- 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
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!
Also referred to as the Tokyo Session, the trading period between 23:00 and 8:00 GMT.
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.
An order issued to a dealer or broker to buy or sell an asset at the best possible price at a given time.
Nickname for the AUD/USD (Australian Dollar/US Dollar) pairing.
Balance of Trade
The value of a country’s exports minus imports.
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.
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.
A trend of declining prices over time. For example, bearish GBP/USD sees the British pound weakening against the US dollar.
Traders who favor declining prices and hold short positions.
The price at which the base currency of a pair can be sold. The bid is the first price listed in a forex quote.
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.
Bank of Canada: the country’s central bank.
Bank of England: the country’s central bank.
Bank of Japan: the country’s central bank.
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.
In trading terms, a record of the total trading positions held by a trader or dealing desk.
An intermediary individual or firm that connects buyers and sellers in return for a commission.
A trading term for one million units of a USD-based pairing, but also a general nickname for US Dollar.
A trend of increasing prices over time. For example, bullish EUR/USD sees the Euro strengthening against the US dollar.
Traders who favour upward price action and hod long positions.
Germany’s National Bank.
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.
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.
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.
Abbreviation of central banks.
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.
The settlement of a trade.
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.
The final price of an asset at the end of a trading session, or the price at which an individual trade has been closed.
A fee that is charged for buying or selling products or in return for a service.
Currencies of economies that rely largely on commodity exports, such as Canada, Russia, Australia, and New Zealand.
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.
A period of range-bound fluctuation between more major price movements.
The trend of crises spreading from economy to economy.
Corporations or institutions who hold non-speculative, long-term positions in the markets for hedging or financial management objectives.
The second currency listed in a forex pair.
Consumer Price Index, a useful economic indicator for inflation.
Also known a minor, a forex pair that does not include USD.
Currencies of commonwealth economies: CAD, AUD, GBP, NZD.
A form of money issued by a government or central bank as legal tender and a medium of exchange and value.
The probability of exchange rates becoming less favorable.
The three-letter identifier code attributed to each global currency, e.g. GBP for the British Pound, JPY for Japanese Yen.
A strategy of trading involving the opening and closing of positions within one trading day.
The declining value of an asset over time.
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.
The process of deliberately depreciating a currency’s value.
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.
The opposite of hawkish, dovish describes data or policy that suggest the easing of financial policy or lower interest rates.
Prices moving in a downward trend characterized by lower lows and lower highs.
European Central Bank: the Eurozone’s central bank.
Official, governmental reports that offer insights into inflation, economic health, and growth. Examples include GDP, CPI, nonfarm payrolls, retail sales etc.
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.
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.
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
Federal Open Market Committee – the policy-making body of the Federal Reserve.
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.
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.
A literal gap in price movement where trades have not occurred, often after the release of important economic data.
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.
To purchase or buy an asset for speculative purposes.
To sell an asset for speculative purposes. Traders can go short without physically owning the underlying asset.
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.
Nickname for US Dollar.
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.
An order type that guarantees trade execution at a pre-set level and protects from market gapping.
The opposite to dovish, hawkish outlook refers to tighter monetary policy and higher interest rates used to slow economic growth or curb inflation.
Describing trading conditions of low liquidity, i.e. a low volume of trading which may cause choppy price movement.
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.
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.
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.
The act of a central bank using the market to control currency price.
Nickname for the NZD/USD (New Zealand Dollar/US Dollar) pairing.
Data believed to offer the best impression of upcoming price action or economic trends.
A price value or zone believed to be of shared or technical interest between traders, e.g. support or resistance.
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.
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.
A market with good trading volume (numbers of buyers and sellers) to keep price moving smoothly and prevent gaps.
The trading period between 08:00 and 17:00 GMT.
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.
Nickname for CAD, the Canadian Dollar, or the USD/CAD (Canadian Dollar/US Dollar) pairing.
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.
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.
A dealer who quotes bid and ask prices and offers two-way trading on assets.
An order to buy or sell at the current market price.
New York Session
The trading period between 13:00 and 22:00 GMT.
Nickname for the Japanese Yen, JPY, or the JPY/USD (Japanese Yen/US Dollar) pairing.
A trade that is still active and contributing to unrealized P&L until closed.
An instruction to execute a trade. Pending orders are set to be triggered at preset levels, whilst market orders operate immediately.
Abbreviation of Over The Counter, describing a transaction that does not occur through an exchange.
Refers to the final decimal place of forex prices. Traders can describe price moves according to the number of pips gained or lost.
The collection of assets invested or traded by an individual or institution.
The difference between sale price and cost price, when sale is higher than cost.
A common occurrence in trending markets where prices temporarily stall and retreat before continuing in the original direction.
The policy whereby central banks inject money into the economy to stimulate growth.
A positive resurgence in price following a downtrend.
The price of one currency in terms of another.
The actual amount of money made or lost when a trade has been closed.
The opposite of a support level, the technical term referring to a level or zone that seems to cap further price growth.
At the bottom of the forex market, individuals who trade on the markets with personal capital rather than through institutions.
The opposite of devaluation; the strengthening of a currency thanks to official intervention.
An umbrella term for trading strategies and analysis geared towards curbing and containing risky exposure in the markets.
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.
The US Securities and Exchange Commission, created in the aftermath of the 1929 Wall Street Crash to prevent market manipulation.
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.
A situation in which a market catalyst causes large numbers of traders to switch for short to long positions, causing a sudden price spike.
The difference in price requested for a trade and the price at which it was executed. Slippage increases at times of extreme volatility.
The market in which assets are traded for immediate exchange, as opposed to on future conditions.
The difference between bid and ask prices. Traders will favor narrower spreads because less price action is required for profit to be realized.
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.
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.
Nickname for the Swiss franc, CHF, or the USD/CHF (US Dollar/Swiss Franc) pairing.
See Limit Order.
The evaluation of past price charts with technical indicators to predict upcoming price movement.
Used to refer to an illiquid, low-volume trading market.
See Asian Session.
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.
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.
The notional balance of profit or loss according to current open positions. The actual balance becomes realized once positions are closed.
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.
Trading slang for sharp spikes and reversals in highly volatile markets.
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.