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Forex Glossary

Using 1XCapital’s Forex Glossary, you can confidently navigate the forex market.

Our groan-inducing FX Glossary will help you unlock the mysteries of currency trading. From “Moon Lambo” to “FUD,” this thorough guide offers quick and amusing definitions for all the strange and amazing terms you’ll meet in the cryptocurrency world. Improve your trading skills and dazzle your fellow traders with your newly acquired jargon. Let’s plunge in and take the cryptoverse by storm, one groan-inducing term at a time!

1. A

  • Ask Price

The asking price for a financial instrument is the price at which the seller is willing to make a sale.

  • Arbitrage

The process of making profit through pricing discrepancies across various markets or exchanges.

  • Appreciation

A currency’s value increases as a result of appreciation.

  • All-or-None Order

Orders that must be fully carried out or not at all are known as “all-or-none” orders.

  • Asset Allocation

Asset allocation is the process of distributing investment funds among various asset types.

2. B

  • Base Currency

The first currency in a currency pair that is used to quote the value of the second currency is known as the base currency.

  • Bearish

A market sentiment that predicts falling prices is considered bearish.

  • Bid Price

The value at which buyers are willing to purchase a financial instrument is known as the bid price.

  • Broker

A middleman who, in exchange for a fee or commission, conducts transactions between buyers and sellers.

  • Bullish

A market feeling that predicts price increases.

3. C

  • Candlestick Chart

A visual representation of price changes that incorporates the shapes of candles to reveal market emotion.

  • Central Bank

The governmental entity in charge of controlling a nation’s monetary policy, interest rates, and money supply is known as the central bank.

  • Counter Currency

 The second currency in a currency pair is called the counter currency.

  • Currency Pair

The exchange rate between two currencies in the foreign exchange market.

  • Cross Rate

The rate at which two currencies are exchanged without using the US dollar.

4. D

  • Day Trading

Buying and selling financial products during the same trading day without holding positions overnight is known as day trading.

  • Depreciation

 A decline in a currency’s value in comparison to other currencies.

  • Divergence

A difference between the price’s direction and a technical indicator, frequently signifying a potential trend change.

  • Drawdown

The value of an investment during a certain time period as measured from peak to trough.

  • Double Bottom

Two successive lows on a chart indicate a double bottom, which indicates a likely trend reversal.

5. E

  • Equity

Equity is the ownership stake in a firm or asset.

  • Exchange Rate

The value of one currency represented in terms of another is called the exchange rate.

  • Economic Calendar

Calendar of significant economic events and data points, including interest rate decisions and GDP reports.

  • Entry Order

An order to enter a transaction at a particular price level is known as an entry order.

  • Exotic Currency

A currency from a less popular or developing market is called an exotic currency.

6. F

  • Fundamental Analysis

Using economic, financial, and political considerations to evaluate financial products is known as fundamental analysis.

  • Forex

The decentralized worldwide currency exchange market is called forex (FX).

  • Forward Contract

A forward contract is a commitment to purchase or sell a currency at a defined price with settlement taking place at a later time.

  • Fibonacci Retracement

A technical analysis tool that uses Fibonacci ratios to pinpoint probable support and resistance levels.

  • Fill or Kill Order

A directive that must either be fully carried out right away or revoked.

7. G

  • Going Long

Opening a trade with the intention of going long means anticipating an increase in price.

  • Going Short

Opening a trade with the assumption that the price will fall is known as going short.

  • Gap

An abrupt price change between two periods, frequently brought on by significant news or events.

  • Good ‘Til Canceled (GTC) Order

An order that is good until executed or canceled by the trader is known as a Good ‘Til Canceled (GTC) Order.

  • Greenback

A slang word for the American dollar is “greenback.”

8. H

  • Hedging

Hedging is the act of taking opposing positions to reduce the risk of unfavorable price changes.

  • High/Low

The highest and lowest prices that a financial instrument has experienced during a certain period of time.

  • Hard Stop

An open position is automatically stopped to reduce losses at a hard stop, which is a predetermined price level.

  • Head and Shoulders

Three peaks make up the Head and Shoulders chart pattern, which is a reversal pattern with the head peak standing higher than the shoulders.

  • Horizontal Resistance

A price level at which selling pressure has historically stopped further higher movement is known as horizontal resistance.

9. I

  • Initial Margin

 The sum of money needed to establish a leveraged position is known as the initial margin.

  • Inflation

The rate at which prices are increasing generally for goods and services, decreasing purchasing power.

  • Interbank Market

The interbank market is a global marketplace where banks and other financial organizations exchange currencies.

  • Inside Bar

A candlestick shape that denotes a period of consolidation when the high and low are contained within the high and low of the preceding candle.

