Forex Trading Glossary

A term that refers to making decisions about timing, price and quantity of market order by means of computers and advanced mathematics, and widely used by hedge funds and banks. To minimize risk and market impact, large trades are broken down into smaller forex Glossary ones, and trades are conducted without any human intervention, using electronically received information. Technical indicators are the inseparable part of technical analysis. Their aim is to predict the direction of the market to help a trader.

It is expected that import bills rise before export orders start increasing. International Trade measures the difference between imports and exports of all goods and services. The level of the international trade balance, along with the changes in exports and imports, indicate market trends, and so they are closely followed by foreign exchange markets. Also called forward, it is an agreement forex Glossary to buy or sell a financial instrument, a commodity, or a security at a specific future date and at a specified price. It is the opposite of an option contract which offers a choice of whether to complete a trade or not. Forwards are not contracts with standard terms but tailor-made between buyer and seller for every deal. Refers to the day on which an options or futures contract expires.

New York Stock Exchange

As one of the most relevant technical indicators, Elder-rays combine the properties of trend following indicators and oscillators. Based on the relative strength of market bull and bear power, Elder-rays are used to estimate the power struggle between these two powers. The moving average stands for the agreed-on price between sellers and buyers for a certain period of time; the maximum price shows the maximum power of the buyers; the minimum price reflects the maximum power of sellers.

If the client sold the EURUSD, he is said to be “Short” the currency pair . If a client bought the EURUSD, he would be long the currency pair, but short USD currency. Foreign exchange transactions assume being long one currency and short another. An option is a derivative financial instrument that establishes a contract between two parties concerning the buying or selling of an asset at a reference price during a specified time frame. The price of an option derives from the value of an underlying asset plus a premium based on the time remaining until the expiration of the option.

Spot Market

The DeM indicator is an oscillator (with a range between -100 to 100) designed to identify new buying and selling opportunities. It tracks the market sentiment of a stock or commodity by comparing the current and previous price of an asset, and so it can be used to detect changes and market interest. A type of trading that refers to the fact that trade positions are opened and closed during the same day. Also known as OHLC (open-high-low-close) charts, bar charts illustrate price movements for a financial instrument over time. Each vertical line on the chart represents the highest and lowest prices over one time unit, which can be as short as one minute or as long as several years. Vertical lines indicate the opening price on the left and the closing price on the right for the same period of time. The ask price is the market price for traders to buy currencies, shown on the right-hand side of a quote (e.g. EUR/USD 1.1965 / 68 indicates that 1 Euro can be bought for 1.1968 USD).

forex Glossary

There is a great number of indicators used by traders for determining the market movement. Some traders prefer to use those indicators which have proved to be efficient in trading in the past, while others try using new indicators. Bill Williams’ indicators, Oscillators, Trend and Volume indicators may serve as examples. A market where traders can buy and sell large volumes of assets anytime and with low transaction costs. The analysis of economic and political events, which may affect the future direction of prices in financial markets.

Real Interest Rates

It is important to be aware of the expiration date so that clients do not lose out if they intend to exercise an option. On expiration date, all open positions are closed at the time when the exchange business day closes. The exchange rate shows how much a currency is worth in terms of another currency. For instance, in the pair EUR/USD, the exchange rate is 1.30.

forex Glossary

The essence of mark-to-market is that trading is not allowed to participants unless there are available funds to cover the positions. Hedging position that involves the purchase of futures contracts in order to protect investors and traders against price rises in the corresponding cash markets. A term used to describe the expected effect of devaluation (i.e. reduction of currency value in terms of the goods and services with which that currency can be exchanged) on a country’s trade balance.

Account Currency

In the currency market, fundamental analysis is based primarily on macroeconomic events. An economic calendar is a calendar of events provided by brokers and other financial companies through which traders track the events affecting the price movements of assets. This is an indicator of monetary imbalances, when sellers are significantly stronger than buyers of a particular financial instrument. Simultaneous purchase of an undervalued financial asset and sale of its overvalued equivalent in order to make further risk-free profit from the price difference of assets which emerged as a result of temporary market inefficiency. The American Depositary Receipt is used to trade in securities of foreign companies in the United States. Shares of foreign companies are acquired by the American depositary bank in the process of listing these shares on US stock exchanges. ADRs are a tool for raising capital in the US and international markets.

  • The impact of seasonal and geopolitical events is already factored into market prices.
  • The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you.
  • The value of currencies may fluctuate and investors may lose all or more than their original investments.
  • Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency.

They may have different names that meet the requirements of a particular market. This page provides a collection of terms necessary for traders to understand the complex terminology of Forex and CFD trading. The most commonly used trading terms, acronyms, and abbreviations are presented here explaining the core ideas and methods used by traders every day. Such condition of the Forex account when the open positions are forcedly closed by the Company at current prices. Investor possessing sufficient knowledge, experience and/or capitalization to trade in Foreign Exchange market or other financial markets. The investor has to decide for him/herself if CFD on foreign exchange, CFD on spot metals, CFD on stock, CFD on futures and other financial derivatives are suitable investment vehicle for his or her purposes. Having an open position that was created by selling a currency.

Bid Price

Other types of options exist, and options can in principle be created for any type of valuable asset. Buy or sell action by a central bank in an attempt to affect the value of its currency. Concerted intervention refers to action by a number of central banks to influence the value of exchange rates. The act of buying a CFD on foreign exchange, CFD on spot metals, CFD on stock, CFD on futures and other financial derivatives. For example, if a trader bought the EURUSD, he would be “going long” the Euro.

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