Forex Glossary

Ask price, also known as the offer price, refers to the lowest price at which a seller wants to sell an asset like a stock or currency.

Arbitrage refers to the financial strategy that involves making money by taking advantage of price differences for the same thing in different markets. It’s like buying low in one market and selling high in another.

For instance, the exchange rate for 1 USD is 75 INR in market A, but in market B, 1 USD is trading for 76 INR. You exchange 1,000 USD for 75,000 INR in market A. And you sell those 75,000 INR for USD in market B at the rate of 76 INR/USD, which makes 986.84 USD.

Anything valuable which is owned or controlled by a person, company or organization with the expectation that it can provide future benefits or generate income. Asset can be tangible like a house or intangible like a patent, which are used to create value and are often measured when evaluating financial health.

Base currency, or transaction currency, refers to the first currency listed in a currency pair which represents all the profits and losses.

For example: Currency Pair: EUR/USD= 1.10

EUR is base currency and USD is quote currency. This means that 1 unit of the base currency (EUR) is equal to 1.10 units of the quote currency (USD).

The highest price a buyer is willing to pay for a stock, commodity, or currency.

A person or company who acts like an intermediary and facilitates trading between buyer and seller and earns commissions or spreads for their services.

When the price of a stock, currency, or other asset moves above a resistance level (a price it could not rise past before) or below a support level (a price it could not fall below before).

A bear market is a situation when the prices of stocks, currencies, or other assets fall significantly over a period and reflects widespread pessimism among traders and investors.

The first two or three digits of a price or exchange rate, excluding the smaller decimal values.

For example: If the EUR/USD exchange rate is 1.2345, the big figure is 1.23

The Bretton Woods Agreement of 1944 was an international monetary system established to rebuild the global economy after World War II. Delegates from 44 countries met in Bretton Woods, New Hampshire, to create a system of fixed exchange rates. Currencies were pegged to the US dollar, which was backed by gold at $35 per ounce. The agreement also led to the creation of the International Monetary Fund (IMF) and the World Bank to support economic stability and development. The system collapsed in the 1970s when the US ended the dollar’s gold convertibility, leading to the adoption of floating exchange rates.

A period when the prices of stocks, currencies or other investments rise consistently over time and reflects optimism and strong economic growrth.

It refers to the difference between two related prices, rates, or values. In trading, it is the difference between spot price/current market price and the futures price of an asset.

For example: If gold’s spot price is $500 and its future prices price is $520, then the basis is $20.

A price movement where an asset’s closing price is lower than its opening price during a specific period. The top of the body shows the opening price, and the bottom of the body shows the closing price.

A price movement where an asset’s closing price is higher than its opening price during a specific period. The bottom of the body shows the opening price, and the top of the body shows the closing price.

A type of order you place to buy an asset at a specific price or lower

A type of order placed to buy an asset once its price rises to a specific level, known as the stop price.

Carry refers to the cost or benefit of holding an asset over time. Assets with positive carry generate income exceeding holding costs, while those with negative carry incur costs surpassing any income. For example, commodities often have negative carry due to storage expenses.

A strategy involving borrowing funds in a currency with a low interest rate and investing in a currency with a higher interest rate, aiming to profit from the interest rate differential.

A currency pair that does not include the US Dollar, representing the value of one non-USD currency relative to another.

The exchange rate between two currencies in the forex market. It shows how much of one currency (quote currency) is needed to buy one unit of another currency (the base currency).

A closing order in forex trading is an instruction to end an open trade, securing any profit or loss. This can be done manually or set to occur automatically when the market hits a certain price.

Carry-over charge, also called Rollover fee, is a cost traders pay when the keep a position open overnight in certain markets. If you are buying or selling currencies, the charge depends on the interest rate difference between the two currencies involved.

Credit Risk is the possibility that a counterparty that owes money won’t be able to repay. For instance, there is always a chance that someone you give money to won't pay it back. The concept is the similar in the financial sector, but it applies to bonds, loans, and any other circumstance where payments are anticipated.

A counterparty is the other person, company, or institution you're making a deal within a financial transaction. For example, if you agree to buy stocks, the seller is your counterparty. In trading or investing, every transaction involves two sides, and the other side is called the counterparty.

A call option is a financial agreement that gives you the right, but not the obligation, to buy a specific asset (like a stock or currency) at a pre-agreed price (called the strike price) before a certain date. You pay a fee (premium) for this right. If the asset's price goes higher than the strike price, you can buy it cheaper and potentially make a profit. If the price doesn’t go up, you can choose not to buy it.