  • Intraday Trading

Opening and closing trades throughout the same trading day is known as intraday trading.

10. J

  • Japanese Candlestick

A charting method that incorporates the open, high, low, and close prices to show price movements.

  • Jobless Claims

A weekly report that counts the number of people who initially applied for unemployment compensation.

  • JPY (Japanese Yen)

The Japanese yen’s currency code.

  • J-Curve Effect

A phenomena where a nation’s trade balance initially declines following a currency depreciation before improving over time.

  • Joint Account

An account that has equal access and ownership rights for two or more people.

11. K

  • Key Currency

A currency that is widely used and traded on the international forex market.

  • Kiwi (New Zealand Dollar)

The local currency’s colloquial name.

  • KYC (Know Your Customer)

The process of confirming customers’ identities in order to stop fraud, money laundering, and other criminal actions is known as KYC (Know Your Customer).

  • Knock-In Option

A knock-in option is one that only becomes active and marketable if the value of the underlying asset crosses a predetermined threshold.

  • Knock-Out Option

A knock-out option is one that expires if the price of the underlying asset crosses a predetermined threshold.

12. L

  • Leverage

Using borrowed money or margin to boost an investment’s potential returns.

  • Liquidity

The flexibility with which an asset or security can be acquired or sold quickly without having a substantial impact on its price is known as liquidity.

  • Long Position

Owning something with the hope that its value will increase is known as a long position.

  • Limit Order

A purchase or sale order for a financial item at a set price or higher.

  • Lot

A lot is a predetermined amount of a financial instrument used in forex trading, often equal to 100,000 units of the base currency.

13. M

  • Margin Call

 An email from a broker requesting extra deposits from a trader to satisfy margin obligations.

  • Market Order

 An instruction to purchase or sell a financial item at the best market price.

  • Moving Average

A well-liked technical analysis tool that establishes the average price of an asset over a predetermined time period to eliminate price swings.

  • Margin Trading

Margin trading is the practice of trading with borrowed money in order to increase prospective returns while simultaneously raising the risk of losses.

  • Momentum

The rate at which the price of an asset increases; frequently used to spot possible trend reversals.

14. N

  • NFA (National Futures Association)

A self-regulatory body that regulates the American futures market, including forex trading.

  • News Trading

Using news research and economic data to make trades, news trading seeks to profit from market turbulence.

  • Non-Farm Payrolls (NFP)

The non-farm sector of the U.S. economy’s non-farm payrolls, or NFP, is a major economic indicator that is reported each month. It counts the number of jobs created or eliminated in this sector.

  • Non-Deliverable Forward

Currency forward contract known as a non-deliverable forward (NDF) in which the underlying currency is not actually delivered.

  • Narrow Range

A time frame with little volatility is known as a narrow range when there is little variation between price highs and lows.

15. O

  • Order

A request to purchase or dispose of a financial instrument at a particular price.

  • Overbought

A technical indicator indicating that the price of an asset has grown too high and has to adjust itself.

  • Oversold

An oversold technical indication signifies that the price of an asset has dropped too low and is overdue for a recovery.

  • Over-the-Counter

Trading that occurs directly between two parties outside of a regulated exchange is referred to as OTC (Over-the-Counter).

  • Open Position

A deal that is still open and not yet closed by a countermove.

16. P

  • Pips

In most currency pairs, the fourth decimal place is represented by this smallest unit of measurement in forex trading.

  • Position Trading

Trading positions over a long time, usually for weeks, months, or even years, is known as position trading.

  • Pending Order

An order to buy or sell a financial item at a specific price is known as a pending order.

  • Price Action

The movement and behavior of an asset’s price, frequently deciphered through chart patterns and candlestick patterns.

  • Profit Target

A set price at which a trader plans to close a position and take profits.

17. Q

  • Quote Currency

The second currency used to quote the value of the base currency in a currency pair.

  • Quantitative Easing (QE)

A central bank’s purchase of government bonds or other financial assets is known as quantitative easing (QE), and it is used to raise the money supply and boost the economy.

  • Quid (British Pound)

The British pound is referred to as the “quid” in colloquial language.

  • Quiet Market

A market that is quiet has little trading activity and low volatility.

  • Quotation

A two-way price quote that typically shows the bid and ask prices for a financial instrument.

18. R

  • Resistance

A price level where selling pressure has historically restrained future price growth.

  • Risk Management

Risk management is the procedure used to recognize, evaluate, and reduce potential hazards in trading or investing.

  • Range-Bound Market

During a range-bound market, an asset’s price fluctuates between predetermined levels of support and resistance.

  • Rollover

The procedure of moving an open position’s settlement date to the following trading day.

