Not sure of the meaning of a term in the Forex industry. We compiled a list of the top forex terms with easy to understand explanations for each term.
Automated Trading
Balance Sheet Available For Review
Bid And Ask
Bollinger Band Charts
Broker
Candlestick Charts
CFDs
CFTC/NFA Member
Charts With Broker Feed
Client Funds Held Separate From Operating Funds
Closing A Position
Closing Market Rate
Currency Pair/Base Currency
Cysec
Dealing Desk/NDD*
Demo Account
Downloadable Platform
ECN NDD
Economic Calendar
EMA/SMA Charts
Fixed Spreads
Foreign Exchange/Forex/FX
Fractional Pips
FSA (London)
Funding Options
GTC – Good-Till-Cancel Order
Head And Shoulders Trend
Integrated Charts
Integrated News
Leverage
Long/ Short
MACD
Margin Watcher
Mini Account
Minimum Account Size
MT4
Options
Pips
Pips On Majors
Premium Charts W/Feed
Pro Account
Rate Or Exchange Rate
RSI Charts
Segregated Account
Settlement
Spreads
STP/DD
Trading Off Charts
Trading Signals
Trailing Stops
Web Based Trading Platform
Webinars
Wire Transfer
Definitions:
Automated Trading
Software that executes FOREX trades without human involvement.
Balance Sheet Available For Review
A broker who is willing to divulge their financial condition to any prospective client trader.
Bid And Ask
The bid price represents the highest price a buyer is willing to pay for a currency pair. The ask price represents the lowest price anyone is willing to accept to sell the currency pair.
Bollinger Band Charts
Bollinger bands indicate the market’s volatility by displaying contracted bands when the market is quiet, and expanded bands when the market is loud. Traders interpret these bands as a way of recognizing short-term support and resistance levels.
Margin Watcher
An automated feature of some trading platforms that automatically issues and order to close all open trades whenever the trader’s account equity falls below the broker’s minimum margin requirement thresholds. This saves the trader the unexpected expense of owing money to the broker when account equity falls as the result of a large trading loss.
Mini Account
A trading account used mostly by new traders. Features include a lower minimum opening deposit, and a limit of a 10,000 contract size versus a typical 100,000. By taking a smaller position size, the trader reduces the amount of money they have at risk for any particular trade.
Minimum Account Size
The lowest amount of money a broker will accept in order to open a trading account.
MT4
MetaTrader 4 is one of the most popular and widely-used automated FOREX trading platforms. In addition to the traditional feature found in any high-quality trading platform, MT4 offers a number of automated features that make trading easier, safer, and potentially more profitable.
Options
An option provides they trader with the right, but not the obligation, to buy or sell an underlying option depending upon whether they are entering a long call or a long put.
The benefit of options trading is that it reduces the amount of money a trader has at risk. The downside is that the trader pays a premium to the broker when trading options.
Pips
The smallest possible upward or downward price movement of a currency pair. The pip amount varies among currency pairs. For example, when trading the Euro and U.S. Dollar (EUR/USD) one pip is a movement of 0.0001.
Pips On Majors
This refers to the spread charged by brokers to traders who are trading in these most popular trading currencies: Australian Dollar (AUD), British Pound (GBP), Canadian Dollar (CAD), Euro (EUR), Japanese Yen (JPY), New Zealand Dollar (NZD), Swiss Franc (CHF), U.S. Dollar (USD).
Premium Charts W/Feed
These charts require a paid subscription in order to provide essential FOREX trading data in real-time. A real-time data feed enables you to see a visual representation of market movement as well as the ability to customize your charts to your exact needs.
Pro Account
A professional trading account entitles the trader to all the rights and privileges of a professional trader including higher leverage and larger trade lots. See Mini Account.
Rate Or Exchange Rate
What it costs in one currency to buy another currency.
RSI Charts
The RSI (Relative Strength Index) displays the gap in the price of a currency pair over a defined period of time, on a scale of 0 to 100.
The chart typically initiates a sell signal when the figure rises above 70, and a buy signal when the figure dips below 30.
Segregated Account
Traders’ funds are held by brokers in accounts other than the broker’s operating account. This protects traders in the event a broker becomes insolvent.
Settlement
The official recording of a trade into the books of both parties to the contract. Because of the nature of FOREX trading, settlement will not necessarily include the actual physical exchange of currency.
Spreads
The difference quoted between the bid price and the offer price. The bid price is which the market maker is willing to pay when buying the base currency. The ask price what the market maker is willing to sell the base currency for in exchange for the counter currency. For example, if a USD/CAD pair had a bid price of 120.00, and an ask price of 120.05, the difference of 0.05 (or $0.0005) would be the spread.
STP/DD
STP (Straight Through Processing) is the ability for a trader to send their orders directly to the most appropriate liquidity pool.
Some brokers quote fixed spreads and route orders through the Dealing Desk. These brokers, called Market Makers because they buy and sell from traders rather than passing the order to the open market. Traders who work through a DD are not quoted the actual market price, but rather the price that the market maker sets.