Cable refers to the exchange rate between the US dollar (USD) and British Pound (GBP). The phrase first appeared in the nineteenth century, when transatlantic telegraph wires were used to convey currency exchange rates between London and New York. The shorthand "cable" is still used by traders today to refer to this particular currency pair.

Capitulation refers to a point in the market when investors give up on trying to recover losses, often selling their assets in panic or frustration. It typically happens during a severe market downturn, marking a point where prices might stop falling and start stabilizing or recovering.

A cash market, sometimes referred to as a spot market, is a financial marketplace where commodities, stocks, and bonds are purchased and sold for prompt delivery and payment. Basically, unlike futures or options markets where transactions are finalized later, this market allows you to pay the entire amount up front and receive the product immediately. The reason it's referred to as a "cash market" is that transactions are immediately settled in cash.

In trading, a closed position indicates that you have either sold an item you previously purchased or repurchased an asset you previously sold. For instance:

1. In the event that you purchase stock and subsequently sell it, your position is "closed."
2. A stock that you shorted and then bought back is considered "closed."

Any profit or loss you make on a transaction is locked in when you close your position.

A commodity is a basic resource or raw material that can be purchased, sold, or exchanged. Commodities are standardized, they are interchangeable and identical independent of the producer. They serve as building blocks for goods and services and are frequently exchanged in markets.

A day order is a trade instruction that stays active only for the day it’s placed. If the trade doesn't happen by the end of the trading day, it gets canceled automatically.

The discount rate is the interest rate a central bank charges banks for borrowing money. It's also used to calculate the value of future cash in today's terms.

A direct quotation shows the price of one unit of foreign currency in terms of the domestic currency. For example, "1 USD = 100 INR" is a direct quotation if your domestic currency is INR.

Devaluation is when a country lowers the value of its currency compared to other currencies. This makes exports cheaper and imports more expensive. This is usually done by the government or central bank and often happens in fixed or semi-fixed exchange rate systems.

Derivatives are financial contracts whose value depends on another asset, like stocks, bonds, or commodities. Examples include futures, options, and swaps. They are often used to manage risk or speculate on price changes.

A deficit happens when a person, company, or country spends more money than they earn or receive. For example, if a government collects less in taxes than it spends, it runs a budget deficit.

A dividend is a share of a company’s profits distributed to its shareholders as a reward for investing in the company. Dividends are typically paid in cash, but some companies also issue them in the form of additional stock. Dividends are usually declared on a per-share basis (e.g., $1 per share). They provide a source of regular income for investors, especially those holding shares in established, profit-generating companies.

Day trading involves buying and selling financial assets like stocks, currencies, or cryptocurrencies within the same trading day. The goal is to profit from short-term price movements. Day traders typically rely on technical analysis, charts, and market trends to make quick decisions. Unlike long-term investors, day traders close all positions before the market closes to avoid overnight risks, such as news events that might impact prices.

A deal is an agreement between two parties to trade a financial asset, such as stocks, bonds, currencies, or commodities. The deal specifies the asset, quantity, price, and other terms, such as the date of settlement.

The dealing spread is the difference between the buying (bid) price and the selling (ask) price of a financial asset. This spread represents the cost of trading and is how brokers or market makers earn money. For example, if the bid price of a stock is $100 and the ask price is $102, the spread is $2. A narrower spread indicates high market liquidity, meaning the asset is easy to trade. Conversely, wider spreads often occur in less liquid or more volatile markets, increasing trading costs for buyers and sellers.

Delisting occurs when a company’s shares are removed from a stock exchange, meaning they can no longer be traded publicly on that platform. This can happen voluntarily, such as when a company decides to go private, or involuntarily if the company fails to meet the exchange’s requirements, like minimum share price or reporting standards. Delisting can impact shareholders, as their ability to buy or sell shares becomes more limited. While delisting doesn’t mean the company is bankrupt, it may indicate financial or operational challenges.

Delta measures how the price of an option changes in relation to a $1 move in the price of the underlying asset. It’s a key concept in options trading, showing how sensitive an option is to price changes. For example, if an option has a delta of 0.5, its price will increase by $0.50 for every $1 rise in the underlying asset’s price. Call options have positive delta values, while put options have negative ones. Delta helps traders assess risk and hedge positions effectively.

