Forex Gossary
Discover a wealth of financial terms and definitions that every trader should know.
Adjustable Peg
An adjustable peg is a system used by a country to manage the exchange rate of its currency. It's a hybrid system between a fixed exchange rate and a floating exchange rate.
Aggregate Risk
Aggregate risk refers to the combined or total exposure an entity has to various individual risks. It essentially looks at the big picture of potential risks, considering how they might interact and amplify each other's impact.
Aggressive
In the forex market, aggressive trading refers to a trading style characterized by taking on higher levels of risk in pursuit of potentially larger profits.
Agio
In the context of foreign exchange (forex) trading, agio refers to the premium or difference between the nominal value of a currency and its actual value in another currency.
Analyst
An analyst is a professional who collects, interprets, and analyzes data to extract valuable insights and inform decision-making. They work in various fields, and their specific responsibilities and areas of expertise can differ depending on the industry and their role.
Arbitrage
In the world of finance, arbitrage refers to a risk-free trading strategy that exploits price discrepancies between different markets or exchanges. It essentially involves buying an asset at a lower price in one market and simultaneously selling it at a higher price in another market, locking in a quick profit.
Ask
In the context of forex trading, the ask price refers to the price at which a seller is willing to sell a specific currency pair. It represents the minimum amount of the quote currency (the second currency in the pair) a seller is willing to accept in exchange for one unit of the base currency (the first currency in the pair).
Aussie
"Aussie" is a common slang term used in the forex market to refer to the Australian dollar (AUD).
Average True Range (Atr)
As you previously mentioned, the Average True Range (ATR) is a volatility indicator used in technical analysis to measure the average price fluctuation of a security over a specific period. It takes into account the high, low, and closing prices of the security, as well as the absolute difference between the previous day's close and the current high and low prices.
Bar Chart
In the forex market, a bar chart is a type of price chart used to visualize the historical price movements of a currency pair over a specific period. It's one of the most common and fundamental chart types used by forex traders for technical analysis.
Base Currency
In the realm of foreign exchange (forex) trading, the base currency is the first currency listed in a currency pair. It serves as the reference point for the value of the second currency, known as the quote currency.
Basis Point
A basis point (bp), also written as bips, is a unit used to express small changes in percentages, particularly in the context of finance and economics. It represents one-hundredth of one percent (0.01%).
Bearish/bear Market
In the context of financial markets, the terms bearish and bear market are used to describe a period of prolonged price decline.
Bid
In the world of forex trading, the bid refers to the highest price a buyer is willing to pay to purchase a specific currency pair. It essentially represents the demand side of the market for a particular currency pair.
Bollinger Bands
Bollinger Bands® is a technical analysis tool used in the forex market and other financial markets to assess volatility and identify potential buying and selling opportunities.
Bond
In the world of finance, a bond is essentially an IOU (I Owe You) issued by an entity like a government, corporation, or municipality to raise money. When you invest in a bond, you are essentially loaning money to the issuer for a predetermined period at a fixed interest rate. In return, you receive regular interest payments (known as coupon payments) and eventually get your initial investment back (known as principal) at the maturity date.
Breakaway Gap
In the realm of forex trading, a breakaway gap is a significant price movement that occurs on a chart, breaking away from a previous trading range. It's often seen as a potential indicator of a new trend developing.
Bulls
In the realm of financial markets, the term bulls refers to investors who hold a positive outlook and believe that prices will generally rise in the near future. This belief system is often contrasted with bears, who hold a negative outlook and expect prices to decline.
Call Option
In the world of forex trading, a call option is a type of derivative contract that grants the **buyer the right, but not the obligation, to purchase a specific currency pair at a predetermined price (strike price) within a certain time period (expiry date).
Candlestick Chart
A candlestick chart is a type of price chart used in various financial markets, including forex, to visually represent the price movements of an asset over a specific period. It's a popular and informative way for traders to analyze price action and identify potential trading opportunities.
Commission
In the world of finance, a commission refers to a fee charged by a financial intermediary, such as a broker, for facilitating a financial transaction on behalf of a client.
Consolidation
In the realm of finance, consolidation refers to a period of relatively flat price movement following a significant price increase or decrease. It's characterized by reduced volatility and trading activity within a defined trading range.
Contract Size
Contract size refers to the standardized unit of an underlying asset that is traded in a futures or options contract. It represents the minimum amount of the asset that a buyer is obligated to purchase or a seller is obligated to sell when entering into the contract.
Correlation
In the realm of finance, correlation refers to the statistical relationship between two variables. It measures the degree to which two variables move in relation to each other over a specific period.
Currency Pair
A currency pair is the quotation of the relative value of one currency unit against another currency unit. It's the fundamental building block of foreign exchange (forex) trading.
Currency Risk
Currency risk, also known as foreign exchange risk (FX risk), refers to the potential loss in value of an investment due to fluctuations in exchange rates. It impacts various aspects of finance, including international trade, investing in foreign assets, and borrowing in foreign currencies.
Currency Swap Line
A currency swap line is an agreement between two central banks that allows them to exchange their respective currencies with each other.
Day Trader
A day trader is a type of trader who executes a relatively large volume of short-term trades within a single trading day, with the goal of profiting from small price movements in the market. They typically close all their positions before the market closes for the day to avoid the risks associated with holding positions overnight.
Dealer
In the realm of foreign exchange (forex) trading, a dealer plays a crucial role in facilitating market liquidity and price discovery.
Deficit
Delisting refers to the removal of a security (such as a stock, bond, or exchange-traded fund) from a stock exchange. This means the security is no longer available for trading on that specific exchange.