Trading Off Charts
This term refers to the process of entering and closing positions based upon chart movements. Traders who practice this type of trading are usually satisfied to exit a trade after a movement of just a few pips.
Trading Signals
Trading signals are suggested buy and sell suggestions that include price targets along with suggested stop-loss points. Trade signals are available from signal providers.
Trailing Stops
A trailing stop is an exit point that moves with the direction of the trade. It allows you set a stop-loss strategy tied to the amount of pips you are willing to risk. Rather than setting a firm stop at a pre-determined price, a trailing stop will cause you to exit the trade if your loss will exceed the amount of pips you have pre-determined.
Web Based Trading Platform
A FOREX trading platform accessed by logging into the provider’s web site rather than downloading and installing it on your computer. See Downloadable Platform.
Webinars
Training and/or informational seminars that are conducted on the Web.
Wire Transfer
A transfer of funds between two accounts performed electronically.
Broker
A trading agent who executes buy and sell orders on behalf of clients.
Candlestick Charts
A chart depicting the opening and closing price of a currency pair as well as the day’s trading range. The rectangular space between the open and close price is shaded whenever the opening price is higher than the closing price, and unshaded when the opposite is true.
CFDs
A contract for difference (or CFD) is a contract between a buyer and seller whereby the seller agrees to pay the buyer the difference between the current value of a currency and the value of a currency at the time the contract is written. The seller earns a profit of the value of the currency goes down.
CFTC/NFA Member
A trading professional who is registered with the United States Commodity Futures Trading Commission (CFTC), and who is a member of the National Futures Association (NFA).
Charts With Broker Feed
Automated charting systems that receive live market data via a feed provided by a broker.
Client Funds Held Separate From Operating Funds
Traders’ funds are held by brokers in accounts other than the broker’s operating account. This protects traders in the event a broker becomes insolvent.
Closing A Position
Liquidating a position by either buying or selling the underlying assets.
Closing Market Rate
The rate a position may be closed at based on the market price at the close of the day.
Currency Pair/Base Currency
A currency pair represents the two currencies being traded. For example: EUR/USD. The first currency listed in the currency pair, the Euro in this example, is the base currency.
Cysec
Cyprus Security and Exchange Commission. The agency responsible for regulating investment activity in Cyprus.
Dealing Desk/NDD*
A Dealing Desk is a trading procedure where dealers collaborate to set pricing and execute trades amongst each other. In the typical Dealing Desk environment, a broker or dealer takes the opposite side of a presented trade.
A Non Dealing Desk (NDD) is NDD is a trading procedure where a trade is passed on to the market rather than where a broker takes the other side of the trade.
Demo Account
A practice account that enables new traders to execute trades without the risk of losing actual money. All profits and losses are on paper only. No money changes hands.
Downloadable Platform
Trading software that can be downloaded from the provider’s website and installed directly onto the trader’s computer.
ECN NDD
ECN stands for Electronic Communications Network. This is a worldwide computerized network where market makers, banks, dealers and traders can enter bids and have the trades filled by one or more liquidity providers. All trades are executed under the name of the ECN broker which affords complete anonymity to the trader.
NDD stands for No Dealing Desk, indicating that ECN trades are passed directly to the interbank market without passing through a dealing desk.
Economic Calendar
The Economic Calendar displays daily scheduled events and occurrences in the FOREX market as well as important announcements such as major interest rate changes, Gross Domestic Product (GDP) announcements, and other economic indicators.
Traders us the calendar to help predict potential movements as the market reacts to the events and announcements reported by the calendar.
EMA/SMA Charts
Both charts measure the price of a currency across a specific time period. However, EMA give more weight to recent time periods than SMA charts do. The advantage being that EMA have a tendency to smooth out potential spikes that might otherwise provide a false indication of the direction a currency price is moving.
Fixed Spreads
A pre-determined difference between the Ask and Bid price that is not subject to changing market conditions.
Foreign Exchange/Forex/FX
The Foreign Exchange is a world-wide decentralized electronic marketplace that is used to trade the world’s currencies.
Fractional Pips
Also known as pipettes, a fractional pip represent an extra digit of precision used when quoting some currency pairs. See Pips.
FSA (London)
The Financial Services Authority (FSA) is the UK’s independent regulatory agency empowered by the Financial Services and Markets Act 2000 (FSMA) with rule-making, investigatory and enforcement powers to be used in maintaining a fair and efficient trading and investment environment.
Funding Options
Various ways to transfer money into your trading account. Depending upon the broker, funding options may include wire transfer, credit cards, PayPal, etc.
GTC – Good-Till-Cancel Order
A GTC order to buy or sell does not expire until it is either filled or cancelled by the person who placed the order.
Head And Shoulders Trend
A chart pattern that appears to resemble the outline of a person’s head and shoulders. The line connecting the left and right armpit is called the neckline. Traders use this pattern to predict price movement.
Integrated Charts
Charting software that can be integrated into a trading platform. Used to monitor and react to specific trading patterns by executing or closing trades when specified market conditions exist.
