Trader’s Dictionary

The price at which a trader can purchase a particular financial instrument, such as currency pairs. Also, called offer price, offer, asking price, or ask

A currency is said to appreciate when the price rises in response to market demand; an increase in the value of an asset.

Slang term for the Australian Dollar, abbreviated AUD.

The rate at which a country’s central bank lends money to its domestic banks.

Bank of Canada, the central bank of Canada.

Bank of England, the central bank of the UK.

Bank of Japan, the central bank of Japan.

The central bank of Germany, also nicknamed Bubba.

A name for a debt which is issued for a specified period of time on which interest is paid.

In a currency pair, the first currency in the pair is called the base currency. For example, in the GBP/USD pair, GBP is the base currency.

It is the market characterized by generally falling prices. The opposite of Bull Market.

It is a market characterized by generally rising prices. The opposite of Bear Market.

The price at which an asset is offered to traders who wish to sell. This is also known as the ‘bid price’ and ‘bid rate’.

A type of entry order used by traders to buy an asset below the current market price.

A type of entry order used by traders to buy an asset above the current market price.

A position that has been terminated or ended.

The authoritative bank that manages a country’s currency. For example, the US central bank is the Federal Reserve and the German central bank is the Bundesbank.

A decline in the value of a currency due to market forces.

Opening and closing the same position or positions within the same trading session.

An individual or firm that buys and sells assets from their own portfolio, acting as a principal or counterparty to a transaction.

Used loosely as the place where dealers facilitate pricing and executing trades.

The rate at which one currency can be exchanged for another.

Abbreviation for Europe’s central bank, the European Central Bank.

When a trade is carried out and completed.

This refers to the amount invested in a security and exposed to market risk.

Abbreviation for the Foreign Exchange market in which global currencies are exchanged/traded.

The impact economic and political events have on prices in financial markets (interest rate announcements, unemployment rate, etc.)

The Central Bank of the United States.

An official exchange rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates fluctuate between definite upper and lower bands, leading to intervention.

Nickname for the US dollar.

Group of 7 Nations – United States, Japan, Germany, United Kingdom, France, Italy, and Canada.

The total value of a country’s output, income or expenditure produced within the country’s physical borders.

A position or combination of positions that reduces the risk of your primary position.

The interest rate charged on short-term loans between banks.

An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Nickname for New Zealand Dollar.

Also known as margin, this is the percentage or fractional increase you can trade from the amount of capital you have available. It allows traders to trade notional values far higher than the capital they have.

Nickname for the Canadian dollar or the USD/CAD (U.S. Dollar/Canadian Dollar) currency pair.

The London Inter-Bank Offered Rate. Banks use LIBOR as a base rate for international lending.

Liquidity refers to how much an asset can be bought or sold without affecting its price. It also refers to the ability to exchange an asset for currency

An order to execute a trade at a specific price or a better one.

The specific price referred to in limit order.

Lot is a standardized quantity of the instrument you are trading. In forex, one lot is 100,000 units of a particular currency.

Taking a long position on a currency means that you buy it. In a currency pair, you buy the first of the two currencies – the base currency.

The guarantee, which is required by the dealer from the trader, to maintain an open locked position or locked position that the client intends to open. Each tool, asset or market has its own margin requirements. The margin is the collateral on a leveraged trade.

This is a notification which alerts you that you need to deposit more money in your trading account so there can be sufficient margin to keep existing positions open.

An order for a trade to be executed instantly at the best available price.

This is the maximum allowable trade size/volume that a trader can use for a forex trade on his broker’s forex trading platform.

This is the minimum allowable trade size/volume that a trader can use for a forex trade on his broker’s forex trading platform. Some brokers allow a minimum lot of 0.1 lots while some others allow 0.001 lots (1 micro-lot).

The process of delivering prices from the liquidity providers to traders without a department in the broker’s office acting as trade or pricing intermediary. ECN brokers operate a ‘no dealing desk’ environment.

An instruction to execute a trade at a specified rate.

An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.

A client’s order to open a position when a price reaches a certain level. A trader may decide to use a pending order if the current market prices are deemed unfavorable for profiting from, but are expected to get to price levels where the odds of profitability are improved. Pending orders are also used when the trader expects prices to retrace to cheaper levels before resuming the previous trend, or when the trader is waiting for confirmation of a break of a key level before entering in the direction of breakout.

Pip stands for Percentage in Point and it is the smallest price change that can be seen in an exchange rate. In most cases currency pairs are priced to four decimal points and the smallest change can be seen in the last decimal.

The second currency of a currency pair is called the Quote currency. In EUR/USD for example, USD is the quote currency.

A security price considered while buying and selling. It is expressed in Ask and Bid prices, and the quoted prices are always that of the counter currency (quote currency) to one unit of the base currency. A price quote is made up of the highest price that the trader is willing to pay for the asset as well as the lowest price that the dealer is willing to accept for the asset. A typical quote for the EURUSD is 1.2940/1.2943, where the first price is the Bid price and the second price is the Ask price. Both prices indicate how much of the counter currency (USD in this case) is used to buy 1 unit of the base currency (EUR in this case).

The difference between the highest and lowest price of a future recorded during a given trading session.

The price of one currency in terms of another, typically used for dealing purposes.

In forex, the rollover rate is the interest rate that traders pay or earn when they hold (rollover) a position open overnight.

The employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.

A price that may act as a ceiling. The opposite of support.

Abbreviation for the Swiss National Bank.

This is when a trader executes an order at a price which is very different to the price they expected the trade to be executed at. This usually happens during periods of high volatility, when traders use market orders and stop loss orders.

A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.

The difference between the Ask and Bid price of a currency pair.

A sudden upward or downward movement in price that happens in a short time period.

An order placed to buy or sell a security/currency when a certain price is reached. These orders are placed to limit loss on a position.

A stock index is a measured value of a group of selected stocks that are analyzed together. Investors use indices to monitor the market in general.

This is the trade practice of opening and closing positions manually within a few minutes of each other in order to capture small market moves and gradually build these up over time to produce increased profits. Scalpers use larger position sizes in order to make more money from the smaller pip targets.

An order to execute a transaction only at a specified price (the limit) or higher. The sell limit order is used when the trader has a bearish expectation for the asset, but expects the asset to rise higher up to the nearest resistance point before resuming the downward move.

A price that acts as a floor for past or future price movements.

A feature that allows traders to exit a profitable trade before the official time of expiry to ensure that profits are made.

Traders use technical analysis to forecast prices by examining market/historical data through the use of charts and trading indicators.

A liquid, slippery or choppy market environment. A light-volume market that produces erratic trading conditions.

Tick is a minimal change of security price (1/100 000=0.00001).

A trailing stop allows a trade to continue to gain in value when the market price moves in a favorable direction, but automatically closes the trade if the market price suddenly moves in an unfavorable direction by a specified distance. Placing contingent orders may not necessarily limit your losses.

Abbreviation for The Turkish Lira.

The Non-Farm Payrolls is one of the most followed economic releases in the market. Generally published on the first Friday of each month it can create irregular volatility in multiple instruments. It measures the change in employment numbers for the previous month for people that work outside the farming industry.

Abbreviation for The South African Rand.