The deposit rate is the interest rate banks pay customers for keeping their money in savings or fixed deposit accounts. It acts as an incentive for individuals to save money. For example, if a bank offers a 3% deposit rate, it will pay $3 annually for every $100 deposited. Higher deposit rates encourage saving, while lower rates might lead to more spending. Central banks also influence deposit rates, impacting overall economic activity by encouraging or discouraging savings.

Depreciation in currency refers to a decrease in a currency’s value compared to another currency. For example, if 1 USD equals 100 units of a currency today but 110 units tomorrow, that currency has depreciated. Depreciation makes imports more expensive and exports cheaper, often benefiting a country’s trade balance. However, it can also lead to inflation, as imported goods cost more. Depreciation can occur due to economic factors like inflation, trade deficits, or political instability.

Divergence happens when an asset’s price moves in one direction, but an indicator like momentum or volume moves in the opposite direction. It often signals a potential trend reversal. For example, if a stock’s price is rising, but its relative strength index (RSI) is falling, it may indicate weakening momentum. Traders use divergence to predict changes in market trends and make informed decisions.

A dove is someone in finance, typically a central banker or economist, who favors lower interest rates and monetary policies that support economic growth over controlling inflation. Doves believe stimulating the economy through low rates and increased spending is more important than keeping inflation low. Their approach is often seen as more accommodating and growth-focused, especially during periods of slow economic activity.

A downtrend refers to a consistent decline in the price of an asset over time. It is characterized by lower highs and lower lows on price charts. Downtrends can result from factors like poor market sentiment, weak economic conditions, or company-specific issues. Traders and investors monitor downtrends to identify bearish markets and avoid potential losses or find opportunities to buy at lower prices.

Dry powder is a term for cash or other liquid assets that investors keep aside for future opportunities. It’s like having a financial reserve to use when the market presents a good deal, such as during a downturn. Keeping dry powder ensures investors can act quickly without needing to sell existing assets at a loss to raise funds.

The reduction in equity from a peak to a subsequent trough, indicating the extent of losses experienced by a trader or investment portfolio.

An exchange is a platform where people trade financial assets like stocks, currencies, or commodities. It connects buyers and sellers, ensuring secure and fair transactions. Exchanges like the New York Stock Exchange (NYSE) or forex markets operate globally and play a critical role in financial systems by providing liquidity and transparency. They are also regulated to protect participants and maintain trust in the financial ecosystem.

EPS shows how much profit a company makes for each share of its stock. It’s calculated by dividing the company’s net income by the total number of shares. For example, if a company earns $1 million and has 1 million shares, its EPS is $1. Investors use EPS to evaluate a company’s profitability and compare it to others when deciding where to invest.

Equity represents ownership in an asset or company. For businesses, it’s the value left after subtracting liabilities from total assets. For investors, equity refers to the shares they own in a company, giving them a claim on profits and voting rights. Positive equity means an entity has more assets than debts, indicating financial health, while negative equity suggests potential financial issues.

Exposure refers to the degree to which an investor or trader is at risk due to changes in the market. It can indicate the total value of a position, the overall level of risk at a specific time, or the percentage of a portfolio allocated to a certain asset, market, or sector.

Euroclear is a Financial Market Infrastructure (FMI) provider that facilitates the clearing and settlement of securities transactions carried out on European exchanges. It also serves as a central securities depository (CSD), safeguarding assets and providing custody services for major financial institutions operating within the European financial markets.

End-of-day (EOD) trading refers to placing trades that are executed at or near the market’s closing time. It involves buying or selling securities, such as stocks, based on price movements observed throughout the trading session. The specific timing and duration of the trading period depend on the type of security and the exchange it is listed on.

An economic indicator is data used to evaluate the health of an economy. Examples include GDP (economic output), inflation rates, and unemployment figures. These indicators help governments, businesses, and investors predict future trends, make informed decisions, and plan strategies. For instance, high unemployment may signal economic trouble, while strong GDP growth suggests a robust economy.

Eastern Standard Time (EST) is a time zone used in the eastern part of the United States and Canada. It is five hours behind Coordinated Universal Time (UTC-5). EST is commonly referenced in financial markets to indicate trading hours, as major exchanges like the NYSE operate in this time zone.