Depreciation
Deprecciation, in the realm of finance, refers to the systematic allocation of the cost of a tangible asset (like a building, equipment, or vehicle) over its estimated useful life. This essentially means spreading out the cost of the asset as an expense over the period it benefits the business, rather than recognizing the entire cost as an expense in the year it is purchased.
Derivative
Derivative is a financial instrument whose value is derived from the value of an underlying asset, index, or rate. The underlying asset can be anything from stocks, bonds, commodities, currencies, interest rates, or market indices.
Devaluation
Devaluation, in the context of macroeconomics and modern monetary policy, refers to the deliberate downward adjustment of a country's currency value relative to a foreign reference currency or currency basket. This essentially means that it takes more of the devalued currency to buy the same amount of goods and services denominated in the foreign currency.
Dividend
A dividend is a distribution of a portion of a company's profits to its shareholders. It's essentially a reward for owning shares in the company.
Downtrend
A downtrend refers to a prolonged decrease in the price of a financial instrument over time. This can be observed in various markets, including stocks, bonds, commodities, and currencies.
Dragonfly Doji
The Dragonfly Doji is a candlestick chart pattern used in technical analysis to potentially signal a reversal in price trends. It is most commonly interpreted as a bullish reversal pattern, indicating that a downtrend might be coming to an end and an uptrend could potentially begin
Ecn (Electronic Communication Network)
An Electronic Communication Network (ECN) is a multilateral trading system that electronically connects buyers and sellers of securities in an open and transparent marketplace. It functions as a decentralized network where participants can directly interact and negotiate trades without the need for a designated market maker (middleman).
Economic Indicator
An economic indicator is a statistic or measure used to understand the current and future state of an economy.
Emerging Market (Em)
An emerging market (EM), also referred to as an emerging economy or an emerging country, is a market that exhibits characteristics of both developing and developed economies. It's essentially a nation in the transition from a lower-income to a higher-income economy, experiencing rapid economic growth and development.
End Of Day Order
An end-of-day order, also commonly known as a day order, is an instruction given to a broker to buy or sell a security at a specific price, but with the condition that the order is cancelled if not filled by the end of the trading day.
Entry Order
An entry order is an instruction given to a broker to buy or sell a security at a specific price or within a certain price range, but only under certain conditions. This means the order won't be executed immediately and will remain active until it's either filled or cancelled.
Evening Doji Star
The Evening Doji Star is a bearish reversal candlestick pattern used in technical analysis. It suggests a potential shift from an uptrend to a downtrend in the price of a security.
Exchange Rate
An exchange rate is the relative value of one currency compared to another. It essentially tells you how much of one currency you need to exchange to get one unit of another currency.
Exotic Currency
An exotic currency refers to a currency that is not widely traded in the foreign exchange market and is not considered a major currency. These currencies are typically associated with developing economies or smaller countries with lower trading volumes and less liquidity.
Expert Advisor
An Expert Advisor (EA), also known as a trading robot or algorithmic trading system, is a computer program used in forex trading and other financial markets to automate trading decisions based on predefined rules and algorithms.
Fakeout
A fakeout, also known as a false breakout, is a situation in the financial markets where a price movement initially appears to be breaking out of a support or resistance level, but then quickly reverses course and moves back within the level. This can be misleading for traders, as it can trick them into believing that a significant trend change is underway, only to see the price revert back to its previous direction.
Falling Wedge
A falling wedge is a bullish technical chart pattern used in technical analysis to potentially signal an upward reversal in a downtrend. It's characterized by converging trendlines drawn above the highs and below the lows of the price movement, creating a cone-shaped pattern that slopes downwards.
Fed Dot Plot
The Fed Dot Plot is a crucial tool used to understand the future path of interest rates in the United States. It's a chart published by the Federal Open Market Committee (FOMC) of the Federal Reserve, which summarizes the individual projections of each FOMC member for the federal funds rate over a specific timeframe.
Federal Funds Rate
The federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight on an uncollateralized basis. In simpler terms, it's the interest rate banks charge each other to borrow reserves from one another overnight.
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Fibonacci Extension
Fibonacci extensions are a technical analysis tool used in various financial markets, including forex, stocks, and commodities. They aim to identify potential price targets for an asset based on historical price movements and the Fibonacci sequence.
Fomc Meeting
The Federal Open Market Committee (FOMC) meeting is a crucial event in the financial world. It's where the Federal Reserve (Fed), the central bank of the United States, sets monetary policy, primarily by determining the federal funds rate. This rate, as explained previously, impacts borrowing costs throughout the economy and influences various aspects of financial markets.
Fomo
FOMO, which stands for "fear of missing out", is a common psychological phenomenon that can have significant implications in the financial world, particularly for investors. It refers to the anxiety and fear associated with missing out on a potential opportunity, often leading to impulsive decisions.
Fud
FUD stands for "Fear, Uncertainty, and Doubt". It's a manipulative tactic used in various contexts, including sales, marketing, public relations, politics, polling, and even cults, to discredit or undermine an idea, product, or individual.
Gann Fan
A Gann Fan is a technical analysis tool used in various financial markets, like stocks, forex, and commodities. It aims to identify potential support and resistance levels based on geometrical angles drawn from a specific high or low point in the price chart.
Gap
A gap in a stock chart refers to an area discontinuity where the price jumps significantly from one level to another, with no trading activity occurring in the intermediate price range. This can happen due to various reasons, and understanding these reasons can be helpful for interpreting the market and making informed investment decisions.
