Forex Glossary

Here are some of the most common terms used in FOREX trading.

Ask Price ¨C Sometimes called the Offer Price, this is the market price for buyers to buy foreign acceptances. Ask Prices are shown on the right side of a quote ¨C e.g. EUR/USD 1.1965 / 68 ¨C means that one euro can be bought for 1.1968 UD dollars.

Bar Chart ¨C A type of plan used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information ¨C the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the barrier shows the beginning price and the horizontal line on the right of barrier shows the closing price.

Base Currency ¨C is the first currency in a currency pair. A quote displays how much the support currency is worth in the quote (second) exposure. For example, in the quote - USD/JPY 112.13 ¨C US dollars are the base currency, with 1 US dollar being worth 112.13 Japanese yen.

Bid Price ¨C is the price a broker can sell notes. The Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1965 / 68 ¨C means that one euro can be sold for 1.1965 UD dollars.

Bid/Ask Spread ¨C is the difference between the bid price and the ask rate in any currency quotation. The distribution represents the broker’s fee, and varies from broker to broker.

Broker ¨C the intermediary between buyer and seller. Most FOREX brokers are associated with large financial institutions and earn money by setting an expansion between proposal and ask prices.

Candlestick Chart - A type of plan used in Technical Analysis. Each time division on the chart is displayed as a candlestick ¨C a red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the plan division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening cost, and green candlesticks indicate the amount is rising.

Cross Currency ¨C A currency pair that does not include US dollars ¨C e.g. EUR/GBP.

Currency Pair ¨C Two currencies engaged in a FOREX transaction ¨C e.g. EUR/USD.

Economic Indicator ¨C A statistical report released by regulations or academic institutions indicating economic conditions within a state.

First In First Out (FIFO) ¨C refers to the arrangement open orders are liquidated. The first orders to be liquidated are the first that were opened.

Foreign Exchange (FOREX, FX) ¨C Simultaneously buying one currency and selling another.

Fundamental Analysis ¨C Analysis of political and economic conditions that can affect currency prices.

Leverage or Margin ¨C The ratio of the value of a transaction to the required deposit. A common margin for FOREX trading is 100:1 ¨C you can trade currency worth 100 times the volume of your deposit.

Limit Order ¨C A request to buy or sell when the rate reaches a specified level.

Lot ¨C The size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.

Major Currency ¨C The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.

Minor Currency ¨C The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.

One Cancels the Other (OCO) ¨C Two orders placed simultaneously with instructions to cancel the second order on execution of the first.

Open Position ¨C An active trade that has not been closed.

Pips or Points ¨C The smallest unit a money can be traded in.

Quote Currency ¨C The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.

Rollover ¨C Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using exchange points based on interest rate differentials.

Technical Analysis ¨C Analysis of historical market data to predict future movements in the market.

Tick ¨C The minimum change in price.

Transaction Cost ¨C The cost of a FOREX transaction ¨C typically the spread between bid and ask prices.

Volatility ¨C A statistical measure indicating the tendency of sharp price movements within a period of time.