Forex Terms
ASK is the price in which you can buy the base currency.
Automated Trading is a computer program based on trading signals that determine the entry and the exit points of a position.
Base Currency is the first currency in the pair
Bid is the price in which you can sell the base currency.
Currency pair is the two currencies that make up a pair.
Dealing Desk provides pricing, liquidity and execution of trades.
Drawdown is the decline in account balance from the high to the low.
ECN stands for Electronic Communications Network
FCM (Futures Commission Merchant) An individual or organization licensed by the U.S. Commodities Futures Trading Commission (CFTC) to deal in futures products and accept money from clients to trade them.
Foreign Exchange Market or Forex market is a very liquid financial market that is open 24 hours a day and where banks and companies can trade currency pairs and hedge positions.
ISO Codes
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar
" this is not a complete list
Leverage allows you to gear your account into a greater position. Example is you can use $1000.00 of margin to open a position of $100,000.00then you are leverage 100 to 1.
Long position is where you enter a position with expectations that you can exit the position at a higher price and profit from the difference.
Lot is the standard unit size of a transaction and one standard lot is equal to 100,000 units of the base currency.
Market Maker provides pricing and liquidity for a particular currency pair and stands ready to buy or sell that currency at the quoted price. A market maker takes the opposite side of your trade and has the option of either holding that position or partially or fully offsetting it with other market participants, managing their aggregate exposure to their clients. A market maker earns their commission from the spread between the bid and offer price.
Margin can be thought of as a good faith deposit required keeping or maintaining an open position.
Meta Trader or MT4 is a user friendly trading platform with advanced technical analysis,
Micro Account is traded with lots of units of 10,000.
NDD is an acronym for no dealing desk
Pip is the smallest price increment or movement a currency can make.
Pip value is fixed for most currencies. Example is 100,000 or a standard lot position of EUR/USD has a pip value of $10.
Quote currency is the second currency the pair.
Resistance is a technical price level where sellers outweigh buyers.
Rollover can add an extra cost or profit to your trade .Why because rollover is the interest paid or earned for holding a position overnight. We know that each currency has an interest rate associated with it and we know that Forex is traded in pairs. Therefore every trade takes into account that there are two different interest rates. If the interest rate on the currency you bought is higher than the interest rate of the currency you sold, then you will earn rollover or positive roll. If the interest rate on the currency you bought is lower than the interest rate on the currency you sold, then you will pay rollover or negative roll
Scalping is a style of trading that tries to make several small profitable trades that capture small price movements.
Short Position is where you enter a position with expectations that you can exit the position at a lower price and profit from the difference.
Slippage is the difference between the order price and the executed price.
Spot Market is the market for buying and selling currencies at the current market rate.
Standard account is traded with lots of units of 100,000.
Support is a technical price level where buyers outweigh sellers.
Technical Trading involves analyzing price charts for technical patterns and technical indicators to determine entry and exit positions.
Trading Hours is the actual hours you can place trades. Forex market is from 5pm EST on Sunday to 5pm EST on Friday.
This is not a complete list however it is some of the most common terms. |
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