Integrated News
Market news-tracking software that can be integrated into a trading platform. Used to monitor and react to specific market-related events by executing or closing trades when specified market events occur.
Leverage
The ratio of money available in the trader’s margin account to the size of a trade that money allow. For example, a $50000 margin balance with a leverage of 50 enables a trader to execute a trade worth $250,000 (5000×5).
Long/ Short
This is an investment or “hedging” strategy whereby the trader goes long on trades that are expected to appreciate and short on ones that are expected to decline.
MACD
Moving Average Convergence / Divergence – This chart analyzes two exponential moving averages in order to generate buy and sell indicators. The two lines in the chart’s lower panel depict the Differential Line and the Signal Line. The Differential Line displays the difference between a short and long-period exponential moving average of normally 12 and 26 periods. The Signal Line displays a 9-period exponential moving average. Whenever the DL and SL cross from above, a sell signal is generated. A buy signal is generated when the lines cross from below.
An automated feature of some trading platforms that automatically issues and order to close all open trades whenever the trader’s account equity falls below the broker’s minimum margin requirement thresholds. This saves the trader the unexpected expense of owing money to the broker when account equity falls as the result of a large trading loss.
Mini Account
A trading account used mostly by new traders. Features include a lower minimum opening deposit, and a limit of a 10,000 contract size versus a typical 100,000. By taking a smaller position size, the trader reduces the amount of money they have at risk for any particular trade.
Minimum Account Size
The lowest amount of money a broker will accept in order to open a trading account.
MT4
MetaTrader 4 is one of the most popular and widely-used automated FOREX trading platforms. In addition to the traditional feature found in any high-quality trading platform, MT4 offers a number of automated features that make trading easier, safer, and potentially more profitable.
Options
An option provides they trader with the right, but not the obligation, to buy or sell an underlying option depending upon whether they are entering a long call or a long put.
The benefit of options trading is that it reduces the amount of money a trader has at risk. The downside is that the trader pays a premium to the broker when trading options.
Pips
The smallest possible upward or downward price movement of a currency pair. The pip amount varies among currency pairs. For example, when trading the Euro and U.S. Dollar (EUR/USD) one pip is a movement of 0.0001.
Pips On Majors
This refers to the spread charged by brokers to traders who are trading in these most popular trading currencies: Australian Dollar (AUD), British Pound (GBP), Canadian Dollar (CAD), Euro (EUR), Japanese Yen (JPY), New Zealand Dollar (NZD), Swiss Franc (CHF), U.S. Dollar (USD).
Premium Charts W/Feed
These charts require a paid subscription in order to provide essential FOREX trading data in real-time. A real-time data feed enables you to see a visual representation of market movement as well as the ability to customize your charts to your exact needs.
Pro Account
A professional trading account entitles the trader to all the rights and privileges of a professional trader including higher leverage and larger trade lots. See Mini Account.
Rate Or Exchange Rate
What it costs in one currency to buy another currency.
RSI Charts
The RSI (Relative Strength Index) displays the gap in the price of a currency pair over a defined period of time, on a scale of 0 to 100.
The chart typically initiates a sell signal when the figure rises above 70, and a buy signal when the figure dips below 30.
Traders’ funds are held by brokers in accounts other than the broker’s operating account. This protects traders in the event a broker becomes insolvent.
Settlement
The official recording of a trade into the books of both parties to the contract. Because of the nature of FOREX trading, settlement will not necessarily include the actual physical exchange of currency.
Spreads
The difference quoted between the bid price and the offer price. The bid price is which the market maker is willing to pay when buying the base currency. The ask price what the market maker is willing to sell the base currency for in exchange for the counter currency. For example, if a USD/CAD pair had a bid price of 120.00, and an ask price of 120.05, the difference of 0.05 (or $0.0005) would be the spread.
STP/DD
STP (Straight Through Processing) is the ability for a trader to send their orders directly to the most appropriate liquidity pool.
Some brokers quote fixed spreads and route orders through the Dealing Desk. These brokers, called Market Makers because they buy and sell from traders rather than passing the order to the open market. Traders who work through a DD are not quoted the actual market price, but rather the price that the market maker sets.
Trading Off Charts
This term refers to the process of entering and closing positions based upon chart movements. Traders who practice this type of trading are usually satisfied to exit a trade after a movement of just a few pips.
Trading Signals
Trading signals are suggested buy and sell suggestions that include price targets along with suggested stop-loss points. Trade signals are available from signal providers.
Trailing Stops
A trailing stop is an exit point that moves with the direction of the trade. It allows you set a stop-loss strategy tied to the amount of pips you are willing to risk. Rather than setting a firm stop at a pre-determined price, a trailing stop will cause you to exit the trade if your loss will exceed the amount of pips you have pre-determined.
Web Based Trading Platform
A FOREX trading platform accessed by logging into the provider’s web site rather than downloading and installing it on your computer. See Downloadable Platform.
Webinars
Training and/or informational seminars that are conducted on the Web.
Wire Transfer
A transfer of funds between two accounts performed electronically.
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