Gearing
Gearing is also known as leverage, is a financial metric that measures the extent to which a company uses debt financing to fund its operations, as compared to equity financing. In simpler terms, it indicates the proportion of debt a company has taken on relative to its shareholder equity.
Going Long
In the world of finance, "going long" refers to an investment strategy where an investor purchases an asset with the expectation that its price will increase in the future. This essentially means the investor believes the asset will become more valuable over time, allowing them to sell it later at a profit.
Gross Domestic Product (Gdp)
Gross Domestic Product (GDP) is a crucial metric used to measure the total monetary value of all final goods and services produced within a country's borders in a specific period, typically a year. It's considered the primary indicator of the overall health and size of an economy.
Gross National Product(Gnp)
Gross National Product (GNP) is a metric used to measure the total market value of all final goods and services produced by a country's residents in a given period, typically a year. Unlike GDP (Gross Domestic Product), which focuses on production within a country's borders, GNP considers the nationality of the producers, regardless of their location.
Guaranteed Order
In the realm of forex trading, a guaranteed stop-loss order (also known as a GSL order) is a specific type of stop-loss order offered by some brokers. It functions as a risk management tool that ensures your trade will be closed at the predefined price, regardless of sudden price movements or market volatility.
Guaranteed Stop
A guaranteed stop, also known as a guaranteed stop-loss order (GSLO), is a specific type of stop-loss order used in forex trading and potentially other financial markets. It acts as a risk management tool that ensures your trade will be closed at a predefined price, regardless of sudden price movements or market volatility.
Gunning
In the context of stock trading, gunning refers to a manipulative tactic where traders deliberately push the price of a stock down to a specific level with the intention of triggering stop-loss orders
Hammer
The hammer candlestick pattern is a bullish reversal pattern used in technical analysis of financial markets, like stocks, forex, and commodities. It signals a potential shift in momentum from a downtrend to an uptrend.
Harami
The Harami is a candlestick pattern used in technical analysis of financial markets, like stocks, forex, and commodities. It can be either bullish or bearish, depending on its location and color, and signifies a potential reversal in the current trend.
Hard Landing
In the context of economics, a hard landing refers to a marked economic slowdown or downturn that follows a period of rapid growth. It's often used to describe situations where attempts to control inflation or other economic imbalances lead to a sudden and significant contraction in economic activity.
Hawk
As you previously mentioned, a hawk is a term used in monetary policy to describe someone who advocates for tighter monetary policy to control inflation. They prioritize price stability even if it comes at the expense of economic growth or higher unemployment.
Head And Shoulders
The head and shoulders (H&S) is a reversal pattern used in technical analysis to identify potential shifts in an uptrend. It's one of the most popular and widely recognized candlestick patterns across various financial markets, including stocks, forex, and commodities.
Hedge
In the realm of finance, a hedge refers to an investment strategy used to protect an existing investment or portfolio from potential losses arising from adverse price movements. It essentially involves taking an offsetting position in an instrument that is negatively correlated with the original investment. This means the gains from the hedge will counterbalance the potential losses in the initial position, mitigating the overall risk.
Hedge Fund
A hedge fund is a pooled investment fund that utilizes a variety of complex investment strategies and risk management techniques to achieve above-average returns for its investors. Unlike traditional mutual funds, hedge funds have greater flexibility in their investment strategies and are typically open only to accredited investors, meaning those who meet certain criteria related to income, net worth, or investment experience.
High-quality Liquid Assets (Hqla)
High-Quality Liquid Assets (HQLA) are assets readily convertible into cash with minimal loss in value during stressful market conditions. They play a crucial role in the banking sector, as they enable banks to meet their short-term liquidity needs and maintain financial stability.
Hyperinflation
Hyperinflation refers to a severe economic condition characterized by an extremely rapid and prolonged increase in the general price level of goods and services. This means that the value of a country's currency rapidly diminishes, leading to significant economic disruption and hardship for its citizens.
Immediate Or Cancel Order (Ioc)
An Immediate or Cancel Order (IOC) is an order type used in the stock market and other financial exchanges that attempts to fill the entire order immediately or cancel it completely if not filled instantly. It prioritizes speed of execution over partial fills.
Implied Volatility
As you previously mentioned, implied volatility (IV) is a key concept in options trading. It represents the market's forecast of the expected future volatility of an underlying asset's price. It's not a prediction of the direction (up or down) of the price movement, but rather a measure of the potential magnitude of the fluctuations.
Inflation
A sustained increase in the general price level of goods and services in an economy over time. This means that the purchasing power of a currency declines, as you can buy fewer goods and services with the same amount of money over time.
Initial Jobless Claims
Initial jobless claims, often referred to as initial claims, is an economic indicator that measures the number of individuals who filed new claims for unemployment benefits in a given week. It is considered the earliest indicator of labor market activity in the United States and is closely watched by economists, investors, and policymakers.
Initial Margin
Initial margin refers to the percentage of the purchase price that an investor must pay upfront using their own cash or readily available securities when using a margin account to buy securities like stocks. It represents the minimum amount of equity the investor needs to have in the position and serves as a security deposit for the broker.
Interbank Rates
Interbank rates, also referred to as interbank exchange rates or market rates, are the interest rates charged on short-term loans between banks. These loans are used by banks to manage their liquidity needs and facilitate various financial transactions.
Intraday Position
As you previously explained, an intraday position refers to a position in a security (like a stock, bond, or currency pair) that is opened and closed within the same trading day. This means that the investor buys the security and then sells it before the market closes, thereby not holding it overnight.
