Forex Glossary of Terms (aka Forex Lingo)

Ask Price- The price at which the currency is offered.

At or Better - An order to deal at a specific price or better.

Authorized Dealer - A financial institution or authorized bank to deal in foreign currency exchange.

Base currency - The currency in which the operating results of the bank or institution are reported. This is the first currency in the currency pair.

Bear market - A prolonged period of generally falling prices.

Bid Price - The price at which a buyer has offered to purchase the currency.

Broker (aka Forex Broker) - An agent, who executes orders to buy and sell currencies either for commission, a spread basis, or both.

Bull market - A prolonged period of generally rising prices.

Bear – A trader who believes that prices are going to fall.

Bull – A trader who believes that prices are going to rise.

Buy-Stop – An order to buy a currency which is entered at a price above the current offering price. It is triggered when the market price touches or goes through the buy stop price. For example if the EUR/USD is currently trading at 1.3200 and you believe if the market breaches an expected resistance-level of 1.3225 that the EUR/USD will continue to rise in price until it reaches a higher resistance level around, say 1.3260, then you could place a "buy-stop" order at 1.3230.  The buy-stop order will trigger an automatic order to buy at the market once the EUR/USD is 1.3230 offered, potentially capturing profits from the expected upward price movement.

Buying Rate - Rate at which the market and a market maker in particular is willing to buy the currency. This is sometimes called bid rate.

Cable - A term used in the foreign exchange market for the US Dollar/British Pound (USD/GBY) rate.

Carry - The interest cost of financing securities or other financial instruments held.

Central Bank - A bank that’s responsible for controlling a countries monetary policy. It is normally the issuing bank and controls bank licensing, and any foreign exchange control.

Closed position - A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.

Commission - The fee that brokers may charge clients for dealing on their behalf.

Day trader - Traders who take positions which are then liquidated prior to the close of the same trading day.

Dealer - An individual or firm acting as a principal, rather than as an agent, in the purchase and/or sale of currencies. Dealers trade for their own account and risk.

Easing - Modest decline in price.

Fast market - Rapid price movement in the market

Fed - The United States Federal Reserve.

FOMC - Federal Open Market Committee, the committee that sets money supply targets in the US which tend to be implemented through Fed Fund interest rates etc.

Foreign Exchange - The purchase or sale of a currency against sale or purchase of another.

Forex – (aka FX) Foreign Exchange.

Fundamentals - The macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.

G7 - The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.

G10 - G7 including Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.

Gap - A mismatch between maturities and cash flows in a bank or individual dealers position book. Gap exposure is effectively interest rate exposure.

Going long - The purchase of a stock, commodity, or currency for investment or speculation.

Going short - The selling of a currency or instrument not owned by the seller.

Good until canceled - An instruction to a broker that unlike normal practice the order does not expire at the end of the trading day.

Gross Domestic Product /GDP - Total value of a country's output, income or expenditure produced within the country's physical borders.

Gross National Product / GNP - Gross domestic product plus " factor income from abroad" - income earned from investment or work abroad.

Head and Shoulders - A pattern in price trends which chartist consider indicates a price trend reversal.

Inflation - Continued rise in the general price level in conjunction with a related drop in purchasing power.

Kiwi - Slang for the New Zealand dollar.

Limit order - An order to buy or sell a specified amount of a currency at a specified price or better.

Liquidity - The ability of a market to accept large transactions.

Margin call - A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse future price movements.

Market order - An order to buy or sell a currency immediately at the best possible price.

Moving Average - A way of smoothing a set of data, widely used in price time series.

Offer - The price at which a seller is willing to sell.

Pip - Minimum fluctuation or smallest increment of price movement.

Profit Taking - The unwinding of a position to realize profits.

Quote - An indicative price. The price quoted for information purposes but not to deal.

Rally - A recovery in price after a period of decline.

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

Rate - The price of one currency in terms of another.

Sell-Stop - A sell order which is not to be executed until the market price reaches the customer's defined price, known as the stop price. When this occurs, it becomes a market order. For example, if the EUR/USD is currently trading at 1.3200 and you believe if the market breaches an expected support-level of 1.3185 that the EUR/USD will continue to fall in price until it reaches a lower support level around, say 1.3150, then you could place a "sell-stop" order at 1.3180.  The sell-stop order will trigger an automatic order to sell at the market once the EUR/USD is 1.3180 bid, potentially capturing profits from the expected downward price movement

Soft Market - More potential sellers than buyers, which creates an environment where rapid price falls are likely.

Spot - The most common foreign exchange transaction.

Spread - The difference between the bid and ask price of a currency.

Stable market - An active market which can absorb large sale or purchases of currency without major moves.

Sterling - British pound, otherwise known as cable. (GBP symbol in Forex)

Support levels - When an exchange rate depreciates or appreciates to a level where Technical Analysis techniques suggest that the currency will rebound, or not go below

Swissy - Market slang for Swiss Franc (CHF symbol in Forex)

Technical Correction - An adjustment to price not based on market sentiment but technical factors such as volume and charting.

Thin market - A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.

Tick - A minimum change in price, up or down.

Up tick - A transaction executed at a price greater than the previous transaction.

Volatility - A measure of the amount by which a currency price is expected to fluctuate over a given period.

Whipsaw – When price whips up and down very quickly. Where a trader takes a position, then has to move against it triggering stop loss limits and liquidation of positions, then having to move in the original direction. Normally occurs in volatile markets.