Forex Glossary: The Language Of Currency Exchange

In Summary: 

  • The forex (foreign exchange) market comprises the buying and selling of global currencies
  • Traders have their own technical (and sometimes tongue-in-cheek) language for talking about the markets

Introduction

Welcome to the realm of the Loonie, the Greenback, and the Ninja! From currency slang to technical trading terminology, forex has a language of its own. To help you find your bearings in the markets, we’ve crafted a glossary of common forex trading terms. Feel-free to bookmark this page until you’ve got the dictionary down! 

Forex Glossary 

Asian Session 

Also referred to as the Tokyo Session, the trading period between 23:00 and 8:00 GMT. 

Ask Price 

Also known as the offer price – the price at which the base currency of a pair can be bought. The ask is the second price listed in a forex quote. 

At Best 

An order issued to a dealer or broker to buy or sell an asset at the best possible price at a given time. 

Aussie 

Nickname for the AUD/USD (Australian Dollar/US Dollar) pairing. 

Balance of Trade 

The value of a country’s exports minus imports. 

Bar Chart 

A style of price chart. Each vertical line indicates price information for a certain period; the top of the line shows the high, the bottom shows the low, and the opening and closing prices are show to the left and right of the line respectively. 

Base Currency 

The first currency of a currency pairing. The price of a pair reflects the value of the base currency in terms of the counter currency. For example, in EUR/USD, EUR is the base, with one Euro equivalent to the stated price.  

Bear Market 

A trend of declining prices over time. For example, bearish GBP/USD sees the British pound weakening against the US dollar. 

Bears 

Traders who favor declining prices and hold short positions. 

Bid Price 

The price at which the base currency of a pair can be sold. The bid is the first price listed in a forex quote. 

BIS 

The Bank of International Settlements, located in Basel, Switzerland. The BIS acts as an intermediary for central banks around the world and markets, and can buy currency on behalf of a country in order to avoid direct governmental intervention. 

BOC 

Bank of Canada: the country’s central bank. 

BOE 

Bank of England: the country’s central bank. 

BOJ 

Bank of Japan: the country’s central bank. 

Bond 

A name for a debt issued for a specific period of time. Governments will use bonds as a means for borrowing money, and investors can buy bonds in order to collect the accrued interest. 

Book 

In trading terms, a record of the total trading positions held by a trader or dealing desk. 

Broker 

An intermediary individual or firm that connects buyers and sellers in return for a commission.  

Buck 

A trading term for one million units of a USD-based pairing, but also a general nickname for US Dollar. 

Bull Market 

A trend of increasing prices over time. For example, bullish EUR/USD sees the Euro strengthening against the US dollar. 

Bulls 

Traders who favour upward price action and hod long positions. 

Bundesbank 

Germany’s National Bank. 

Cable 

Nickname for the GBP/USD (British Pound/US Dollar) pairing. The name comes from the 1800s, when rates were communicated to the US via transatlantic cable. 

Candlestick Chart 

A style of price chart. Each rectangle indicates price information for a given period; the rectangle is shaded if the closing price is higher than the opening prices, and unshaded if closing price is lower than the opening price. The ends of the rectangle therefore indicate the opening and closing prices of the session, and the vertical ‘wicks’ show the session high and low. 

Carry Trade 

An advanced trading strategy aimed at profiting from the difference in interest rates on two currencies. For example, a trader will go long on a high interest currency and go short on a lower interest currency to capture the difference in yields.  

CBS 

Abbreviation of central banks. 

Central Bank 

An governmental or part-governmental institution that manages a state’s financial policy. Examples include the European Central Bank, the Bank of England, or the US Federal Reserve. 

Clearing 

The settlement of a trade. 

Closing 

The process of stopping a live trade and exiting the market. The close is always the opposite to the open, so you will close a long trade with a sell order and a short trade with a buy order. 

Closing Price 

The final price of an asset at the end of a trading session, or the price at which an individual trade has been closed. 

Commission 

A fee that is charged for buying or selling products or in return for a service. 

Commodity Currencies 

Currencies of economies that rely largely on commodity exports, such as Canada, Russia, Australia, and New Zealand. 

Components 

The US Dollar pairings that can be traded reciprocally to create new cross positions. For example, EUR/USD and USD/JPY can be traded against each other to create a position equivalent to EUR/JPY. 

Consolidation 

A period of range-bound fluctuation between more major price movements. 

Contagion 

The trend of crises spreading from economy to economy. 

Corporates 

Corporations or institutions who hold non-speculative, long-term positions in the markets for hedging or financial management objectives.  

Counter Currency 

The second currency listed in a forex pair. 

CPI 

Consumer Price Index, a useful economic indicator for inflation. 

Cross 

Also known a minor, a forex pair that does not include USD. 

Crown Currencies 

Currencies of commonwealth economies: CAD, AUD, GBP, NZD. 

Currency 

A form of money issued by a government or central bank as legal tender and a medium of exchange and value. 

Currency Risk 

The probability of exchange rates becoming less favorable. 