Inverted Hammer
The Inverted Hammer is a bullish candlestick reversal pattern used in technical analysis of financial markets, like stocks and forex. It signals a potential reversal from a downtrend to an uptrend.
Inverted Yield Curve
An inverted yield curve is a phenomenon in the financial world where short-term interest rates are higher than long-term interest rates. This is considered unusual because typically, the opposite holds true: investors are generally willing to accept a higher return for tying up their money for a longer period.
Job Openings And Labor Turnover Survey (Jolts)
The Job Openings and Labor Turnover Survey (JOLTS), conducted by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor, is a monthly report that provides data on job openings, hires, and separations (including quits, layoffs, and discharges) in the nonfarm sector of the United States.
Jobber
Particularly referring to the London Stock Exchange (LSE) before 1986, a jobber was a specialist market maker who facilitated trading between brokers and investors. They acted as intermediaries, holding their own inventory of securities and buying and selling shares to provide liquidity and narrow bid-ask spreads in the market.
Jpn225
The JPX Nikkei 225 (Japanese: 日経平均株価, Nikkei heikin kabuka), or simply the Nikkei, is a stock market index for the Tokyo Stock Exchange (TSE). It is the leading and most widely followed stock market index in Japan.
Key Pair
A key pair is a fundamental component of public key cryptography, a widely used system for secure communication and data protection.
Kimchi Premium
The Kimchi Premium refers to the gap between the price of cryptocurrencies, especially Bitcoin (BTC), on South Korean exchanges and their prices on international exchanges. This means that cryptocurrencies are often priced higher in South Korea compared to other parts of the world.
Kof Economic Barometer
The KOF Economic Barometer, also known as the KOF Swiss Economic Barometer, is a leading composite indicator used to predict the direction of economic growth in Switzerland. It is published by the KOF Swiss Economic Institute.
Latency
In high-frequency trading, latency refers to the time it takes to execute a trade, which can be crucial for maximizing profits.
Leverage
In finance, leverage refers to the use of borrowed capital to amplify potential returns from an investment. It essentially allows you to control a larger asset by using a smaller amount of your own money. Leverage can be a powerful tool for investors, but it also comes with significant risks.
Limit Order
A limit order is an instruction given to a broker to buy or sell a security at a specific price or better. This means the investor sets a maximum price they are willing to pay for a buy order or a minimum price they are willing to accept for a sell order.
Liquidation
In the context of forex (foreign exchange) trading, liquidation refers to the forced closing of an open position by your broker, typically due to a margin call
Liquidity
Liquidity, in general terms, refers to the ease with which an asset can be bought or sold in a market at a fair price. It essentially reflects how quickly you can convert an asset into cash without significantly impacting its price.
Long
In the foreign exchange (forex) market, going long refers to a trading strategy where you buy a base currency with the expectation that it will appreciate in value relative to the quote currency.
Lot
In finance, the meaning of "lot" depends on the specific context, but it generally refers to a standardized unit in which an asset is traded.
Macd
The Moving Average Convergence Divergence (MACD) is a technical indicator used in various financial markets, including forex and stocks, to identify trends and potential buying and selling opportunities. It is a trend-following momentum oscillator that combines two exponential moving averages (EMAs) and a histogram.
Margin
Margin refers to the difference between the total value of an investment and the amount of money you borrow to finance that investment.
Margin Call
A margin call occurs in margin accounts when the value of your investment falls below a certain threshold, known as the maintenance margin requirement. This signifies that your account lacks sufficient equity to cover potential losses, putting the broker at risk.
Market Order
A market order is an instruction given to a broker to buy or sell a security at the best available price in the current market. This means the investor prioritizes immediate execution of the trade over obtaining a specific price.
Marubozu
The Marubozu candlestick is a powerful and visually striking technical indicator used in various financial markets, including forex and stocks, to identify strong trends and potential trading opportunities.
Momentum
In finance, momentum refers to the tendency of an asset's price to continue moving in the same direction it has been moving recently. It essentially suggests that assets that are trending up are likely to continue going up, and assets that are trending down are likely to continue going down. This concept is used by investors and traders to identify potential buying and selling opportunities based on the strength and direction of price movements.
Monetary Policy
Monetary policy refers to the actions taken by a central bank (like the Federal Reserve in the US or the European Central Bank in the Eurozone) to influence the money supply and credit conditions in an economy.
Monetary Tightening
Based on the image you sent, monetary tightening refers to a contractionary monetary policy implemented by a central bank to slow down economic growth and combat inflation.
Money Supply
The money supply refers to the total amount of money circulating in an economy at a particular point in time
Moving Average (Ma)
A moving average (MA) is a common technical indicator used in various financial markets, including forex and stocks, to smooth out price data and identify trends. It essentially calculates the average price of an asset over a specific period.
Net International Investment Position (Niip)
The Net International Investment Position (NIIP) is a key metric that reflects a country's financial position relative to the rest of the world at a specific point in time.
Noise Trading
Noise trading refers to trading activity driven by factors other than fundamental analysis or sound technical analysis. Noise traders often lack sufficient information or experience and base their decisions on emotions, rumors, or short-term trends. Their actions can introduce noise (randomness) into the market, potentially leading to increased volatility and inefficiencies.
Non-convertible Currency
A non-convertible currency is the legal tender of a country that cannot be freely exchanged for other currencies on the international foreign exchange (forex) market. This inability to exchange the currency is typically due to government restrictions.
Non-deliverable Forward (Ndf)
In finance, an NDF is a cash-settled, forward contract used to hedge foreign exchange (forex) exposure in currencies that are not freely convertible. This means the underlying asset (currency) is not physically delivered upon contract expiration.