The Euro Short-Term Rate (ESTR) is the overnight interest rate for lending or borrowing in euros. It’s a benchmark rate used by banks and financial institutions in the eurozone to calculate costs for loans and other financial products. ESTR reflects the cost of short-term borrowing and influences broader financial markets.

The European session refers to the trading period when markets in Europe, such as London, Paris, and Frankfurt, are open. It typically runs from 2:30 am to 10:30 pm EST. This session is a critical part of the global trading day, offering high activity and liquidity, especially in forex markets, as it overlaps with other sessions.

Ex-dividend is when a stock trades without the right to receive the next dividend payment. If you buy the stock on or after the ex-dividend date, you won’t receive the upcoming dividend, as it’s reserved for the previous owner. Ex-dividend dates help clarify who is eligible for dividend payouts.

An exporter is an individual or company that sells goods or services to buyers in other countries. For example, a farmer in the U.S. selling wheat to Europe is an exporter.

In trading, "extended" describes a market or asset that has moved significantly beyond its usual range. This often happens due to strong buying or selling activity, leading to overbought or oversold conditions. An extended market can indicate a potential reversal, prompting traders to analyze if the price movement is sustainable or temporary.

Fiscal policy refers to how a government uses its spending and tax policies to influence the economy. By increasing spending or cutting taxes, the government can stimulate growth, while reducing spending or raising taxes can control inflation. For example, during a recession, governments may use fiscal policy to create jobs and boost demand.

The Fibonacci Retracement is used in technical analysis to identify potential levels of support (where prices may stop falling) or resistance (where prices may stop rising). These levels are based on ratios derived from the Fibonacci sequence, such as 23.6%, 38.2%, 50%, 61.8%, and 100%.

A financial market is a platform where people trade assets like stocks, bonds, currencies, and commodities. It connects buyers and sellers, providing a place to invest, raise capital, or manage risks. For Examples stock markets, forex markets, and commodity markets.

A financial instrument is any contract that holds monetary value and can be traded. For Examples stocks, bonds, derivatives, and currencies. They help investors manage risks, raise funds, or earn returns based on market conditions.

The Federal Reserve, or Fed, is the central bank of the United States which is composed of the Board of Governors, the Federal Open Market Committee (FOMC), and the 12 regional Federal Reserve Banks. It controls monetary policy, manages interest rates, and oversees the banking system to ensure economic stability. The Fed also regulates money supply and combats inflation.

Fiat currency is money issued by a government that doesn’t have intrinsic value, like paper bills or coins. Its value comes from government backing and public trust. For examples US Dollar, Euro, Yen etc.

Forex (Foreign Exchange) is the global market for trading currencies. It’s the largest and most liquid financial market, where currencies like USD, EUR, and JPY are bought and sold. Traders use forex to profit from currency value changes.

A futures contract is an agreement to buy or sell an asset at a predetermined price on a specific future date. It’s often used to hedge risks or speculate on price movements for commodities, currencies, or financial instruments.

A forward contract is a customized agreement between two parties to buy or sell an asset at a set price on a future date. Unlike futures, forward contracts are traded privately and are not standardized.

Factory orders are reports that show the total orders placed with manufacturers for goods. They help gauge demand in the economy and are used to predict industrial production and economic growth trends.

A filled order is when a trade request to buy or sell a financial asset is successfully completed. For example, if you place an order to buy 100 shares at $10 each and the transaction occurs, it’s considered a filled order. Traders and investors track filled orders to confirm that their trade instructions have been executed as planned.

Fill or Kill is a trade order that must be executed immediately in full or canceled completely. For example, if you want to buy 1,000 shares at a specific price but only 500 shares are available, the entire order will be canceled. It’s often used to avoid partial transactions or price fluctuations.

A financial liability is a debt or obligation that a person, company, or organization must pay in the future. Examples include loans, credit card balances, or bonds issued by companies. Liabilities are recorded on the balance sheet and can impact financial stability if not managed properly.

FIFO is an accounting method where the oldest inventory or assets are sold or used first. For example, if a company buys 100 units of a product in January and 100 more in February, under FIFO, the January stock is sold first. This method affects cost calculations and profits.

In trading, a fix refers to a standardized time each day when exchange rates or asset prices are set. These fixed rates are often used as benchmarks for trades, contracts, and financial analysis. For example, forex traders use the London 4 PM fix for consistency.

A flat reading occurs when economic data, like inflation or GDP, shows no significant change compared to previous periods. It indicates stability or lack of growth, often leading to neutral market reactions.