  • Reversal

A reversal in a price trend’s direction, frequently accompanied by a change in the mood of the market.

19. S

  • Scalping

Scalping is a trading technique in which several fast trades are made in an effort to profit from minute price changes.

  • Spread

The cost of trading is represented by the gap between the ask and bid prices for a financial item.

  • Support

A price level where historical buying pressure has kept the price from falling any further.

  • Stop-Loss Order

A stop-loss order limits potential losses by instructing a trade to automatically close at a specific price level.

  • Swing Trading

A trading method designed to take advantage of more rapid price changes within a larger trend.

  • Slippage

The discrepancy between a trade’s anticipated price and its actual execution price.

20. T

  • Technical Analysis

Technical analysis is a technique for analyzing the financial markets and forecasting future price movements using previous volume and price data.

  • Take Profit

The price at which a trader plans to stop a profitable transaction and collect their profits.

  • Trend

The long-term movement of an asset’s price in one of three directions: upward (trend), downward (trend), or sideways (trend).

  • Trailing Stop

A stop-loss order known as a “trailing stop” automatically adjusts to safeguard profits as the price of an asset rises in the trader’s favor.

  • Trading Platform

A piece of software offered by a broker that enables users to execute trades and gain access to market information and analytical tools.

21. U

  • Unemployment Rate

The percentage of the labor force that is unemployed and actively looking for work is known as the unemployment rate.

  • Underlying Asset

The asset or financial instrument on which a derivative contract is based is known as the underlying asset.

  • Uptrend

A price trend that shows upward movement by having higher highs and lower lows.

  • User Interface

The visual and interactive components of a trading platform or software that enable users to interact with the system are referred to as the user interface (UI).

  • Unrealized Gain/Loss

The profit or loss on a position that is open but has not yet been closed.

22. V

  • Volatility

A statistical measurement of an asset’s price changes or variability, volatility is frequently employed as a risk indicator.

  • Volume

The quantity of shares or contracts traded in a financial instrument during a predetermined period of time.

  • Variable Spread

The price differential between the ask and the bid may change based on the state of the market.

  • Volatility Index

The “fear gauge” is the Volatility Index (VIX), a well-liked indicator of market turbulence and investor sentiment.

  • Value Date

The date on which the parties to a transaction anticipate exchanging money.

23. W

  • Whipsaw

A scenario when an asset’s price moves swiftly in one direction before abruptly reversing in the opposite direction.

  • Wire transfer

A technique for electronically moving money between bank accounts.

  • World Bank

An international financial organization that offers loans and grants to the governments of less developed nations in order to fund development initiatives.

  • Wallet

 A wallet is a type of digital storage that enables people to transmit, receive, and keep cryptocurrency safely.

  • White Candlestick

The closing price of an asset is more than the beginning price when a white candlestick pattern is present on the candlestick chart.

24. X

  • XM

A forex and CFD broker that provides trading services to customers all over the world.

  • XAG Silver

Silver’s currency symbol in forex trading is XAG.

  • XAU Gold

The currency symbol for gold in forex trading is XAU (Gold).

  • XBT (Bitcoin)

The currency symbol for Bitcoin in forex trading is XBT.

  • XRP Ripple

The currency symbol for Ripple (XRP) in forex trading is XRP.

25. Y

  • Yield

The return on an investment is referred to as the yield and is often represented as a percentage of the initial investment.

  • Yield Curve

A yield curve is a graphical representation of interest rates for financial instruments with various maturities that demonstrates how interest rates and remaining maturity time are related.

  • Yen Carry Trade

This approach involves borrowing money in a low-interest currency (such as the Japanese yen) and using that money to make investments in a higher-yielding currency.

  • Year-close Rally

Towards the close of the year, financial markets frequently experience a period of increasing buying and rising prices.

  • Yield Spread

A measure of market mood and risk appetite, the yield spread is the difference between the yields of two different debt instruments.

  • Year-To-Date (YTD)

Year-to-Date, or YTD, refers to the time from the start of the current calendar year to the present.

26. Z

  • Zero-Sum Game

A zero-sum game is one in which the gains of one player are exactly offset by the losses of another.

  • Zigzag Pattern 

A series of alternating price movements that form a zigzag shape define the technical analysis pattern known as the zigzag pattern.

  • ZAR (South African Rand)

The South African rand’s forex trading currency code.

  • Zone of Resistance

A price range when heavy selling pressure is anticipated, frequently resulting in a reversal or brief halt in an upward trend.

  • ZEW Economic Sentiment Index

The ZEW Economic Sentiment Index measures how institutional investors and analysts feel about the prognosis for the German economy. It is a closely monitored economic indicator in Germany.

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