Forex Glossary

The rate at which a country’s central bank lends money to its domestic banks can be termed as Bank rate.

In a currency pair, the first currency in the pair is called the base currency, and based on one unit of which other currency’s value is shown. For example, in the 114.18 USD/JPY pair, USD is the base currency, and 1 US dollar equals 114.18 Japanese yen.

When the prices of certain securities, assets, or markets are falling.

The price at which a trader is ready to sell a security.

When the prices of certain securities, assets, or markets are on the rise.

An order to carry out a transaction at, or lower than, a specified price. The word ‘limit’ refers to the specified price.

If an investor feels like there are other assets that can produce higher interest rates, he will borrow at low interest rates. This trade is called Carry Trade.

When a position or order gets closed, the transaction gets completed – whether the position was long or short or whether it was profitable or incurred losses.

The final rate that a security is traded at on a specific day, candle or timeframe. Also called as closing rate.

When one currency increases in value compared to another currency.

A contract that specifies the price that a currency can be bought or sold at on a set future date. Future contracts are often used by investors to hedge against risk.

Two different currencies which are to be traded in a Forex transaction form a currency pair. For example, EUR/USD and GBP/USD.

A graph that illustrates the intraday movements every day of all or a particular security.

An act of buying and selling a currency during a day is called day trade.

Demo Account is funded with virtual money and designed for traders who are new in the market and wants to test the trading platform before starting live trading with real money.

The numbers of open buy and sell orders placed for a security at varying prices measures the depth of market.

When the value of an investment declines, the length between its peak and low is known as the drawdown.

A broker who uses Electronic Communications Networks (ECNs) to provide his clients with direct access to liquidity providers is called ECN Broker.

An exchange rate is the rate at which one currency can be exchanged for another.

When a trade is carried out and completed, the act is called execution.

The amount invested in a security and exposed to market risk.

An act of completion of an order.

If investors have a specific price in mind, they place Fill or Kill order. This way, if the order does not hit the specified price, it gets terminated or killed.

The price at which an order has been completed is called Fill Price.

When an exchange rate is not fixed, but adjusts depending on the supply and demand for a particular currency relative to other currencies.

A digital chart that helps investors make informed trading decisions by plotting the price movements of currency pairs.

It is a trading strategy based on the concept that if you buy and sell (or sell and buy) a currency within a very short period of time, the chances of you making profit are higher than what you would make with large price movements.

It is a system for traders to receive signals which help them make a decision whether a specific time is suitable to buy or sell a currency pair.

It is a weighted average formed by specific group of currencies that can act as a measure to value an obligation.

The current exchange rate that a currency pair can be bought or sold at is called Forex Spot Rate.

Forex Trading Robot is automated trading software, designed to help determine whether to buy or sell a currency pair at a given time.

The analysis based on the impact of economic and political events have on prices in financial markets (interest rate announcements, unemployment rate, etc.).

When investors make two counterbalancing investments to minimize the losses incurred by price fluctuation, it is known as Hedging. The main purpose is to get a protection against the risk that may be caused by adverse market movements.

The interest rate charged on short-term loans between banks is called Interbank Rate.

Brokers offer leverage to increase traders’ buying power by enabling them to trade larger volumes on a small deposit. Leverage of 1:100 means that trader’s buying power is 100 times than the deposit.

An order that is executed at a specific price or a better one is called Limit Order.

The specific price referred to in limit order is called Limit Price.

The volume available in the market to trade for a specific currency pair.

Taking a long position on a currency means that you are buying that particular currency. You have to buy the first of the two currencies in the currency pair – the base currency.

Standardized quantity of a particular instrument you are trading is called a lot. Usually, there are three types of lots: micro, mini and standard. In forex, one lot is 100,000 units of a particular currency.

The amount of money needed in your account to maintain an open position is called Margin.

A reminder to trader alerting you that you need to make a deposit in your trading account to maintain sufficient margin to keep your positions open.

Mark-to-Market refers to the value an open position would be if it was closed at the current market rate.

An order for a trade to be executed instantly at the best available price is called Market Order.

The current quote for a currency pair is known as Market Rate.

A lot 1,000 units of the base currency in a currency pair is called a Micro Lot.

The price exactly in-between the bid and ask prices is called Middle Rate.

When traders have direct access to the interbank market and there is no dealing desk involved in their transactions, the process is called No Dealing Desk.

It is a position taken on a currency pair/security that is subject to profits or losses.

When a trader makes Forex transaction over the telephone or on electronic devices, traditionally it is called ‘Over the Counter’.

When a trader’s position is kept open and carried over to the next trading day it is called Overnight Position.

Percentage in Point (Pip) is the smallest price change that can happen in an exchange rate. Usually, currency pairs are priced to four decimal points.

When an order is closed to make profit, it is called Profit Taking.

The second currency other than base currency in a currency pair is called the Quote currency. In EUR/USD for example, USD is the quote currency.

It is a market governed by legislative rules and regulations formed to protect investors.

The resistance refers to a price level which a currency finds difficult to go past and as a result, it may begin declining instead.

Traders use tools and strategies to manage the risk involved in Forex and limit financial risk as much as possible.

When traders want to hold a position open overnight, they have to pay or earn interest rate which is called Rollover Rate.

Round Trip refers to the total amount of funds involved in opening and closing of a position.

During periods of high volatility, prices are subject to change very quickly. Thus, the actual order execution price is usually different then what traders expected it to be. This phenomenon is called Slippage.

A currency that is sensitive to political and economic events and thus fluctuates greatly and is generally unstable is known as Soft Currency.

A trader who takes big risks while trading, choosing to trade instruments with a higher risk in the hope that they will return higher profits is known as a Speculator.

A sudden upward or downward movement in price in a short time period is called Spike.

Spread is the difference between the Ask and Bid price of a currency pair.

It is an order placed to buy or sell a security/currency when a certain price is reached. These orders are placed to limit loss on a position.

It is an order placed to close a position once it hits a specific price set by trader.

The analysis carried by examining market/historical data through the use of charts and trading indicators to forecast currency prices for traders is called Technical Analysis.

The level of uncertainty because of the price fluctuations of a certain security/currency pair is called volatility.

The return on an investment is known as Yield. Usually, it is expressed in form of percentage.