A flat market refers to a situation where prices show little movement, and trading activity is minimal. It’s also called a sideways market, as there’s no clear trend of rising or falling prices. Traders often avoid flat markets due to limited profit opportunities.

FOMC Minutes are detailed notes from the Federal Open Market Committee meetings. They summarize discussions about U.S. monetary policy, interest rates, and the economic outlook. Investors study these minutes to anticipate future policy changes and market impacts.

Follow-through refers to continued price movement in the same direction after a trend starts. For example, if a stock price rises sharply, traders look for follow-through, like further gains, to confirm the trend. It’s often used to assess market momentum and predict sustainability.

Gross National Product (GNP) measures the total economic output of a country's residents and businesses, regardless of where the production occurs. It includes income from abroad, like profits from international businesses. For example, a U.S. company earning profits overseas contributes to the U.S. GNP. It’s used to evaluate a nation’s economic performance.

GDP represents the total value of goods and services produced within a country’s borders over a specific period. It’s a key indicator of economic health. For example, if a country produces $1 trillion worth of goods and services in a year, its GDP is $1 trillion. Growth or decline in GDP signals economic expansion or contraction.

Gross margin shows the percentage of revenue left after deducting the cost of goods sold (COGS). It’s calculated as (Revenue - COGS) ÷ Revenue × 100. For example, if revenue is $100 and COGS is $60, the gross margin is 40%. It indicates a company’s efficiency in producing goods or services.

A GTC order stays active until the trader cancels it or it gets executed. For example, if you place a buy order at $50 for a stock, the order remains open indefinitely until the price is reached or you decide to cancel it.

A gap occurs when the price of a financial asset opens significantly higher or lower than its previous closing price. Gaps often happen due to news, earnings reports, or major events. Traders use gaps to predict potential market movements.

Greenwich Mean Time (GMT) is the standard time zone used worldwide for reference, especially in global financial markets. It does not change with seasons, unlike daylight saving time. For example, many forex market sessions and financial reports use GMT for consistency.

Gold bullion refers to physical gold in the form of bars or ingots. It’s valued based on its weight and purity and is often used as an investment or a reserve asset by central banks.

A gold certificate is a document that represents ownership of a specific amount of gold. Instead of holding physical gold, investors use certificates as proof of ownership. These were more common before modern financial systems.

A GFD order remains active only during the trading day it is placed. If it’s not executed by the market’s close, it automatically expires. Traders use GFD orders to manage short-term trading strategies.

Greenback is a nickname for the U.S. dollar, originally referring to paper currency printed in green during the 19th century. Today, it’s a common slang term for the dollar used in global markets.

A guaranteed order ensures that a trade is executed at a specific price, regardless of market volatility. Even if prices jump or fall sharply, the broker guarantees execution at the set price. This reduces risk in unpredictable markets.

A guaranteed stop is a type of stop-loss order where the broker guarantees to close your trade at the exact stop level, even in volatile markets. This ensures your losses don’t exceed a certain amount, but often comes with a fee.

The gearing ratio measures how much of a company’s capital comes from borrowed funds versus its own equity. A high gearing ratio means the company relies heavily on debt, which can be risky. It’s calculated as Debt ÷ Equity × 100.

Hedging is a strategy used to protect against financial losses by taking an offsetting position. For example, a company importing goods might buy currency futures to lock in exchange rates and avoid potential losses from currency fluctuations. Similarly, investors use hedging to reduce risks in volatile markets.

A hard currency is a stable and widely accepted currency used in global trade and finance, like the U.S. dollar, euro, or Japanese yen. These currencies are considered reliable because they come from countries with strong economies and stable governments.

The head and shoulders is a chart pattern used in technical analysis to predict market reversals. It has three peaks: the middle one (head) is the highest, and the other two (shoulders) are lower. It signals a potential price drop after the pattern forms.

In trading, a handle refers to the whole number part of a price. For example, if a stock is trading at $52.75, the handle is $52. Traders often use this term when discussing price levels or movements.

A hawk is someone in finance, often a central banker, who supports higher interest rates to control inflation, even if it slows economic growth. Hawks prioritize keeping prices stable over boosting economic activity, the opposite of a dove.

An interest rate is the cost of borrowing money or the reward for saving it, expressed as a percentage. For example, if you borrow $1,000 at a 5% annual interest rate, you’ll pay $50 in interest each year. Central banks set benchmark rates that influence loan, mortgage, and savings rates in the economy.