 Currency Symbol 

The three-letter identifier code attributed to each global currency, e.g. GBP for the British Pound, JPY for Japanese Yen. 

Day Trading 

A strategy of trading involving the opening and closing of positions within one trading day. 

Depreciation 

The declining value of an asset over time. 

Derivatives 

Trading contracts based on assets which do not entail actual asset ownership. This allows for leveraged trading and the flexibility to go long or short on a trade. 

Devaluation 

The process of deliberately depreciating a currency’s value. 

Divergence 

A technical term describing when price and momentum move in opposite directions. Divergence is often followed by a price reversal which allows price to follow the momentum indicator once more. 

Dove 

The opposite of hawkish, dovish describes data or policy that suggest the easing of financial policy or lower interest rates. 

Downtrend 

Prices moving in a downward trend characterized by lower lows and lower highs. 

ECB 

European Central Bank: the Eurozone’s central bank. 

Economic Indicators 

Official, governmental reports that offer insights into inflation, economic health, and growth. Examples include GDP, CPI, nonfarm payrolls, retail sales etc. 

Exporters 

Corporations that sell goods internationally as exports. These corporations also influence the forex market because they are effectively selling foreign currency and buying domestic currency. 

FED 

The Federal Reserve – the central bank of the US responsible for monetary policy. Due to the prominence of US companies and USD, the Federal Reserve’s decisions carry significant weight in the markets. 

Fix 

An regular instance in each forex trading day when large quantities of currency are exchanged to fulfill a major institution’s orders. Fixes often produce elevated volatility, and are timed as follows (GMT): 

5:00am – Frankfurt  

6:00am – London  

10:00am – WMHCO (World Market House Company)  

11:00am – WMHCO (World Market House Company) – more important  

8:20am – IMM 

8:15am – ECB 

FOMC 

Federal Open Market Committee – the policy-making body of the Federal Reserve. 

Forex 

Short for foreign exchange, the exchange of currencies, or buying one and selling another. Used to describe the market of currency exchange as a whole. 

Fundamental Analysis 

Method of analysis on an asset’s prospects utilizing economic indicators, news, and other background data. From this, traders attempt to predict upcoming price action. 

Gap 

A literal gap in price movement where trades have not occurred, often after the release of important economic data. 

GMT 

Greenwich Mean Time – The time zone most frequently used in the forex market as it remains unchanged throughout the year, without daylight savings or summertime adjustments. 

Going Long 

To purchase or buy an asset for speculative purposes. 

Going Short 

To sell an asset for speculative purposes. Traders can go short without physically owning the underlying asset. 

Gold 

The metal still considered to as a store of value outside of fiat currencies. For this reason, gold prices tend to move inversely to USD: investors will turn to gold when USD is weak, and vice versa. 

Greenback 

Nickname for US Dollar. 

GDP 

Gross Domestic Product, or the total value of a country’s economic processes within its borders. 

Gross National Product 

GDP combined with income from overseas investment and activity. 

Guaranteed Order 

An order type that guarantees trade execution at a pre-set level and protects from market gapping. 

Hawk 

The opposite to dovish, hawkish outlook refers to tighter monetary policy and higher interest rates used to slow economic growth or curb inflation. 

Illiquid 

Describing trading conditions of low liquidity, i.e. a low volume of trading which may cause choppy price movement. 

Industrial Production 

An economic indicator reflecting the total value of manufacturing, mining, utilities, and production outputs. This measurement often tracks business cycles and offers insights into earnings and employment trends. 

Inflation 

The decline of a currency’s purchasing power against the rising price of consumer goods. 

Initial Margin Requirement 

The upfront collateral deposit requirement before entering a trade. 

Interbank Rates 

Exchange rates between larger international banks for high volume transactions. Banks either deal directly or via the major platforms, Electronic Broking Services (EBS) or Thomas Reuters Dealing. 

Intervention 

The act of a central bank using the market to control currency price. 

Kiwi 

Nickname for the NZD/USD (New Zealand Dollar/US Dollar) pairing. 

Leading Indicators 

Data believed to offer the best impression of upcoming price action or economic trends.  

Level 

A price value or zone believed to be of shared or technical interest between traders, e.g. support or resistance. 

Leverage 

Also referred to as margin, the amplification of your capital exposure in the markets. This allows traders to expand their profit/loss potential through the trading of notional capital on top of their real deposit. For example, with 1:100 leverage, a deposit of $10 will control $1,000 on the market. 

Limit Order 

An pre-set, pending order to buy at lower than the current price or sell at higher than the current price. Also referred to a ‘Take Profit’ order when applied to an open trade, because it automates closure at a favorable price. 

Liquid 

A market with good trading volume (numbers of buyers and sellers) to keep price moving smoothly and prevent gaps. 

London Session 

The trading period between 08:00 and 17:00 GMT. 

Long Position 

A position entered by ‘buying’ a forex pair. This position is placed in the hope that price will rise for the trade to be closed at a profit. 

Loonie 

Nickname for CAD, the Canadian Dollar, or the USD/CAD (Canadian Dollar/US Dollar) pairing. 

