Forex Trading Glossary

ADX (Average Directional Index) is a standard technical indicator which measures the strength of a trend.

Ask (Offer) is the price of the offer, so the price you buy for.

Aussie is a Forex slang name for the Australian dollar.

Bank Rate is the percentage rate at which central bank of a country lends money to the country's commercial banks.

Bid is the price of the demand, so the price you sell for.

Broker is the market participating body which serves as the middleman between retail traders and larger commercial institutions.

Cable is a Forex traders slang word GBP/USD currency pair.

Carry Trade means in Forex trading, holding a position with a positive overnight interest return in hope of gaining profits, without closing the position, just for the central banks interest rates difference.

CCI (Commodity Channel Index) is a cyclical technical indicator that is often used to detect overbought/oversold states of the market.

CFD is a Contract for Difference, it is a special trading instrument that allows financial speculation on stocks, commodities and other instruments without actually buying.

Commissions are broker commissions for operation handling.

CPI is a consumer price index the statistical measure of inflation based upon changes of prices of a specified set of goods.

Data Mining Bias is a systematic error occurring in data analysis when a very large set of data samples are evaluated to obtain the best result. In Forex trading data mining bias affects optimization results of manual strategies and automatic expert advisors.

EA (Expert Advisor) is an automated script which is used by the trading platform software to manage positions and orders automatically without or with little manual control.

ECN Broker is a type of Forex brokerage firm which provides its clients direct access to other Forex market participants. ECN brokers do not discourage scalping, do not trade against the client, do not charge spread (low spread is defined by current market prices) but charge commissions for every order.

ECB (European Central Bank) is the main regulatory body of the European Union financial system.

Elliott Waves are a set of principles for chart analysis based on 5-wave and 3-wave patterns.

Fed (Federal Reserve) is the main regulatory body of the United States of America financial system, which division - FOMC (Federal Open Market Committee) - regulates, among other things, federal interest rates.

Fibonacci Retracements are the levels with a high probability of trend break or bounce, calculated as the 23.6%, 32.8%, 50% and 61.8% of the trend range.

Flat (Square) means a neutral state when all your positions are closed.

Floating Leverage is a leverage that changes depending on the total size of open positions.

Fundamental Analysis is the analysis based only on news, economic indicators and global events.

Gap is a difference between the previous period's close price and the next period's open price. In Forex usually only occurs during weekends - between the Friday's close and the Monday's open price.

GDP (Gross Domestic Product) is a measure of the national income and output for the country's economy, it is one of the most important Forex indicators.

GTC (Good 'Til Canceled) is an order to buy or sell of a currency with a fixed price or worse. The order is alive (good) until execution or cancellation.

Hedging means maintaining a market position which secures the existing open positions in the opposite direction.

Jobber is a slang word for a trader who is aimed toward fast but small and short-term profit from an intra-day trading. Jobber rarely leaves open positions overnight.

Kiwi is a Forex slang name for the New Zealand currency, New Zealand dollar.

Leading Indicators is a composite index (year 1992 = 100%) of ten most important macroeconomic indicators that predicts future (6-9 months) economic activity.

Limit Order is an order for a broker to buy the lot for fixed or lesser price or sell the lot for fixed or better price. Such price is called limit price.

Liquidity is the measure of markets which describes relationship between the trading volume and the price change.

Long is the position which is in a Buy direction. In Forex trading, the primary currency when bought is long and another is short.

Loss means the loss from closing long position at lower rate than opening or short position with higher rate than opening, or if the profit from a position closing was lower than broker commission on it.

Lot definites amount of units or amount of money accepted for operations handling (usually it is a multiple of 100).

Margin is the money which the investor needs to keep at broker account to execute trades. It supplies the possible losses which may occur in margin trading.

Margin Account is the account which is used to hold investor's deposited money for Forex trading.

Margin Call is a demand of a broker to deposit more margin money to the margin account when the amount in it falls below certain minimum.

Market Order is an order to buy or sell a lot for a current market price.

Market Price is the current price for which the currency is traded for on the market.

Momentum is the measure of the currency's ability to move in the given direction.

Moving Average (MA) is one of the most basic technical indicators. It shows the average rate calculated over a series of time periods. Exponential Moving Average (EMA), Weighted Moving Average (WMA) etc. are just the ways of weighing the rates and the periods.

Offer (Ask) is the price of the offer, the price you buy for.

Open Position (Trade) means a position on buying (long) or selling (short) for a currency pair.

Order is the order for a broker to buy or sell the currency with a certain rate.

Percentage Allocation Management Module (PAMM) means a broker-side system which allows investor to invest with traders, and allows traders to manage investors' funds using the broker's platform.

Pivot Point is the primary support/resistance point calculated basing on the previous trend's High, Low and Close prices.

Pip (Point) is the last digit in the rate (e.g. for EUR/USD 1 point = 0.0001).

Profit (Gain) is the positive amount of money gained for closing the position.

Principal Value is the initial amount of money of the invested.

Realized Profit/Loss means gain/loss for already closed positions.

Resistance is price level for which the intensive selling can lead to price increasing (up-trend).

RSI (Relative Strength Index) is an indicator which measures of the power of direction price movement by comparing the bullish and bearish portions of the trend.

Scalping is a style of trading notable by many positions that are opened for extremely small and short-term profits.

Settled (Closed) Positions are  closed positions for which all needed transactions has been made.

SL, please have a look at Stop-Loss Order.

Slippage is the execution of order for a price different than expected (ordered), main reasons for slippage are a "fast" market, low liquidity and low broker's ability to execute orders.

Spread is the difference between ask and bid prices for a currency pair.

Standard Lot means 100,000 units of the base currency of the currency pair, which you are buying or selling.

Stop-Limit Order is an order to sell or buy a lot for a certain price or worse.

Stop-Loss Order is an order to sell or buy a lot when the market reaches certain price. It is used to avoid extra losses when market moves in the opposite direction. Usually is a combination of stop-order and limit-order.

STP (Straight Through Processing) is an order processing that does not require any manual intervention and is fully automatic. In fact, 99.9% of all on-line Forex brokers support order handling with STP.

Support is the price level for which intensive buying can lead to the price decreasing (down-trend).

Swap is the overnight payment for holding your position. Since you are not physically receiving the currency you buy, your broker should pay you the interest rate difference between the two currencies of the pair. It can be negative or positive.

Take-Profit Order is an order to sell or buy a lot when the market reaches certain price. It is used to fixate your profit. Usually is a combination of stop-order and limit-order.

Technical Analysis is the analysis based only on the technical market data (quotes) with the help of various technical indicators.

TP, please have a look at Take-Profit Order.

Trend is the direction of market which has been established with influence of different factors.

Unrealized (Floating) Profit/Loss means a profit/loss for your non-closed positions.

Useable Margin is the amount of money in the account that can be used for trading.

Used Margin is the amount of money in the account already used to hold open positions open.

Volatility is a statistical measure of the number of price changes for a given currency pair in a given period of time.

VPS (Virtual Private Server) means virtual environment hosted on the dedicated server, which can be used to run the programs independent on the user's PC. Forex traders use VPS to host trading platforms and run expert advisors without unexpected interruptions.