Intrinsic value is the real worth of an asset, calculated based on its future cash flows, profitability, or other factors. For example, if a stock is trading at $50 but has an intrinsic value of $60, it may be undervalued and a good investment.

Inflation is the rate at which prices for goods and services rise over time. For example, if inflation is 5%, something that costs $100 today might cost $105 next year. Moderate inflation is normal, but high inflation reduces the purchasing power of money.

In the money refers to an option that has intrinsic value. For example, a call option with a strike price of $50 is ITM if the stock’s market price is $60 because it allows the buyer to purchase the stock at a cheaper price.

An IPO is when a private company offers its shares to the public for the first time to raise capital. It’s a major milestone for companies transitioning from private to public ownership. For example, when a tech startup goes public, it allows investors to buy its stock.

An index is a group of financial assets, such as stocks or bonds, combined to represent a specific market segment. For example, the Nasdaq Composite tracks technology stocks. Indices help investors assess market performance and economic trends.

Interest rate swaps are agreements between two parties to exchange interest rate payments. For example, one party might pay a fixed rate while receiving a variable rate. These swaps help manage interest rate risks, often used by banks and corporations.

Interbank Offered Rate (IBOR) refers to the average interest rate banks charge each other for short-term loans. Common examples include LIBOR and EURIBOR. These rates influence lending and borrowing costs for businesses and consumers globally.

Interbank rates are the interest rates that banks charge each other for borrowing or lending money. These rates are short-term and influence the rates consumers pay for loans or mortgages. They play a crucial role in the global financial system.

INX is the ticker symbol for the S&P 500 index, which represents the performance of 500 large companies listed on U.S. stock exchanges. It’s one of the most widely followed indices to gauge the health of the U.S. economy and stock market.

Intervention occurs when a government or central bank steps into the market to stabilize a currency or financial system. For example, they might buy or sell currency to manage exchange rates or prevent excessive volatility.

The initial margin requirement is the minimum amount of money you must deposit when opening a leveraged trading position, such as in stocks or futures. It ensures you have enough funds to cover potential losses. For example, if the requirement is 10% for a $10,000 trade, you need to deposit $1,000.

Jobless claims are the number of people filing for unemployment benefits in a specific period, usually weekly. This data reflects the health of the job market and economy. Fewer claims indicate a strong job market, while more claims suggest economic struggles or layoffs. It’s closely watched by economists and policymakers as an indicator of economic trends.

JPY is the official currency code for the Japanese yen, which is Japan’s national currency. It is one of the most traded currencies globally, especially in forex markets, and is often seen as a safe-haven currency during economic uncertainty.

JPN225 is the ticker symbol for the Nikkei 225, a major stock market index in Japan. It tracks the performance of 225 top companies listed on the Tokyo Stock Exchange, providing insights into the Japanese economy and market trends.

Kiwi is a slang term for the New Zealand dollar (NZD) in forex trading. The name comes from New Zealand’s national bird, the kiwi. It’s widely used by traders to refer to the currency when discussing market movements or trades involving the NZD.

A knock-in option is a type of financial option that becomes active only if the price of the underlying asset reaches a specific level (the knock-in barrier). Until the barrier is hit, the option remains inactive.

A knock-out option is an option that becomes void if the price of the underlying asset reaches a specific level (the knock-out barrier). It’s often used to limit risk or exposure in trading strategies.

A liability is something you owe to another person or entity, like a debt or obligation. In finance, it can include loans, mortgages, or bills a company must pay. For example, a business might have liabilities like supplier payments or bank loans.

Longs refer to buying an asset with the expectation that its price will rise. For example, if you buy a stock, you’re taking a long position, hoping to sell it later at a higher price.

Leverage is borrowing money to increase your potential return on investment. For example, if you invest $1,000 and borrow $9,000, you control $10,000 worth of assets. While leverage can amplify profits, it also increases the risk of losses.

A lot refers to the standardized unit of trading in financial markets. In forex, for example, a standard lot equals 100,000 units of a currency. It helps maintain consistency in trade sizes.

A limit order is a trade instruction to buy or sell an asset at a specific price or better. For example, you might set a limit order to buy a stock only if it drops to $50 or below.

Liquidity measures how easily an asset can be bought or sold without affecting its price. High liquidity means quick trades with minimal price changes, like in major forex markets or large-cap stocks.

