Terms Glossary

Simple definitions to international markets trading terminology.

Aggregate RiskWhen a bank or financial body is exposed to forex contracts from a single customer.
AskThe price at which a trader accepts to buy a security.
AssetAn item/resource of value.
Bank RateThe rate at which a country's central bank lends money to its domestic banks.
Base CurrencyIn a currency pair, the first currency in the pair is called the base currency. For example, in the USD/JPY pair, USD is the base currency.
Bear MarketWhen the prices of certain securities, assets, or markets are in decline.
BidThe price at which a trader is prepared to sell a security.
Bull MarketWhen the prices of certain securities, assets, or markets are rising.
Buy Limit OrderAn order to carry out a transaction at, or lower than, a specified price, the word 'limit' referring to the specified price.
Carry TradeWhen an investor borrows at low interest rates so they can buy assets that are likely to produce higher interest rates.
Closed PositionWhen a position is closed, the transaction has been completed – whether the position was long or short or whether it was profitable or incurred losses.
Closing Market RateOtherwise known as closing price, this is the final rate that a security is traded at on a specific day, candle or timeframe.
Currency AppreciationWhen a currency increases in value against another.
Currency FuturesA 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.
Currency PairThe pair formed by two different currencies which are traded in a forex transaction. For example: EUR/USD.
Daily ChartA graph that illustrates the intraday movements of a security.
Day TradeA trade opened and closed within one day.
Demo AccountA trading account which is funded with virtual money, giving the trader a chance to explore the markets and test the trading platform they're using before investing real money in a live trading account.
Depth of MarketThe number of open buy and sell orders placed for a security at varying prices.
DrawdownWhen the value of an investment drops, the length between its peak and its low is called the drawdown.
ECN BrokerA broker which uses Electronic Communications Networks (ECNs) to provide its clients with direct access to liquidity providers.
Exchange RateThe rate at which one currency can be exchanged for another.
ExecutionWhen a trade is carried out and completed.
ExposureThis refers to the amount invested in a security and exposed to market risk.
FillThe completion of an order.
Fill or KillWhen an investor has a very specific price they want to carry out a transaction at, they place a Fill or Kill order – this means that if the order is not filled at the desired price, it is terminated, or killed.
Fill PriceThe price at which an order has been completed.
Floating Exchange RateWhen an exchange rate is not fixed, but adjusts depending on the supply and demand for a particular currency relative to other currencies.
Forex ChartA digital chart that plots the price movements of currency pairs to help investors make informed trading decisions.
Forex ScalpingA trading strategy based on the notion that if you buy and sell (or sell and buy) a currency within a very short time frame, you are more likely to make a profit than you would with large price movements.
Forex Signal SystemA system which gives out signals to traders to help them decide whether a specific time is suitable to buy or sell a currency pair.
Forex Signal SystemA specific group of currencies which form a weighted average that can act as a measure to value an obligation.
Forex Spot RateThe current exchange rate that a currency pair can be bought or sold at.
Forex Trading RobotThis refers to automated trading software which is designed to help determine whether to buy or sell a currency pair at a given time.
Fundamental AnalysisThe impact economic and political events have on prices in financial markets (interest rate announcements, unemployment rate, etc.)
HedgeInvestors use hedging to protect themselves by reducing the risk that may be caused by adverse market movements. Hedging means making two counterbalancing investments, in this way minimizing the losses which could be incurred by price fluctuations.
Interbank RateThe interest rate charged on short-term loans between banks.
LeverageLeverage is offered by brokers to maximize traders' buying power by giving them the ability to deposit a small amount of funds and trade larger volumes. Leverage is expressed in ratio form, so if it is 1:100 for example, a trader's buying power is magnified 100 times.
Limit OrderAn order to execute a trade at a specific price or a better one.
Limit PriceThe specific price referred to in limit order.
LiquidityThe volume available in the market for a specific currency pair.
Long PositionTaking a long position on a currency means that you buy it. In a currency pair, you buy the first of the two currencies – the base currency.
LotsA lot is a standardized quantity of the instrument you are trading. In forex, one lot is 100,000 units of a particular currency.
MarginThis refers to the amount of money needed in your account to maintain an open position.
Margin CallThis is a notification which alerts you that you need to deposit more money in your trading account so there can be sufficient margin to keep existing positions open.
Mark-to-MarketThe value an open position would be if it were closed at the current market rate.
Market OrderAn order for a trade to be executed instantly at the best available price.
Market RateThe current quote for a currency pair.
Micro LotA micro lot is equal to 1,000 units of the base currency in a currency pair.
Middle RateThe price exactly in-between the bid and ask prices.
No Dealing DeskWhen traders have direct access to the interbank market and there is no dealing desk involved in their transactions.
Open PositionA position taken on a currency pair/security that is subject to profits or losses.
Over the CounterThe traditional way of trading forex was ‘over the counter’, meaning traders made forex transactions over the telephone or on electronic devices.
Overnight PositionWhen a trader’s position is kept open and carried over to the next trading day.
PipPip stands for Percentage in Point and it is the smallest price change that can be seen in an exchange rate. In most cases currency pairs are priced to four decimal points and the smallest change can be seen in the last decimal.
Profit TakingClosing a position to make a profit.
Quote CurrencyThe second currency of a currency pair is called the Quote currency. In EUR/USD for example, USD is the quote currency.
Regulated MarketA market governed by legislative rules and regulations which are in place to protect investors.
ResistanceThe price level which a stock or currency finds difficult to break above and as a result may begin declining instead.
Risk ManagementTools and strategies traders use to limit financial risk as much as possible.
Rollover RateIn forex, the rollover rate is the interest rate that traders pay or earn when they hold (rollover) a position open overnight.
Round TripRefers to the total amount of funds involved in opening and closing a position.
SlippageThis is when a trader executes an order at a price which is very different to the price they expected the trade to be executed at. This usually happens during periods of high volatility, when traders use market orders and stop loss orders.
Soft CurrencyA currency that is sensitive to political and economic events and thus fluctuates greatly and is generally unstable.
SpeculatorA trader who takes big risks when trading, choosing to trade instruments with a higher risk in the hope that they will return higher profits.
SpikeA sudden upward or downward movement in price that happens in a short time period.
SpreadThe difference between the Ask and Bid price of a currency pair.
Stop Loss OrderAn 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.
Take Profit OrderAn order placed to close a position once it hits a specific price.
Technical AnalysisTraders use technical analysis to forecast prices by examining market/historical data through the use of charts and trading indicators.
VolatilityThis refers to the level of uncertainty surrounding the price fluctuations of a certain security/currency pair.
YieldYield is the return on an investment and is usually expressed as a percentage.