Forex Trading Glossary
Master forex terminology with our comprehensive glossary. From basic terms to advanced concepts, everything you need to understand trading language.
Ask Price
The price at which a broker is willing to sell a currency pair. Also known as the offer price. This is the price you pay when buying a currency pair.
Bid Price
The price at which a broker is willing to buy a currency pair from you. This is the price you receive when selling a currency pair.
Base Currency
The first currency in a currency pair. For example, in EUR/USD, EUR is the base currency. It represents the currency you are buying or selling.
Bear Market
A market condition characterized by falling prices. Traders who believe prices will fall are called bears. Opposite of a bull market.
Bull Market
A market condition characterized by rising prices. Traders who believe prices will rise are called bulls. Opposite of a bear market.
Broker
A financial intermediary that executes buy and sell orders on behalf of traders. Forex brokers provide trading platforms and access to the currency markets.
CFD (Contract for Difference)
A contract between trader and broker to exchange the difference in value of an asset from when the position is opened to when it is closed, without owning the underlying asset.
Currency Pair
Two currencies quoted together, showing how much of the quote currency is needed to buy one unit of the base currency. Example: EUR/USD = 1.1000 means 1 Euro equals 1.10 US Dollars.
Demo Account
A practice trading account with virtual money that simulates real market conditions. Ideal for beginners to learn trading without financial risk.
ECN (Electronic Communication Network)
A trading system that automatically matches buy and sell orders at the best available prices. ECN brokers offer direct market access with typically tighter spreads.
Equity
The current value of your trading account. Calculated as balance plus or minus any unrealized profit or loss from open positions.
Forex (Foreign Exchange)
The global decentralized market for trading currencies. With over $7.5 trillion traded daily, it's the largest and most liquid financial market in the world.
Leverage
The ability to control a large position with a small amount of capital. For example, 1:100 leverage means you can control $100,000 with just $1,000 margin.
Liquidity
The ease with which an asset can be bought or sold without affecting its price. High liquidity means you can enter and exit trades quickly at stable prices.
Lot
A standardized trading size in forex. A standard lot is 100,000 units of base currency, a mini lot is 10,000 units, and a micro lot is 1,000 units.
Margin
The amount of money required in your account to open and maintain a leveraged position. It acts as a deposit or collateral for your trades.
MT4 (MetaTrader 4)
The world's most popular forex trading platform, known for its user-friendly interface, advanced charting, and support for automated trading via Expert Advisors (EAs).
MT5 (MetaTrader 5)
The successor to MT4, offering additional features like more timeframes, an economic calendar, and access to stock and futures markets alongside forex.
Pip (Percentage in Point)
The smallest price movement in a currency pair, typically the fourth decimal place (0.0001). For JPY pairs, it's the second decimal place (0.01).
Quote Currency
The second currency in a currency pair. For example, in EUR/USD, USD is the quote currency. It shows how much of this currency is needed to buy one unit of the base currency.
Resistance
A price level where selling pressure is strong enough to prevent the price from rising further. Traders often look for breakouts above resistance levels.
Scalping
A trading strategy that involves making numerous small profits on minor price changes throughout the day. Scalpers typically hold positions for seconds to minutes.
Spread
The difference between the bid and ask price of a currency pair. This is how most brokers make money. Lower spreads are better for traders.
Stop Loss
An order placed to automatically close a losing position at a predetermined price level. Essential for risk management to limit potential losses.
Support
A price level where buying pressure is strong enough to prevent the price from falling further. Traders often look for bounces at support levels.
Take Profit
An order placed to automatically close a winning position at a predetermined price level. Helps lock in profits when your target is reached.
Technical Analysis
The study of historical price charts and patterns to predict future price movements. Uses indicators, chart patterns, and statistical analysis to make trading decisions.
Volatility
The rate at which the price of a currency pair increases or decreases. High volatility means larger price swings, offering both higher profit potential and risk.
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