Non-Farm Payrolls (NFP)
Non-farm payrolls (NFP) is a key economic indicator in the United States that measures the change in the number of employed people within the private sector and government agencies excluding farm workers, private household employees, and non-profit employees over the previous month. It is released monthly by the Bureau of Labor Statistics (BLS) on the first Friday of each month.
Nonfarm Productivity
Nonfarm productivity is a key economic indicator that measures the change in the efficiency of production within the non-farm sector of an economy.
Noob Trap
In the world of trading, a noob trap refers to a common pitfall or deceptive situation that can entrap novice traders (noobs) who lack experience and knowledge. These traps often exploit common mistakes or biases that beginners are more susceptible to.
OPEC+
The Organization of the Petroleum Exporting Countries (OPEC) + is a group of oil-producing countries that coordinate their production levels to influence the global oil market.
Open Market Operations
Open market operations (OMO) are a crucial tool employed by central banks to influence the money supply and manage interest rates in the economy.
Open Order
An open order is an unfilled order that a trader or investor has placed with a broker to buy or sell a security at a specific price or within a specific price range. It remains active in the market until it is either filled (executed) or canceled.
Open Position
An open position refers to any established or entered trade that has not yet been closed with an opposing trade. This means you currently hold an asset (bought) or owe an asset (sold short) and haven't finished the transaction by selling or buying it back, respectively.
Options
In the world of finance, options are contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price by a specific date. These contracts are traded on financial exchanges and offer investors various ways to speculate on price movements, hedge existing holdings, or generate income.
Order
In the context of trading and investment, an order is an instruction you give to your broker to buy or sell a specific security (e.g., stock, bond, option) in the financial market. It outlines your desired action and parameters for the trade.
Order Block
An order block, in the context of price action trading, refers to a specific price area on a financial chart where there is evidence of significant buying or selling activity taking place. These areas are often identified by clusters of candlesticks with tight price ranges and high volume, indicating a potential concentration of orders at those price levels.
Order Book
An order book is an electronic list maintained by an exchange that displays all current buy and sell orders for a specific security, like a stock, bond, or currency. It essentially acts as a marketplace where buyers and sellers can meet and potentially execute trades.
Oscillator
An oscillator is a technical analysis indicator used by traders to identify overbought or oversold conditions in the market. It typically fluctuates between predefined upper and lower bands, and its movements attempt to gauge the momentum and potential future direction of a security's price.
Over-the-Counter (OTC)
An over-the-counter (OTC) market is a decentralized marketplace where securities are traded directly between two parties (buyer and seller) without the involvement of a centralized exchange. This contrasts with exchange-traded markets, where trades are facilitated and regulated by a central exchange like the New York Stock Exchange (NYSE).
Pain Trade
A pain trade is an informal term used in the financial markets to describe a situation where a majority of market participants have positioned themselves in a particular direction, only to see the market move against them, inflicting substantial losses on them, at least in the short term.
Parabolic SAR (Stop and Reverse)
The Parabolic SAR (Stop and Reverse) is a technical indicator used in financial markets to identify potential trend reversals and set trailing stop-loss orders. It utilizes a series of dots plotted above or below the price on a chart, dynamically moving based on the price action.
Parity
In the context of foreign exchange (forex), parity refers to the point at which the exchange rate between two currencies is equal. This means that one unit of one currency can be exchanged for exactly one unit of the other currency. For example, if the exchange rate between the US dollar (USD) and the Euro (EUR) is 1 USD = 1 EUR, we would say that the USD/EUR exchange rate is at parity.
Passive Order
A passive order, in the world of trading and investing, refers to an unfilled order you place with a broker to buy or sell a security at a specific price or within a specific price range. It remains active in the market until it is either filled (executed) or canceled. Unlike a market order that gets executed immediately at the best available price, a passive order waits for the market price to reach the specified price point before getting triggered.
PCE Price Index
The Personal Consumption Expenditures Price Index (PCE Price Index), also referred to as the PCE deflator, is a measure of inflation in the United States. It tracks the changes in the prices that consumers pay for goods and services
Pip
A pip, which stands for percentage in point, is the smallest unit of price change for most currency pairs in the foreign exchange (forex) market. It represents a movement of 0.01% or one one-hundredth of one percent (1/100%).
Pivot Points
Pivot points are a technical analysis indicator used by traders in various markets, including forex, commodities, and indices. They aim to identify potential support and resistance levels based on the previous day's trading activity.
Price Action
Price action is a technical analysis approach that focuses on analyzing the price movements of a security to identify potential trading opportunities. It emphasizes studying the historical price chart and the interactions between buyers and sellers reflected in the price movements, rather than relying on other technical indicators.
Profit/Loss
Profit and loss (P/L) is a fundamental concept in finance that refers to the financial outcome of an investment or trade. It represents the difference between the buying and selling price of an asset.
Purchasing Managers Index (PMI)
The Purchasing Managers Index (PMI) is a composite indicator used to gauge the health of the manufacturing sector within an economy. It is based on monthly surveys conducted among purchasing managers from various manufacturing companies.
Quantitative Analysis
Quantitative analysis is a process of collecting and evaluating measurable and verifiable data to understand the performance, make better decisions, and predict trends. It utilizes mathematical and statistical methods to analyze data and draw conclusions.
Quantitative Easing (QE)
Quantitative Easing (QE) is a monetary policy strategy employed by central banks to stimulate economic activity during periods of slow growth or economic downturn. It involves the central bank purchasing a significant amount of financial assets, typically government bonds, from the open market.