The last dealing day is the final day a financial product, like a futures contract, can be traded before it expires. After this day, the contract is settled based on its terms.

Leading indicators are economic data that predict future economic trends, like building permits or consumer confidence. These indicators help investors and policymakers make decisions about what might happen in the economy.

A level refers to a specific price point or range in financial markets. For example, traders may discuss a stock reaching the $100 level, signaling a significant price area.

LIBOR (London Interbank Offered Rate) is the interest rate banks charge each other for short-term loans. It was a key global benchmark for loans, mortgages, and financial contracts, though it’s being replaced by newer rates like SOFR.

A liquid market is one where assets can be quickly bought or sold with minimal impact on their price. Examples include forex markets and major stock exchanges, where there’s a high volume of trading.

The London session refers to the trading period when European financial markets, including London, are open. It overlaps with other sessions, offering high activity and liquidity in markets like forex.

A long position is when a trader buys an asset, expecting its price to increase. For example, buying shares in a company and holding them to sell later at a higher price is taking a long position.

A market maker is a financial institution or individual that provides liquidity in markets by buying and selling assets at publicly quoted prices. They profit from the difference between the bid and ask prices (the spread). Market makers ensure smooth trading and price stability by always being ready to execute trades.

Margin is the amount of money a trader must deposit to open and maintain a leveraged position. For example, if you trade $10,000 with a 10% margin, you only need to deposit $1,000. It allows larger trades but increases risk.

A margin call happens when your account balance falls below the required margin level due to losses. Your broker will ask you to deposit more funds or close positions to cover the deficit and reduce risk.

Market capitalization is the total value of a company’s shares. It’s calculated by multiplying the stock price by the number of outstanding shares. For example, if a company has 1 million shares at $50 each, its market cap is $50 million.

A mutual fund pools money from many investors to buy a diversified portfolio of assets like stocks and bonds. Professional fund managers handle investments, making it easier for individuals to invest without directly managing assets.

A macro trader is an investor who focuses on large-scale economic factors, like interest rates, inflation, and global events, to make trading decisions. They often trade currencies, bonds, or commodities based on economic trends.

Market contagion occurs when financial instability in one country or market spreads to others. For example, a crisis in one region might cause investors to withdraw from similar markets worldwide, leading to widespread economic impact.

A market order is a trade instruction to buy or sell an asset immediately at the current market price. It ensures quick execution but may result in a different price if the market is volatile.

Maturity refers to the date when a financial instrument, like a bond or loan, is due for repayment. For example, a 10-year bond reaches maturity after 10 years, at which point the issuer repays the principal amount to the investor.

Month-over-month (MOM) compares changes in data or performance from one month to the next. For example, a company’s MOM sales growth measures how its sales have increased or decreased compared to the previous month.

A moving average is a technical indicator that smooths out price data by calculating the average over a specific time period, like 10 or 50 days. It helps traders identify trends and potential reversals.

Maintenance margin is the minimum account balance a trader must keep to maintain an open leveraged position. If the account falls below this level, the trader may face a margin call to add funds or reduce their position.

Net income is the profit a company makes after subtracting all expenses, including taxes and operating costs, from its total revenue. It’s also known as the “bottom line” because it appears as the last item on a company’s income statement. For example, if a business earns $1 million and has $700,000 in expenses, its net income is $300,000.

Net Asset Value is the total value of a mutual fund or ETF’s assets minus its liabilities, divided by the number of shares. It represents the per-share value of the fund. For example, if a fund’s assets are $10 million, liabilities are $1 million, and there are 1 million shares, the NAV is $9 per share.

Net position refers to the difference between a trader's total long and short positions in an asset. For example, if you own 10,000 shares of a stock (long) and have sold 4,000 shares (short), your net position is 6,000 shares long.

The New York session refers to the trading period when U.S. financial markets, including the NYSE, are open. It overlaps with the London session, making it one of the most active trading times in forex and stock markets due to high liquidity and trading volume.

A no-touch option is a type of binary option where the buyer profits if the underlying asset’s price does not reach a predetermined level during the contract’s life. It’s used by traders who expect low volatility or stable prices.

NYA.X is the ticker symbol for the NYSE Composite Index, which tracks the performance of all stocks listed on the New York Stock Exchange. It provides a broad measure of the market’s overall health and trends.

