Forex Trading Terminology: 15 Most Important Forex Terms Traders Should Know

• Posted on Jun 17, 2019

Forex Trading Terminology: 15 Most Important Forex Terms Traders Should Know

SEC The Securities and Exchange Commission. Sector A group of securities that operate in a similar industry. Sell Taking a short position in expectation that the market is going to go down.

You always trade one currency against another currency. Going back to our example of the EUR/USD, http://www.jeanettesgifts.com/forex-trading/co-to-jest-forex-2/ if you go long on this pair, you are effectively buying the euro and selling the US dollar.

The forex market has no physical location or central exchange as it is a global, decentralized market and trades 24 hours a day, 5 days a week. It’s a Technical Analysis indicator formed by two simple moving averages.

Prior to the development of forex trading platforms in late 1990s forex trading was restricted to large financial institutions. This least affected traders and exporters, and most affected companies in construction, manufacturing or services https://forexbitcoin.info/ which did not earn forex and had medium to long-term investments. The central bank attempted to contain the rate of the zloty’s appreciation by intervening in the forex market within the band. Forex trading bears intrinsic risks of loss.

Strike price The defined price at which the holder of an option can buy or sell the product. Support A price that acts as a floor for past or future price movements. Support levels A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself.

Thus, at the bid price, a trader can sell the base currency to their broker. If you sell the EUR/USD (or any other currency pair), the exchange rate tells you how much of the quote currency you receive for selling one unit of the base currency. In other words, in the example above, you will receive 1.32105 U.S. dollars if you sell 1 euro. Spread – The difference between the sell quote and the buy quote or the bid and offer price.

A moving average type where more weight is assigned to the middle of the period (time span). A market where delivery takes place immediately (almost) after the trade of financial instruments. It gives a trader the right to buy a financial instrument at a specific price, before the expiration date.

The percentage of capital change is shown in parenthesis. A positive number implies a profitable system whereas a negative number, shows a system that resulted in a loss on average after each trade. on the 45 degrees line shows a market in balance i.e. one unit of price corresponds to one unit of time. A digital chart that plots the price movements of currency pairs, to help investors make informed trading decisions. When an exchange rate is not fixed, but adjusts depending on the supply and demand for a particular currency relative to other currencies.

Divergence of MAs A technical observation that describes moving averages of different periods moving away from each other, which generally forecasts a price trend. Dividend The amount of a company’s earning distributed to its shareholders – usually described as a value per share. DJIA or Dow Abbreviation for the Dow Jones Industrial Average or US30. Dove Dovish refers to data or a policy view that suggests easier monetary policy or lower interest rates.

Margin – This refers to the initial deposit you need to make in a trade, in order to utilize leverage. Margin requirements Bitcoin Trading are expressed as a percentage of the whole trading position. Bid and ask – Every currency pair has two price quotes.

Forex Glossary

• For example if in Europe, the exchange rate between the euro and the dollar would be USDEUR.
• A long black candle drives the market lower, well into the long white candle’s body and more specifically, below its mid-point -Indicating a bearish reversal.
• Our spreads can be too small to be seen with only four decimal places.
• Leverage -Leverage is the ability to control a larger amount of money with a small investment.
• In the course of an uptrend, a long white body is followed by three small candlesticks formed between the previous candle’s range- triggering a pause in the market.
• A small candlestick body of either color follows a candlestick of a long white body.

In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. Dealing spread The difference between the buying and selling price of a contract. Deficit A negative balance of trade or payments.

For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the ask price is 1.4532, meaning you can buy one US dollar for 1.4532 Swiss francs. At best An instruction given to a dealer to buy or sell at the best rate that can be obtained at a specific time. At or better An instruction given to a dealer to buy or sell at a specific price or better. AUS 200 A term for the Australian Securities Exchange (ASX 200), which is an index of the top 200 companies (by market capitalization) listed on the Australian stock exchange.

After an established uptrend, the last top fails to exceed the previous top and prices fall below the last bottom. After an established downtrend, the last bottom fails to move lower than the previous bottom and prices rise above the last top. A technical analysis oscillator developed to remove trend from price action, by using a centered moving average. Detrending makes it easier to identify time cycles. High prices above the zero line, correspond to cycle crests, where lows below the zero line correspond to cycle troughs.

It is usually characterised by panic amongst traders. The currency forex vocabulary of the Seychelles. The currency of the Solomon Islands.

When Forex traders talk about profits or losses, they usually use the term “pips”. A pip is short from Percentage in Point and represents the smallest increment that an exchange rate can move up or down. Usually, one pip equals to the fourth decimal of most currency pairs. At any given moment, each currency pair has two exchange rates or prices – the bid price and the ask price. What’s the difference between those two?

Even though the second candle opens lower than the previous close, it doesn’t manage to move lower and eventually it closes at the same price as the previous session. This is indicative of a possible top. Since the market failed to record a new high, a resistance may have been formed and a possible reversal may be in place. A technical indicator developed by Donald Dorsey. It measures the difference between High and Low prices in order to identify reversals.

It is subdivided into 100 poisha. The currency of Bosnia and Herzegovina. It is forex subdivided into 100 fenings (or phenigs). It is subdivided into 100 qepik.

Market definition

Those are basic terms of the Forex market that all traders need to know about and understand early in your trading career. Although not seen as frequently, reversal patterns sometimes take the shape of saucers (or rounding bottoms).