forex glossary

LEARN ALL ABOUT CURRENCY TRADING!

Check our forex glossary in order to understand common words, phrases and terms used by forex traders.

Forex glossary

Securities and Exchange Commission. 

A group of securities that operate in a similar industry. 

Taking a short position in expectation that the market is going to go down. 

The process by which a trade is entered into the books, recording the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another. 

Symbol for Shanghai A Index. 

An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short. 

A situation in which traders are heavily positioned on the short side and a market catalyst causes them to cover (buy) in a hurry, causing a sharp price increase. 

After a decline, traders who earlier went short begin buying back. 

Traders who have sold, or shorted, a product, or those who are bearish on the market. 

Traders staying out of the markets due to directionless, choppy, unclear market conditions are said to be ‘on the sidelines’ or ‘sitting on their hands’. 

A simple average of a pre-defined number of price bars. For example, a 50 period daily chart SMA is the average closing price of the previous 50 daily closing bars. Any time interval can be applied. 

The difference between the price that was requested and the price obtained typically due to changing market conditions. 

A term used when the market feels like it is ready for a quick move in any direction. 

Choppy trading conditions that lack any meaningful trend and/or follow-through. 

Swiss National Bank, the central bank of Switzerland. 

Refers to central banks active in the spot market. 

The underlying main cash price, usually referring to FX.

A market whereby products are traded at their market price for immediate exchange. 

The current market price. Settlement of spot transactions usually occurs within two business days. 

The purchase or sale of a product for immediate delivery (as opposed to a date in the future). Spot contracts are typically settled electronically. 

The difference between the Bid price and the Offer price.

A name for the S&P index. 

Purchase and sales are in balance and thus the dealer has no open position. 

A government tax imposed on the purchase of shares. 

Nickname for GBP/USD. Also known as Pound or British Pound. 

A market on which securities are traded. 

The combined price of a group of stocks - expressed against a base number - to allow assessment of how the group of companies is performing relative to the past. 

An order to sell or buy at a worse level than at present. This will normally open a new position, but could be used to close a position (but it is not linked to anything).

This is an order placed to buy above the current price, or to sell below the current price. These orders are useful if you believe the market is heading in one direction and you have a target entry price. 

An order linked to an open position that will close it at a predetermined level which is further away than at present, thus limiting your loss.

When a market seems to be reaching for a certain level that is believed to be heavy with stops. If stops are triggered, then the price will often jump through the level as a flood of stop-loss orders are triggered. 

This is an order placed to sell below the current price (to close a long position), or to buy above the current price (to close a short position). Stop loss orders are an important risk management tool. By setting stop loss orders against open positions you can limit your potential downside should the market move against you. Remember that stop orders do not guarantee your execution price – a stop order is triggered once the stop level is reached, and will be executed at the next available price. 

A stop order is an order to buy or sell once a pre-defined price is reached. When the price is reached, the stop order becomes a market order and is executed at the best available price. It is important to remember that stop orders can be affected by market gaps and slippage, and will not necessarily be executed at the stop level if the market does not trade at this price. A stop order will be filled at the next available price once the stop level has been reached. Placing contingent orders may not necessarily limit your losses. 

This is an order placed to sell below the current price (to close a long position), or to buy above the current price (to close a short position). Stop loss orders are an important risk management tool. By setting stop loss orders against open positions you can limit your potential downside should the market move against you. Remember that stop orders do not guarantee your execution price – a stop order is triggered once the stop level is reached, and will be executed at the next available price. 

The defined price at which the holder of an option can buy or sell the product. 

A price that acts as a floor for past or future price movements. 

A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance. 

A temporary halt in the trading of a product. 

A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate. 

The nickname for USD/CHF.

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