Quantitative Tightening (QT)
Quantitative Tightening (QT) is the contractionary monetary policy opposite of Quantitative Easing (QE). It aims to reduce the money supply and combat inflation by selling or not re-investing maturing government bonds and raising interest rates.
Quantity Theory of Credit
The Quantity Theory of Credit is an economic theory that proposes a direct relationship between the quantity of credit created by banks and the general level of prices in an economy. In simpler terms, it suggests that increasing the amount of credit available in the economy leads to inflation, and vice versa.
Quote Currency
Quote currency, also known as counter currency, refers to the second currency listed in a foreign exchange (forex) pair. It is the currency being valued against the base currency and essentially represents the price of the base currency expressed in terms of the quote currency.
Rally
In the world of trading, a rally refers to a period of sustained upward movement in the price of an asset, such as a stock, bond, or index. It's characterized by increased buying activity driving the price higher over a relatively short period compared to the overall trend.
Range Trading
Range trading is an active trading strategy that seeks to capitalize on price movements within a defined price range for a particular asset. It involves identifying support and resistance levels and placing buy orders near support and sell orders near resistance, aiming to profit from the price fluctuations within the range.
Rate of Change (ROC)
The Rate of Change (ROC) is a momentum oscillator used in technical analysis to gauge the momentum and direction of price movements of an asset over a specific timeframe. It measures the percentage change between the current price and the price a certain number of periods ago.
Recession
A recession is a significant decline in economic activity spread across the economy, typically lasting for more than a few months.
Relative Strength Index (RSI)
The Relative Strength Index (RSI) is a momentum indicator used in technical analysis to gauge the speed and magnitude of recent price movements of an asset. It aims to identify overbought and oversold conditions that might signal potential reversal points in the price trend.
Repo (RP)
A repo, short for repurchase agreement (RP), is a short-term borrowing arrangement commonly used in the financial markets.
Repo Market
The repo market, also known as the repurchase agreement (RP) market, is a crucial segment of the financial system where repurchase agreements (repos) are facilitated and traded. These agreements, as you already know, are short-term secured borrowings involving the temporary sale and repurchase of securities.
Reserve Currency
Reserve currencies are foreign currencies held in significant quantities by central banks and other major financial institutions around the world.
Resistance
Resistance in trading refers to a price level where the upward momentum of an asset's price tends to stall or reverse. It indicates a concentration of sell orders, suggesting that many market participants are willing to sell at or near that price level.
Retail Sales
Retail sales, as you already know, are an economic metric that tracks the total value of goods and services sold to consumers by retail businesses during a specific period. It serves as a key indicator of consumer spending, which is a major driver of economic growth.
Retail Trader
A retail trader is an individual who trades financial instruments such as stocks, bonds, forex, or options using their own personal capital.
Return on Investment (ROI)
Return on Investment (ROI) is a crucial metric used to measure the profitability or efficiency of an investment or compare the efficiency of multiple investments. It essentially expresses the percentage return (gain or loss) on an investment relative to the cost of that investment.
Reverse Repo (RRP)
A reverse repurchase agreement (RRP), often shortened to reverse repo (RRP), is a short-term secured borrowing transaction in the financial system.
Rising Wedge
A rising wedge is a bearish reversal pattern commonly used in technical analysis to predict potential price declines
Risk Appetite
Risk appetite, in its financial context, refers to the level of risk an individual or organization is willing to accept in pursuit of their goals. It's a flexible and dynamic concept that can be influenced by various factors.
Risk Management
Risk management is the continuous process of identifying, analyzing, and responding to potential risks that could threaten your financial goals, business operations, or personal well-being. It's a crucial practice for individuals, organizations, and even entire economies.
Risk Off
A risk-off environment describes a situation in financial markets where investors are averse to taking risks.
Risk On
A risk-on environment signifies a period where investors are more willing to embrace risk in pursuit of potentially higher returns.
Risk-Reward Ratio
The risk-reward ratio, often abbreviated as R/R ratio, is a fundamental concept in finance used to assess the potential return on an investment compared to the level of risk involved. It helps investors evaluate whether the potential gain justifies the risk of undertaking a particular investment.
Rollover
In the context of foreign exchange (forex) trading, a rollover refers to the automatic extension of an open position beyond the settlement date, which is typically two business days after the trade is initiated. This allows positions to remain open overnight or over weekends without incurring an immediate settlement.
Rollover Fee
In the context of foreign exchange (forex) trading, a rollover fee, also known as a swap, is a charge levied by a forex broker for holding a position open overnight. It essentially represents the cost of carrying over a position beyond the settlement date, which is typically two business days after the trade is initiated.
Safe Haven Currencies
In the ever-changing world of finance, safe haven currencies play a crucial role for investors seeking stability and protection during periods of economic turmoil, geopolitical uncertainty, or market volatility. These currencies are perceived as less risky compared to others and tend to retain or even appreciate in value when other asset classes experience declines.
Scalping
Scalping is a trading strategy employed in financial markets, particularly in stocks, forex (foreign exchange), and cryptocurrencies, where traders aim to make small profits by rapidly buying and selling securities or assets. The term "scalping" comes from the analogy of how a scalper swiftly removes small portions of the scalp, similarly, scalpers aim to capture small price movements in the market. This strategy involves executing a large number of trades within a short period, often holding positions for very brief durations, sometimes just seconds or minutes, to capitalize on small price fluctuations. Scalping requires quick decision-making, discipline, and the ability to react swiftly to market movements.
Sell-Off
A sell-off refers to a situation in the financial markets where a significant number of investors are selling their securities, such as stocks, bonds, or commodities. This selling pressure can drive prices down rapidly.
