Forex Trading Terminology

Below you will find a list of some of the more common Forex trading terminology. Please Contact Me to suggest a new term if you can’t find what you are looking for.

Ask – The minimum price that the market is willing to accept for a currency

AUD – Currency abbreviation for the Australian dollar

Authorized Forex Dealer – Any dealer that has received authorization from an appropriate regulatory body, such as the National Futures Association (NFA) in the United States

Automated Forex Trading – A way of trading Forex where buy and sell orders are placed based on an underlying algorithm without any human intervention

Autotrading – Shorthand for “Automated Forex Trading”

Base Currency – The first currency that is quoted for a currency pair (the Euro is considered the base currency for the EURUSD pairing)

Bear Squeeze  A situation where sellers are faced with an appreciating market which forces them to close their positions at a loss, thus driving prices higher. This is common in an extreme bear market, where a currency pair has experienced a significant depreciation over a relatively short period of time.

Bid – The maximum price at which the market is prepared to buy a specific currency

Blind Entry – A term common to price action trading where a trader makes a decision to buy or sell without the need of a price action signal as confirmation

Cable – Another name for the British Pound (GBP). The term dates back to the 1800s when the exchange rate between the U.S. dollar and British pound was transmitted across the floor of the Atlantic Ocean.

CAD – Currency abbreviation for the Canadian dollar

CHF -Currency abbreviation for the Swiss franc

CNY – Currency abbreviation for the Chinese yuan

Commodity Pairs – Currency pairs that are heavily correlated to commodity prices due to the country’s large possession of those commodities. The three commodity pairs are USDCAD, AUDUSD and NZDUSD.

Currency Pair – The quotation structure of currencies in the Forex market where the value of one currency is compared to that of another currency

Demo Trading – A way of practicing a particular trading strategy where no real money is at risk

ECN Broker – A Forex broker who uses an Electronic Communications Network (ECN) to provide its clients with direct access to other market participants. These brokers do not trade against their clients and typically offer narrower spreads than non-ECN brokers.

EUR – Currency abbreviation for the Euro (Eurozone), which consists of 19 countries and is the second most traded currency in the world

Electronic Currency Trading – A way of trading currencies through an online brokerage account where the base currency is exchanged for a foreign currency at the current exchange rate

Exchange Rate – The price of one country’s currency in exchange for another

Foreign Exchange Market – The global decentralized market responsible for the trading (exchange) of currencies. It is the largest financial market in the world and is often referred to as the Forex, or simply FX market

Forex Broker – A licensed firm that provides traders with access to a trading platform to buy and sell currencies

Forex Charts – A visual representation of the markets that helps traders determine areas of value so as to know when to buy or sell a currency pair

Forex Trading Strategy – A Forex trading strategy is what allows you to stack the odds in your favor when trading the Forex market

GBP – The currency abbreviation for the British pound

Greenback – A slang term for the U.S. dollar (USD) that originated in the 1860s during the American Civil War

Interbank market – The financial system used to trade currencies that is exclusive to banks and financial institutions

Japanese Candlestick – A way of reading price action that dates back to the 17th century where the low, high, open and close of a specific period are visually represented in an easy-to-read format

JPY – The currency abbreviation for the Japanese yen

Kiwi – A slang term for the New Zealand dollar (NZD) that is based on the flightless bird called a Kiwi that has become a national symbol

Liquid Market – A liquid market is any market with many buyers and sellers which creates an environment of low spreads and low volatility where buy and sell orders are executed with ease

Long – To “go long” is the equivalent to buying a currency pair where you simultaneously buy the base currency and sell the quote currency

Major Pairs – The most highly traded and liquid currency pairs in the Forex market. These pairs include EURUSD, USDJPY, GBPUSD and USDCHF.

Micro-Lot – A micro-lot is the equivalent of trading 1,000 units of the base currency in a Forex pair

Mini-Lot -A mini-lot is the equivalent of trading 10,000 units of the base currency in a Forex pair.

No Dealing Desk – A “no dealing desk” broker does not offset its clients’ trades but rather provides clients with immediate access to the interbank market

NZD – The currency abbreviation for the New Zealand dollar

Online Currency Exchange – A decentralized system for exchanging one country’s currency for another

Pip – The smallest unit of measurement used to express the change in value between two currencies

Quote Currency – The second currency that is quoted for a currency pair (the U.S. dollar is considered the quote currency for the EURUSD pairing)

Short – To “go short” is the equivalent to selling a currency pair where you simultaneously sell the base currency and buy the quote currency

Spot Exchange Rate – The current price that a buyer expects to pay for a foreign currency, also known as the “benchmark rate”

Standard Lot – A trading size that is equivalent to 100,000 units of the quote currency in a Forex pair

Symbol – The abbreviation used for a country’s currency (U.S. dollar is USD, Euro is EUR, etc.)

Trading Desk – Where the buying and selling of securities occurs at institutions that actively trade financial markets such as the foreign exchange, equities and commodities

USD – Currency abbreviation for the U.S. dollar, the most traded currency in the world

ZAR – Currency abbreviation for the South African rand

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