If you’re ever stuck and need help to understand a particular term used in Forex trading, you’ve landed on the right page. We’ve listed a few key trading terms used in Forex trading. If you haven’t found the specific term on this page, then head to our detailed glossary section for a broader list of terms used generally in trading.

Trading

  • Asset: A financial entity which can be traded and invested in through buying and selling. 
  • Buy: Opening a trading position with the expectation that the asset price will increase.
  • But Position: Buying an asset with the goal of selling it back at a higher price with profit.
  • CFD: Contract for Difference – a financial instrument that enables trading on the price differences of an underlying financial asset without needing to physically purchase it.
  • Commission: A position opening fee charged (or not) by brokers at their discretion.
  • Contract Size: The amount of asset bought.
  • Forex: Abbreviation of ‘foreign exchange’ – refers to buying and selling currencies against each other.
  • Hedging: A trading strategy which involves opening Buy and Sell Positions simultaneously with the idea that if the main position is losing, the profits from the alternative position will cover the losses.
  • Instrument: A financial trading entity which allows trading without actual purchase such as CFDs, options, futures, and forwards.
  • Leverage: A trading tool provided by the brokers to magnify the available capital and enable opening larger positions.
  • Long Position: Another term for a Buy position.
  • Loss: Experiencing a decrease in the account balance when a position is closed. 
  • Margin: The amount of capital allocated in a position to open it.
  • Margin Call: A broker’s warning to a trader whose available margin is depleting to a point that the open positions cannot be maintained and will be closed automatically.
  • Portfolio: Our basket of financial assets which we are trading.
  • Pip Value: The amount of profit or loss accrued per pip movement, based on the position size.
  • Profit: Experiencing an increase in the account balance when a position is closed.
  • Risk Factor: A market event that can influence the prices of one or more assets in our trading portfolio.
  • Risk Management: A money management strategy to understand, analyse, and manage the risk exposure of our portfolio.
  • Risk/Return Ratio: A personal trading rule to determine the proportion between the expected return and the taken risk.
  • Rollover: Leaving a trading position open overnight to carry it to the next day.
  • Scalping: A trading strategy which involves opening and closing Buy and Sell positions within a few seconds to profit from minimal price movements.
  • Sell: Opening a trading position with the expectation that the asset price will decrease.
  • Sell Position: Selling an asset with the goal of buying it back at a lower price with profit.
  • Short Position: Another term for a Sell position.
  • Spread: The difference between Bid and Ask prices of a financial asset.
  • Swap: The interest paid or received from the rollover of a trading position.
  • Trading Plan: A written personal guideline outlining all elements of our trading activities.
  • Trading Psychology: The psychological phenomena experienced when trading.
  • Trading Strategy: A specific set of personal trading rules to apply when opening and closing positions in the financial markets.

Trading Platform

  • Ask: The market’s Buy price for a financial asset.
  • Automated Trading Systems (ATS): An algorithmic computer software that automatizes the trading strategy by automatically analysing the markets and opening and closing positions, without the attendance of the trader. 
  • Bid: The market’s Sell price for a financial asset.
  • Execution: Exercising of a market order.
  • Expert Advisor (EA): Expert Advisors are automated trading systems used on MetaTrader 4 and MetaTrader 5. EAs are algorithmic trading robots which either open and close positions for the trader or generate trading signals for the trader to use.
  • Lot: A term referring to the standard trading size of a financial asset.
  • Market Order: A regular trading position.
  • One-Click Trading: A trading platform feature which allows you to pre-determine position specifications and trade immediately by clicking Buy or Sell buttons.
  • Pending Order: A market order to open a Buy/Sell position when the market price of an asset reaches a predetermined value.
  • Pip: The increment decimal of the price of a financial asset. In Forex currency pairs, 4th or 2nd decimal; in non-Forex asset CFDs, the last digit of the price.
  • Pipette: The subordinate increment decimal of the price of a financial asset. In Forex currency pairs, the 5th decimal.
  • Price Chart: A technical chart which demonstrates the price changes over time in specific formats.
  • Stop Loss: A trading order to close a losing position at a predetermined price.
  • Take Profit: A trading order to close a profitable position at a predetermined price.
  • Indicator: An automatic analysis tool implemented into the price chart that measures changes in the quantitative characteristics of a financial asset. 
  • Tick: A nominal price change caused by a specific number of trades in a single time point of the observed time window of the time chart.
    • Virtual Private Server (VPS): Virtual Private Servers allow the trading platform to continue running even when the trader exits the program – often utilised along with Expert Advisors.
  • Volume: Position size.

Brokers

  • Account Manager: A representative of a broker whose responsibility is to conduct the communication between the broker and the client.
  • Anti-Money Laundering Policy (AML): A legal obligation of brokers to identify the sources of clients’ funds and ensure that they are not generated by or used for illegal activities.
  • Bonus: A trading tool, in form of extra funds to trade, awarded by a broker to a trader within certain rules and requirements.
  • Dealing Room: The trading department within the organisation of a broker which governs the trading activities of the clients.
  • Deposit: Transferring funds from an external account to the trading account balance.
  • Electronic Communications Networks (ECN): A type of broker which provides traders with direct access to liquidity providers.
  • Know-Your-Client (KYC): A legal obligation of brokers to verify the identity of their clients.
  • MAM/PAMM Accounts: Multi-Account Manager is an account type in MetaTrader 4 trading platform which allows Money Managers to trade for their clients and manage multiple accounts from a single platform. 
  • Market Maker: A type of broker which does not give traders a direct access to the market but executes trades within its own system. 
  • Regulation: An officially empowered governmental or autonomous organisation which supervises the business activities of brokers to ensure legal compliance and trader security. 
  • Straight-Through Processing (STP): A type of broker which gives traders a direct access to other participants of the trading process by receiving price quotations from multiple providers.
  • Withdrawal: Transferring funds from the trading account balance to an external account.