Shooting Star
A shooting star is a candlestick pattern used in technical analysis for trading stocks, forex, and other assets. It's a single candlestick that signals a potential bearish reversal, meaning the price might be reaching a top and starting to trend down.
Soft Landing
A soft landing in economics refers to a scenario where an economy slows down from a period of strong growth but avoids falling into a recession. It's like an airplane making a smooth and controlled landing instead of a rough and bumpy one.
Spot
A spot, also known as a spot contract, is an agreement to buy or sell an asset at a specific price on a specific future date. This type of contract is used for a variety of commodities, such as oil, gold, and currencies.
Spread
In finance, a spread refers to the difference between two prices, rates, or yields. It's a general term used across various financial instruments and markets.
Stagflation
Stagflation is an economic phenomenon characterized by a combination of stagnant economic growth, high unemployment, and high inflation. This term is a portmanteau of "stagnation" and "inflation." In a typical economic scenario, high inflation may be associated with strong economic growth, while periods of economic stagnation or recession might lead to lower inflation or even deflation. However, stagflation represents a challenging situation where both high inflation and high unemployment coexist, leading to stagnant economic growth or even contraction.
Stop Limit Order
A stop-limit order is a type of order used in the stock market that combines elements of both stop orders and limit orders. It allows you to set parameters for both the entry price (when the order is triggered) and the execution price (the price at which the order is actually filled).
Stop Loss (SL)
A stop-loss (SL) order is an instruction placed with a broker to automatically buy or sell a security once the price reaches a certain level, known as the stop price. It's a risk management tool designed to limit your potential losses in a trade.
Stop Out
A stop-out occurs in margin trading when your account equity falls below a certain threshold set by your broker, known as the margin level or stop-out level. It's an automatic mechanism brokers employ to manage their risk and yours.
Support
In the financial markets, support refers to a price level at which a stock, currency, commodity, or other asset is expected to find buying interest, preventing the price from falling further. It's essentially a zone where demand is believed to be strong enough to outweigh selling pressure.
Swap
A swap in finance is a derivative contract between two parties that involves the exchange of cash flows of two financial instruments. It's essentially an agreement to swap future payments based on predetermined terms.
Take Profit (TP)
In the world of trading, a take-profit (TP) order is an instruction placed with a broker to automatically close out a winning position once the price reaches a certain level. It's essentially a way to lock in profits and prevent potentially missing out on further gains if the price turns against you.
Technical Analysis
Technical analysis is a method used by investors and traders to evaluate investments and identify trading opportunities by analyzing past price movements, trading volume, and other statistical indicators. It's based on the assumption that historical price patterns and market activity can provide clues about future price movements.
Terminal Rate
The terminal rate, also known as the neutral federal funds rate or the terminal fed funds rate, refers to the interest rate that the Federal Reserve (Fed), the central bank of the United States, believes is consistent with a balanced economy in the long run.
Trailing Stop
A trailing stop, also sometimes called a trailing stop-loss order, is an advanced order type used in trading to automatically adjust the stop-loss price of a position as the market price moves in your favor. It's a way to lock in profits while allowing your winning trade to potentially continue running.
Triple Bottom
A triple bottom is a bullish reversal pattern used in technical analysis of financial markets. It's a three-touch point pattern on a price chart that suggests a potential shift in momentum from bearish (downward) to bullish (upward).
Triple Top
In the world of technical analysis, a triple top is a bearish reversal pattern that appears on price charts. It signifies a potential shift in momentum from bullish (upward) to bearish (downward).
Underlying Market
An underlying market, also sometimes called an underlying asset, refers to the financial instrument or asset that a derivative contract is based on. In simpler terms, it's the real security or financial product that forms the foundation of a derivative.
Unemployment Rate
The unemployment rate is the percentage of the labor force that is unemployed and actively seeking work. It's a key indicator of the health of an economy and is used by policymakers, businesses, and individuals to assess economic conditions.
Unrealized Gain/Loss
An unrealized gain or loss refers to the difference between the purchase price of an investment and its current market value, when you haven't sold the investment yet. It's essentially a "paper" profit or loss because it hasn't been locked in through a sale.
Uptrend
An uptrend, in the world of financial markets, describes the overall price movement of a security or index that is in a sustained upward direction. It's characterized by a series of higher highs and higher lows on a price chart.
Variation Margin
Variation margin, also known as mark-to-market margin, refers to the additional funds an investor or trader may need to deposit into their account to maintain their position size in futures contracts or other derivative instruments. It essentially reflects the daily change in the value of these contracts due to market price movements.
VIX
The VIX, also known by its full name as the CBOE Volatility Index, is a popular measure of expected volatility in the U.S. stock market. It's not a directly tradable security itself,
Volatility
In the world of finance, volatility refers to the degree of variation or fluctuation in the price of a security or market index over time. The higher the volatility, the wider the range of price movements experienced by the investment.
Volume
In the financial markets, volume refers to the total number of shares, contracts, or other units traded for a particular security or market index within a specific timeframe. It's a crucial metric that provides valuable insights into market activity, investor sentiment, and liquidity.
VWAP
VWAP, which stands for Volume-Weighted Average Price, is a technical analysis indicator used primarily in intraday charts to measure the average price of a security at which it has traded throughout a trading session. It takes into account both the price and the volume of each transaction.
Wash Trading
Wash trading is a deceptive practice in the financial markets that involves an entity buying and selling the same security or very similar securities within a short period to create a misleading impression of market activity. It's essentially a way to generate artificial volume without any real change in the underlying ownership of the security.
