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Forex Glossary

(Italian aggio) is a fee charged for the exchange of one currency into another.

Ask price
It is the lowest price a seller is willing to sell a financial instrument. Also called offer price, offer, asking price, or ask.

Accounting Currency
Currency in which account deposit and withdrawal operations are denominated.

At Best
It is a type of order where a dealer is instructed to buy or sell at the best rate that is currently available in the market.

At or Better
It’s an order to deal at a specific price or better.

Base currency
It’s the first currency in a currency pair. The second currency is named the quote currency, counter currency or terms currency. For example, in the currency pair EUR/USD the base currency is EUR, and USD is the counter currency.

Bid Price
It’s the highest price that a buyer (i.e., bidder) is willing to buy a financial instrument. It is usually referred to simply as the bid.

Bid/ask spread
It is the difference between the buy (bid) and sell (offer) price of a currency or financial instrument.

Bar chart
It is a type of chart used which consists of four major points- the high and low prices which form the vertical bar, the opening price marked with a horizontal line on the left side of the bar, and the closing price marked with a horizontal line on the right side of the bar.

Bear market
It is the market characterized by generally falling prices.

It is a movement of the price through a selected support or resistance level. It is typically followed by increased volatility and heavy volume.

It is an intermediary agent that executes orders to buy and sell currencies or other financial instruments for commission fees.

It is a broker’s fee or commission.

Bull Market
It is a market characterized by generally rising prices.

Closed position
It is a position that has been terminated or ended.

It is a fee charged by brokers from their clients for dealing on their behalf.

Cross currency pair
These are the currency pairs that do not involve the US dollar, e.g. GBP/JPY. Pairs that involve the euro are often called euro crosses, such as EUR/GBP.

It is the process of settling a transaction.

Currency pair
A currency pair is the quotation of the relative value of a currency unit against the unit of another currency. The currency that is used as the reference is called the counter currency or quote currency and the currency that is quoted in relation is called the base currency or transaction currency.

It is a type of financial contract that gives you the right to buy or sell shares at a particular price until a specific date in the future, or to pay a particular price now for shares that you will receive at a specific date in the future. Its price is largely determined by the commodity, currency, share price, interest rate, etc., to which it is linked

Daily Cut-off
It is a particular point in time specified by a forex dealer to stand as the end of the current trading day and the beginning of a new trading day.

Economic indicator
Economic indicators provide statistical data showing general trends in the economy. They allow analysis of economic performance and predictions of future performance.

End of day order
End of day order also known as EOD order is a buy or sell order that specifies that a transaction occurs at a specific price, and is left open until the end of a trading day. If the parameters of the end of day order are not met, the order is cancelled.

Entry order
It is an order to enter the market at a specified price. If the currency pair never reaches that specified price level then the entry order is not executed.
There are three types of entry orders:

A market order allows the trader to buy or sell at the current price.

A limit order is an order to buy below the current market price or to sell above the current price. This is used when the trader thinks that the price action will reverse upon hitting that specified price level.

A stop order is an order to buy above the current market price or to sell below the current price. This is used when the trader thinks that the price action will continue upon reaching that specified price level.

Exotic Currency
Any currency that is not considered a major currency on the foreign exchange is called exotic (e.g. USD/THB, USDMXN, USD/NOK). Such currencies are not highly liquid, and come with greater spreads in the bid and ask prices.

It is a non-standardized contract according to which one counterparty is obliged to buy and the other to sell a financial instrument at a definite time and price in the future.

Going short
It is the act of selling a financial instrument.

Going long
It is the act of buying a financial instrument.

It is an investment which is made to reduce the risk of adverse price movements in a security, by taking an offsetting position in a related security, such as an option or a short sale.

Initial margin
It is the amount of money required to open a trading account.

A ratio of amount used in a transaction to the required deposit.
It is a loan provided to an investor by the broker that is handling the former’s account. As a rule the amount of leverage provided makes 1:50, 1:100 or 1:500, depending on the broker and the investment size.

It is the ability of a currency pair to be bought and sold without leading to significant change in its exchange rate. A currency pair is said to have high level of liquidity when it is easily bought or sold and there is a considerable amount of trading activity for that pair.

Long position
It is a position that becomes beneficial as market price goes up.

It is a unit that measures the size of the transaction.

Margin call
It is a broker's demand on an investor using margin to deposit additional funds to maintain necessary margin requirements.

Market order
It is an order to buy or sell a financial instrument at the best price currently available.

It is the sum needed in a customer account to be able to open up a position or to maintain a position open.

Market maker
It is a brokerage or bank which quotes both the buy and sell prices.

It is the price at which a seller wants to sell a financial instrument.

Open position
It is an active trade that hasn’t been closed yet.

Open order
It is an order that will be executed as soon as a specified market price is reached.

It is the smallest commonly quoted change of an exchange rate of a currency pair.

It is a  general reference to an investment holding. A position can be long or short, and it can be in any asset class, such as stocks, bonds, futures, or options.

It is the highest bid or lowest ask price available on a financial instrument at any given time.

It is the interest that is gained or lost on any open position held overnight, i.e. after 10 pm GMT. Each currency has a specific interest rate, based on the interest rate of a particular country;so if the interest rate of the currency a trader buys is higher than that of the currency he sells, the trader will earn a positive Rollover; whereas if the interest rate of the bought currency is lower than the interest rate of the sold currency, the trader will have to pay the Rollover. 

Round trip
It is buying and selling of a specified amount of currency.

Spot price
It is the current price at which a certain financial instrument can be bought or sold at a specified time and place.

It is the original capital paid into or invested in the business by its founders. If a person owns a stock of a particular company, he/she is entitled to a proportional share of its profits. Stocks of companies can be bought and sold in stock markets, such as the New York Stock Exchange.

Stop Loss
It is a limit order in which a trade is closed when the price of a financial instrument falls to a certain level.

It is the simultaneous buying and selling of the same amount of a given currency at a forward exchange rate.

Swing Trading
It is a speculative activity in financial markets which consists in repeated buying and selling of financial instruments at or near the end of up or down price swings caused by price volatility.

Short position
It is a position that becomes beneficial as market price goes down.

It is the difference in the price at which a broker is instructed to execute an order, and the price at which the order is actually executed.

Spot Trade
It is the immediate settlement or delivery of a trade.

Stop order
It is an order to buy or sell a certain financial instrument if a specified price (the stop price) is reached or passed.

Take Profit
It is an order in which the position is automatically closed once a certain profit has been made. Although it terminates any further advance in profit, it guarantees a specific profit after a level has been reached.

It is total value of money of all executed transactions in a certain time period.

Unrealized gain/loss
It is a theoretical profit or loss of an open position determined by current market prices.

It is a measure of the amount by which the price of an asset is expected to fluctuate over a certain period of time.