Assets

  • Commodity: An underlying asset type for CFDs, referring to physical natural resources such as metals, energy, and agriculture. 
  • Crude Oil: One of the most traded commodities; most-traded energy commodity; a major energy resource and industrial raw material.
  • Cryptocurrency: An underlying asset type for CFDs, referring to digital currencies that are used for online monetary transactions based on the blockchain technology.
  • Currency: Monetary unit of a country, representing the national economy.
  • Currency Pair: An underlying asset type for CFDs, referring to a trading instrument comprised of two currencies to exchange them directly against each other.
  • DJ30: One of the most traded U.S. stock indices, comprised of 30 biggest American companies by market value.
  • Exchange-Traded Fund (ETF): An underlying asset type for CFDs, referring to privately held funds and indices which can be traded in the stock exchanges like stocks.
  • Exotic Currency Pairs: Currency pairs that involve at least one currency that isn’t among major currencies.
  • Gold: One of the most traded commodities; most-traded metal commodity; a major industrial raw material and wealth symbol.
  • Major Currencies: Most traded currencies in the financial markets – American Dollar (USD), Euro (EUR), British Pound Sterling (GBP), Canadian Dollar (CAD), Swiss Franc (CHF), Japanese Yen (JPY), Australian Dollar (AUD), and New Zealand Dollar (NZD).
  • Major Currency Pairs: The most liquid currency pairs group comprised of the currency pairs between a major currency and USD (e.g., EUR/USD, USD/CAD).
  • Minor Currency Pairs: The second most liquid currency pairs group comprised of the currency pairs between two major currencies except USD (e.g., EUR/GBP, AUD/JPY).
  • NASDAQ100: One of the most traded U.S. stock indices, comprised of 100 biggest American companies traded in the Nasdaq Stock Exchange.
  • Safe Haven Assets: High-liquidity and low-volatility financial assets which are perceived as stable investment options and preferred by investors when the risk sentiment increases. 
  • S&P 500: One of the most traded U.S. stock indices, comprised of 500 biggest American companies traded in the New York Stock Exchange.
  • Silver: One of the most traded commodities; second most-traded metal commodity; a major industrial raw material and wealth symbol.
  • Stock: An underlying asset type for CFDs, referring to the equity percentage of publicly traded shares of a company.
  • Stock Exchange: A venue to physically buy and sell stocks and other financial assets or instruments.
  • Stock Index: An underlying asset type for CFDs, referring to a basket of stocks formed to measure the performance of a stock exchange, a group of companies, or an industry as a whole. 
  • Ticker Symbol: The trading symbol of a financial asset, derived as an abbreviation of its name, usually used for companies in the stock exchanges.
  • Treasury Bond: An underlying asset type for CFDs, referring to the time-bound debt contracts, issued by governments or companies, that involve lending money to the issuer in exchange of periodical interest payments.

Analysis

  • Bar Chart: A technical price chart that shows the price changes within a time point in form of separate vertical bars and indicates opening and closing prices as hyphens. 
  • Bear Market: A strong downtrend in the price of an asset. 
  • Bull Market: A strong uptrend in the price of an asset.
  • Candlestick Chart: A technical price chart that shows the price changes within a time point in form of coloured rectangles that indicate the difference between opening and closing prices, and shadow lines that indicate the highest and lowest price points.
  • Chart Time: A technical price chart option which allows to divide the price changes into specific time windows.
  • Consumer Price Index (CPI): A fundamental economic indicator and inflation measure which gauges the change in the prices of consumer goods and products over time.
  • Dovish: A central bank’s approach to interest rate in terms of keeping them at lower levels.
  • Earnings Report: A fundamental economic indicator and company performance measure which informs about the revenue, profit, and earnings-per-share numbers of a company within a specific period (usually quarterly or yearly).
  • Earnings Season: A market event during which publicly traded companies publish their periodic earnings reports.
  • Economic Indicator: An economic report or data that gives information about the performance of a quantitative economic variable.
  • Employment/Unemployment Reports: Fundamental economic indicators which monitor the changes in the employment or unemployment levels in an economy. 
  • Fundamental Analysis: A market analysis strategy which involves monitoring market events and the change in their performance over time.
  • Gross Domestic Product (GDP): A fundamental economic indicator and overall performance measure which gauges the change in the value of goods and products manufactured by a country.
  • Hawkish: A central bank’s approach to interest rate int terms of keeping them at high levels.
  • Interest Rate Decision: A fundamental economic indicator in which a central bank announces their decision for the interest rate they offer when borrowing or lending money.
  • Line Chart: A technical price chart that shows the price changes over time in form of a continuous line that includes only the closing prices in each time point.
  • Liquidity: A technical market information which shows the total trading volume of a financial asset in a given time period.
  • Market Event: A fundamental economic event that can affect the market prices of assets.
  • Quantitative Easing: A fundamental market event that refers to a specific monetary policy decision by a central bank to stimulate the economy by printing more money to buy debts.
  • Resistance Level: A technical indicator which marks the price levels which the asset previously struggled to break beyond when approaching from below.
  • Risk Sentiment: The psychological status of the market when it comes to taking or avoiding risks.
  • Support Level: A technical indicator which marks the price levels which the asset previously struggled to break beyond when approaching from above.
  • Technical Analysis: A market analysis strategy which involves monitoring price charts and the change in asset prices over time.
  • Technical Indicator: A trading tool to implement into price charts and assess market characteristics using mathematical formulas.  
  • Trend: A price movement that formed a consistent pattern of a range of time. 
  • Volatility: A technical market information which shows the speed and extent of changes in the price of a financial asset.