Lot 

A unit to measure position size of a trade. One forex lot is equivalent to 100,000 units of the base currency, but mini (10,000) or micro lots (1,000) can also be traded for convenience. 

Forex Glossary

Margin Call 

A warning from a broker requesting additional funds from a trader in order to continue holding a position, issued after an unfavorable price movement has cut into the trader’s margin. 

Market Maker 

A dealer who quotes bid and ask prices and offers two-way trading on assets. 

Market Order 

An order to buy or sell at the current market price. 

New York Session 

The trading period between 13:00 and 22:00 GMT. 

Ninja 

Nickname for the Japanese Yen, JPY, or the JPY/USD (Japanese Yen/US Dollar) pairing. 

Open Position 

A trade that is still active and contributing to unrealized P&L until closed. 

Order 

An instruction to execute a trade. Pending orders are set to be triggered at preset levels, whilst market orders operate immediately. 

OTC 

Abbreviation of Over The Counter, describing a transaction that does not occur through an exchange. 

Pips 

Refers to the final decimal place of forex prices. Traders can describe price moves according to the number of pips gained or lost. 

Portfolio 

The collection of assets invested or traded by an individual or institution. 

Profit 

The difference between sale price and cost price, when sale is higher than cost. 

Pullback 

A common occurrence in trending markets where prices temporarily stall and retreat before continuing in the original direction. 

Quantitative Easing 

The policy whereby central banks inject money into the economy to stimulate growth. 

Rally 

A positive resurgence in price following a downtrend. 

Rate 

The price of one currency in terms of another. 

Realized Profit/Loss 

The actual amount of money made or lost when a trade has been closed. 

Resistance Level 

The opposite of a support level, the technical term referring to a level or zone that seems to cap further price growth. 

Retail Trader 

At the bottom of the forex market, individuals who trade on the markets with personal capital rather than through institutions. 

Revaluation 

The opposite of devaluation; the strengthening of a currency thanks to official intervention. 

Risk Management 

An umbrella term for trading strategies and analysis geared towards curbing and containing risky exposure in the markets. 

Rollover 

The act of closing an open position at the end of the day and reopening on the next day in order to extend the settlement period. According to the position, interest will be earned or charged for the rollover, known as the rollover rate. 

SEC 

The US Securities and Exchange Commission, created in the aftermath of the 1929 Wall Street Crash to prevent market manipulation. 

Short Position 

The opposite of a long position: a position entered by ‘selling a forex pair. This position is placed in the hope that price will fall for the trade to be closed at a profit. 

Short Squeeze 

A situation in which a market catalyst causes large numbers of traders to switch for short to long positions, causing a sudden price spike. 

Slippage 

The difference in price requested for a trade and the price at which it was executed. Slippage increases at times of extreme volatility. 

Spot Market 

The market in which assets are traded for immediate exchange, as opposed to on future conditions. 

Spread 

The difference between bid and ask prices. Traders will favor narrower spreads because less price action is required for profit to be realized. 

Sterling 

Nickname for the British pound, GBP, or the GBP/USD (Great British Pound/US Dollar) pairing. 

Stop Entry Order 

Also known as a buy stop order, a pending buy order placed above current market price, or sell order below current market price. Ideal if traders have a target entry point. 

Stop Loss Order 

A pending order used to contain risk, positioned to close trades if price starts moving unfavorably. 

Support Level 

The opposite of a resistance level, the technical term referring to a level or zone that seems to act as a floor preventing further price decline. 

Swissie 

Nickname for the Swiss franc, CHF, or the USD/CHF (US Dollar/Swiss Franc) pairing. 

Take Profit 

See Limit Order. 

Technical Analysis 

The evaluation of past price charts with technical indicators to predict upcoming price movement. 

Thin 

Used to refer to an illiquid, low-volume trading market. 

Tokyo Session 

See Asian Session. 

Trade Balance 

The difference in value between imported and exported goods for a country. Nations with trade surpluses (exports higher than imports), tend to see their currencies appreciate whilst countries with trade deficits (imports higher than exports) tend to see currency depreciation. 

Trend 

An overall pattern of price movement over a given time period. Uptrends are characterized by higher highs and higher lows, and downtrends by lower highs and lower lows. 

Unrealized Profit/Loss 

The notional balance of profit or loss according to current open positions. The actual balance becomes realized once positions are closed. 

Volatility 

The rate at which price changes in a given market. High volatility usually follows major events or economic reports as the volume of trading spikes, and is liable to cause slippage. Scalpers and short-term traders will use elevated volatility to make fast profits, but this demands careful risk management. 

Whipsaw 

Trading slang for sharp spikes and reversals in highly volatile markets. 

Final Thoughts 

This glossary covers the basics of forex terminology, but there is plenty more to learn! We recommend familiarizing yourself with basic trading concepts and general economic trends in order to build strong foundations for your forex strategy. If you’re ready to dive into the detail, head over to our other articles to understand more about economic and technical indicators. 

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