Weak Shorts
The term "weak shorts" in the financial world refers to a situation where short sellers are losing confidence in their bearish positions. This can happen for a variety of reasons, and it can have a significant impact on the price of a security.
Wedge
A wedge is a popular chart pattern used in technical analysis to identify potential price reversals or continuations. It's formed by the convergence of two trendlines, typically drawn along the highs and lows (or price swings) of the security.
Weighted Moving Average (WMA)
The Weighted Moving Average (WMA) is a technical analysis indicator used to smooth out price fluctuations and identify trends in the financial markets. Unlike a simple moving average (SMA) that gives equal weight to all data points in the calculation, a WMA assigns greater weight to more recent prices, making it more responsive to recent price movements.
Whale
Particularly in financial markets like stocks, forex, and cryptocurrencies, the term "whale" refers to an individual or entity that executes large trades that significantly impact market prices. These traders typically have substantial financial resources and trading capital, allowing them to influence market movements through their buying or selling activities.
Win Rate
In the realm of trading, particularly day trading, the win rate refers to the percentage of trades that result in a profit. It's a common metric used by traders to evaluate their trading strategy and identify areas for improvement.
XAG
XAG refers to the ISO 4217 currency code for one troy ounce of silver. ISO 4217 is a globally recognized standard for currency codes.
XAU
XAU refers to the ISO 4217 currency code for one troy ounce of gold.
Xenocurrency
As discussed earlier, xenocurrency is another term for foreign currency. It literally translates to "foreign currency" from the Greek words "xeno" (meaning "foreign" or "strange") and "currency" (referring to money).
Yield
Yield, in the financial world, refers to the return an investor earns on an investment over a specific period.
Yield Curve
The yield curve, as you mentioned earlier, is a graphical representation that shows the relationship between market yields (interest rates) and the time to maturity of debt instruments, typically government bonds. It's a crucial indicator used to understand investor sentiment about the economy and future interest rates.
Yield Curve Control (YCC)
Yield Curve Control (YCC) is a monetary policy tool used by central banks to artificially control interest rates along the yield curve. It primarily targets longer-term interest rates to achieve specific economic goals.
Zero Interest Rate Policy (ZIRP)
A Zero Interest Rate Policy (ZIRP) is a monetary policy tool used by central banks to stimulate economic growth. In a ZIRP, the central bank sets its target short-term interest rate at or very close to 0%. This effectively makes borrowing very cheap, aiming to encourage businesses and consumers to borrow more money, invest, and spend.
ZEW Financial Market Survey
The ZEW Financial Market Survey, as you've already learned, is a monthly survey conducted by the ZEW – Leibniz Centre for European Economic Research. It gauges the sentiment of institutional investors
ZEW Indicator of Economic Sentiment
The ZEW Indicator of Economic Sentiment is a key metric derived from the ZEW Financial Market Survey. This monthly survey conducted by the ZEW research institute gauges the sentiment of institutional investors regarding the economic outlook for Germany and other major economies.
What are Fundamental Forex Terms?
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Fundamental Forex TermsDecipher the essential vocabulary related to economic indicators, central bank policies, and other factors driving currency values.
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Technical Forex Terms?Unravel the code of technical analysis, deciphering chart patterns, indicators, and trading strategies used to forecast price movements.
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Forex Market MechanicsGain a comprehensive understanding of the inner workings of the forex market, including order types, execution methods, and various market participants.
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Forex Glossary FAQs
A Forex Glossary serves as a comprehensive reference guide for traders, providing definitions and explanations of terms and concepts commonly used in the foreign exchange (Forex) market.
- Terminology Definitions: Forex Glossaries include definitions of essential terms such as pips, lots, leverage, margin, spreads, and currency pairs, helping traders understand the language of the Forex market.
- Concept Explanation: In addition to defining terms, Forex Glossaries often offer explanations of fundamental concepts such as technical analysis, fundamental analysis, risk management strategies, and order types commonly used in Forex trading.
- Educational Resource: Forex Glossaries serve as an educational resource for traders of all levels, from beginners to experienced professionals, aiding in the development of a solid understanding of Forex trading principles and practices.
Traders utilize Forex Glossaries as a valuable tool to enhance their understanding of Forex terminology and improve their trading skills.
- Terminology Clarity: By referring to a Forex Glossary, traders can clarify the meanings of unfamiliar terms encountered in trading platforms, analysis tools, or educational resources.
- Strategy Development: Understanding Forex terminology is essential for developing effective trading strategies. Traders use the Glossary to grasp the nuances of concepts like support and resistance levels, trendlines, and candlestick patterns.
- Communication and Collaboration: A common understanding of Forex terminology facilitates communication and collaboration among traders, brokers, analysts, and other participants in the Forex market, enhancing information sharing and collaboration.
Forex Glossaries encompass a wide range of terms and concepts relevant to the Forex market, providing a comprehensive resource for traders seeking to expand their knowledge base.
- Currency Pair Terminology: Forex Glossaries cover terms related to currency pairs, including base currency, quote currency, major pairs, minor pairs, and exotic pairs.
- Trading Strategies and Analysis: Terms associated with trading strategies (such as scalping, swing trading, and carry trading) and analysis methods (like technical analysis indicators and fundamental analysis metrics) are included to aid traders in strategy development and decision-making.
- Brokerage and Platform Terminology: Glossaries also explain terms related to brokerage services and trading platforms, including order types, account types, trading hours, and commission structures, helping traders navigate the operational aspects of Forex trading.
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Please review our Legal Documents to understand the risks involved before you invest. See your rights and responsibilities as a retail client.
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