Welcome to the Traders' Glossary—a comprehensive resource designed to help you navigate the world of forex trading.
Whether you're a beginner or an experienced trader, understanding key terms and concepts is essential for making informed decisions.
Below is a list of commonly used terms in forex trading:
A
Ask Price: The price at which a trader can buy a currency pair.
Asset: Any financial instrument that can be traded, such as currency pairs, stocks, or commodities.
B
Bid Price: The price at which a trader can sell a currency pair.
Broker: A financial intermediary that facilitates trades between buyers and sellers in the forex market.
C
Currency Pair: A quotation of two currencies, with the value of one currency relative to the other (e.g., EUR/USD).
CFD (Contract for Difference): A financial derivative allowing traders to speculate on the price movements of assets without owning them.
D
Day Trading: A strategy involving the opening and closing of trades within the same trading day.
Drawdown: The peak-to-trough decline of an investment or trading account, often expressed as a percentage.
E
Exchange Rate: The value of one currency expressed in terms of another.
Equity: The total value of a trader's account, including profits and losses from open positions.
F
Forex (Foreign Exchange): The global marketplace for trading currencies.
Fundamental Analysis: A method of evaluating an asset by examining economic, financial, and other qualitative and quantitative factors.
G
GDP (Gross Domestic Product): A measure of a country's economic performance, often used to gauge the health of its economy.
Gearing: Another term for leverage, referring to the ability to trade with a larger position than your account balance.
H
Hedging: A strategy used to reduce risk by opening positions that offset potential losses.
High-Frequency Trading (HFT): A trading strategy that uses algorithms to execute a large number of orders in fractions of a second.
I
IB (Introducing Broker): A person or company that refers clients to a forex broker, often earning commissions.
Inflation: The rate at which the general level of prices for goods and services rises, eroding purchasing power.
L
Leverage: The use of borrowed funds to increase the size of a trading position, amplifying both potential profits and losses.
Liquidity: The ease with which an asset can be bought or sold without affecting its price.
M
Margin: The amount of capital required to open a trading position.
Market Order: An order to buy or sell at the best available price.
P
Pip (Percentage in Point): The smallest price movement in a currency pair, typically the fourth decimal place in most pairs.
Position: The amount of a security, commodity, or currency that a trader owns or owes.
R
Risk Management: The process of identifying, assessing, and controlling risks in trading.
Rollover: The interest earned or paid for holding a position overnight.
S
Scalping: A trading strategy that aims to profit from small price changes over short time frames.
Spread: The difference between the bid and ask prices.
T
Take Profit (TP): An order to close a position when it reaches a specified profit level.
Technical Analysis: The study of price charts and indicators to predict future market movements.
V
Volatility: The degree of variation in a trading instrument's price over time, often used to gauge risk.
W
Whipsaw: A market condition where a price moves sharply in one direction and then reverses equally sharply.