order (SL)
|An order to sell or buy a lot when the market reaches certain price. It is used to avoid extra losses when market moves in the opposite direction. Usually is a combination of stop-order and limit-order.
|STP (Straight Through Processing)
|An order processing that doesn't require any manual intervention and is fully automatic. In fact, 99.9% of all on-line Forex brokers support order handling with STP.
|The price level at which intensive buying can lead to a price fall (downtrend).
|Overnight payment for holding your position. Since you are not physically receiving the currency you buy, your broker should pay you the interest rate difference between the two currencies of the pair. It can be negative or positive.
|Official currency of Switzerland, and the legal tender of Campione d'Italia and Liechtenstein. The safe-haven currency is comprised of 100 centimes.
|Swiss National Bank
|Switzerland’s central bank and banknote issuing authority established in 1907. Its responsibilities include ensuring cash supply and price stability in the country and bolstering the liquidity of the money market when necessary.
|Act of acquiring a company by making a bid for a target corporation, either by employing a friendly or hostile approach.
|Take-Profit Order (TP)
|An order to sell or buy a lot when the market reaches certain price. It is used to fixate your profit. Usually is a combination of stop-order and limit-order.
|An asset with a physical form. Some examples of tangible asset include accounts receivable, machinery, and real estate property.
|Tax Identification Number
|A nine-digit identifying number designated by a country’s tax collection agency to an individual or entity for tax purposes.
|An involuntary charge imposed by a country’s tax collection agency to an individual or corporation in order to finance their activities or projects.
|The analysis based only on the technical market data (quotes) with the help of various technical indicators.
|A metric projecting the future price levels or the overall price direction of a derivative by studying its previous patterns.
|Slightest price change or minimal movement in a derivative’s price.
|Tokyo Stock Exchange
|Japan’s biggest stock exchange and the world’s fourth largest exchange (in terms of total market capitalization). Founded in 1878, the TSE has over 2,200 listed firms, including Honda and Toyota.
|Toronto Stock Exchange
|Canada’s largest stock exchange formed in 1852. Controlled and regulated by TMX Group, the TSX (formerly TSE) has listed more than 1,515 companies.
1. In economics, a fundamental concept in which several parties exchange goods and/or services to one another in a negotiation.
2. In finance, facilitating a transaction to purchase and sell a security.
|A person working on purchasing and selling a derivate or security in a market either for his own use or the financial institution’s utilization.
|Computer program or software enabling a person to trade financial instruments including currencies and stocks, as well as manage their trading accounts. It is normally provided by brokerage or investment firm.
|A preset of rules and parameter outlining the requirements which should be fulfilled to enter and exit trades. It includes the following: order types, trade entries, filters and triggers, money management, and timetables.
|Direction of market which has been established with influence of different factors.
|Monicker referring to the United States or the US government. Based on mythos, the word is related to a certain Samuel Wilson, a meat distributor who gave barrels of beef to the US military throughout the War of 1812.
|An indicator gauging the aggregate workforce in the labor market. Expressed in percentage, it determines the total number of people who are jobless but seeking to gain a paid job.
|An intergovernmental organization responsible for ensuring peace and security around the globe, attain global cooperation in resolving international disputes, developing harmonious relations among member countries, and synchronizing the acts of countries to achieve the common ends. Established in 1945, the United Nations has 193 member nations and 2 observer countries.
|Unrealized (Floating) Profit/Loss
|A profit/loss for your non-closed positions.
|Market dealing in which the price of an investment instrument or security increases relative to its last trade.
|The United States’ official currency presented with the symbol $. Initially incepted though the Coinage Act of 1792, the currency is comprised of 100 cents.
|Federal agency responsible for releasing all Treasury notes, bonds, and bills, as well as bolstering the economy and creating economic and job opportunities. Introduced in 1798, the Treasury Department oversees the following government agencies: the Alcohol and Tobacco Tax and Trade Bureau, the Bureau of the Public Debt, the Internal Revenue Service, and the United States Mint.
|Amount of money in the account that can be used for trading.
|Amount of money in the account already used to hold open positions open.
|A statistical measure of the number of price changes for a given currency pair in a given period of time.
|The aggregate number of dealings occurring in a derivative or exchange within a particular time period.
|VPS (Virtual Private Server)
|Virtual environment hosted on the dedicated server, which can be used to run the programs independent on the user's PC. Forex traders use VPS to host trading platforms and run expert advisors without unexpected interruptions.
|1. A Manhattan street where the New York Stock Exchange, as well as most of the biggest brokerages and investment banks in the United States are located.
|A global organization, founded in 1944, which is responsible for conducting research, giving an advice, and funding developing countries to help boost their economic progression.
|Cash return of a derivative or security to its holder or owner, which expressed as a percentage.