Forex terminology - Understanding basic forex language

Forex terminology can be a little overwhelming when you first start trading the forex markets, and the same can be said about the amount of unfamiliar information out there to take in. It might all sound a little strange when people start to talk about things like "the Bulls and the Bears".

At 2beanonlinetrader, we want you to understand forex and the world of online trading with all it's strange trading terms. You might not think that learning forex terminology is all that important, that you can get by without it and you would be right but just think it like this. When you visit another country how much more you can get from the experience if you know the language. It makes things so much easier doesn't it? The same applies to the forex world; learn the forex language and the experience will be so much more meaningful.

Ok so forex terminology, some of the trading terms used will be self-explanatory but others will not be so easy. Below is a good start. We have put together for you, your very own forex dictionary which we hope will put you on the right road to understanding basic forex language.

A-Z of Forex Terminology

Ask - the rate at which a trader can buy a currency.

Base Currency - is the first currency quoted in a pair. For example EURUSD pair, the Euro is the base currency.
Bear - someone who believes the price/market will fall.
Bear Market - is a market where price is falling.
Bid - the price at which a trader can sell a currency.
Bull - someone who believes the price/market will rise.
Bull Market - is a market where price is rising.
Broker - is an individual/company that brings together buyers and sellers for a commission.

Clearing - a term that refers to a process of settling a trade.
Commission - is the fee that is charged by a broker.
Contract - is the standard unit of trading.
Cross Rate - is the exchange rate between two currencies.
Currency - is the unit of exchange.

Day trading - refers to a trade which is opened and closed within the same day.
Dealer - is an individual/company that takes one side of a position in a hope of making a profit by closing the position with a different trader.

Entry Order - is an order which you have decide at what price you want to enter the market. As soon as that price is hit the trade is executed.

Flat Market - is a market where price is neither rising or falling.
Foreign Exchange (Forex or FX) - the simultaneous buying or selling of one currency against the buying or selling of another.
Forward - is the agreed exchange rate for settling of transactions at some future point in time.
Fundamental Analysis - is the analysis of economic and political data with the aim of determining the future movement in the market.

Hedging - is the practice of taking on one trade to protect against the loss in another. For example you buy a currency to offset the loss of an earlier sell trade.
High/low - the high is the highest price a currency was traded at that day. The low is the lowest price for the same currency.
Initial Margin - is the required amount of capital needed to enter a position as a guarantee on future performance.

Limit Order - is a pre-set position on the chart at which your trade will be closed and your profit taken.
Liquidity - is the ability of the market to soak up large amounts of transactions without causing a significant movement in the price.
Long Position - is a trade where a currency has been brought and will increase in value if the market rises.

Margin - is the deposit of funds to cover any losses if the market moves against you.
Margin Call - is a demand form the broker for extra funds to be deposited to bring the margin deposits back up to the required level to cover any losses if the market moves against you.
Market Maker - is a dealer who is prepared to buy and sell at the price supplied by himself.
Maturity - is the date for settlement.

Offer - is the rate at which the dealer is willing to sell.
Open Position - is a trade that has not yet been settled with physical payment.
Overnight Trading - are trades that remain open until the next day.

Pips/Points - is the term used to represent the smallest amount of movement price can make, it is the last digit of a rate.

Resistance - is a point on the chart at which you would expect price to start to fall again.
Risk - is the exposure to the chance of loss.
Rollover - is where the settlement of a deal is carried forward to another date.

Short Position - is a trade where a currency has been sold and will increase in value if the market falls
Spread - is the difference between the bid and offer prices for a currency pair.
Stop Loss Order - is a pre-set point on the chart that will close a trade when price reaches it in order to limit the amount of loss a trade will incur if the market moves against you.
Support - is a point on the chart at which you would expect price to start to rise again

Technical Analysis - is to try and forecast the direction that the market might take in the near future based on previous data in the financial market.
Trend - The direction the market is currently moving.

Volatility - is a statistical measure of the market price movement over time.

If you have anything to add to our dictionary of forex terminology that you think would be helpful to traders please feel free to add it to the comments box bellow. If we believe it will help then we will add it to this page.

Forex terminology

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The Alternative Dictionary for the forex. Some definitions for trading terminological but, put in a way that you might never have seen before.

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