An order book is a digital list of buy and sell orders for a financial asset, organized by price levels. It shows the number of orders at each price, helping traders see market demand and supply. For example, a stock’s order book will display the highest bids and lowest asks.

An order is an instruction to buy or sell a financial asset. Traders use different types of orders, like market orders (executed immediately) or limit orders (executed at a specific price).

An open position is an active trade that hasn’t been closed. For example, if you buy 100 shares of a stock and haven’t sold them yet, that’s an open position. Profits or losses are unrealized until the position is closed.

An open order is a trade instruction that hasn’t been executed yet. For example, a limit order to buy a stock at $50 remains open until the stock’s price reaches $50 or the trader cancels the order.

A one-touch option is a type of binary option where the buyer profits if the price of an asset touches a predetermined level at least once before the option expires.

OCO (One Cancels the Other) order is a pair of linked orders where the execution of one cancels the other. For example, if you set a limit order to sell at $100 and a stop-loss order at $90, triggering one cancels the other.

In trading, “on top” refers to placing a buy or sell order at the best available price in the order book, matching the current highest bid or lowest ask.

An offsetting transaction is a trade made to close or reduce an existing position. For example, if you buy 100 shares of stock and then sell 100 shares, the second trade offsets the first, closing your position.

Position refers to a trader’s commitment in the market, representing an active exposure to a financial instrument. It can be an open position, which is a trade currently subject to profit or loss based on market movement, or a closed position, which is a trade that has been exited, finalizing any gains or losses.

PPP is an economic theory used in forex to compare the relative value of currencies. It suggests that exchange rates should adjust to equalize the purchasing power of two currencies for a basket of goods. Traders use PPP to assess whether a currency is undervalued or overvalued, aiding long-term market analysis.

A pip, or “percentage in point,” is the smallest price movement in forex trading, usually representing 0.0001 for most currency pairs. It measures changes in currency value, allowing traders to calculate profits or losses. For example, if EUR/USD moves from 1.1000 to 1.1005, it represents a 5-pip movement.

A put option gives the holder the right, but not the obligation, to sell a currency pair at a specific price (strike price) before a set expiry date. It is typically used as a hedge against declining currency values.

The P/E, Price-to-earnings ratio measures the valuation of stocks in a foreign market. It compares the price of a company’s stock to its earnings per share. Forex traders analyze P/E ratios to assess economic conditions and potential currency movements driven by equity markets.

A price level refers to a specific value on a chart where an asset's price tends to find support (stay above) or resistance (stay below). Traders watch price levels to predict potential reversals or breakouts.

Profit is the money left after subtracting all costs from total revenue. For example, if you sell a product for $100 and it costs $70 to make, your profit is $30. In trading, profit is the difference between the buying and selling prices.

The Purchasing Managers’ Index (PMI) is an economic indicator that measures the health of the manufacturing or services sector. It’s based on surveys of purchasing managers about orders, production, and employment. A PMI above 50 indicates growth; below 50 signals contraction.

In trading, "paid" refers to the execution of a buy order at the offer (ask) price. For example, if a trader accepts the ask price of $50 for a stock, they are said to have “paid” $50.

In trading, being "patient" means waiting for the right market conditions or price levels before taking action. It involves discipline to avoid impulsive trades and to stick to a trading plan.

A partial fill occurs when only part of a trade order is executed. For example, if you place an order to buy 1,000 shares at $50, but only 500 shares are available at that price, the order is partially filled.

Physical settlement occurs when the actual asset (like stocks, bonds, or commodities) is delivered at the end of a contract instead of cash. For example, in a physically settled gold futures contract, the buyer receives physical gold upon expiry.

A quote refers to the price of one currency in terms of another. It shows the exchange rate between two currencies, where the first currency is the base, and the second is the quote currency. For example, in the EUR/USD quote of 1.1000, 1 Euro is worth 1.1000 US Dollars.

The quote currency is the second currency in a currency pair, used to determine the value of the base currency. For example, in USD/JPY, the Japanese Yen is the quote currency, indicating how much Yen is needed to buy one US Dollar.

Quantitative Easing is a monetary policy where central banks inject liquidity into the economy by purchasing government bonds or other securities. In the forex market, QE typically weakens a currency as it increases money supply, influencing traders’ decisions and currency valuations.

In forex trading, range refers to the difference between the highest and lowest price levels a currency pair trades within over a specific period. Traders use range-bound strategies in sideways markets.

A rally is a strong upward movement in a currency pair’s price, often driven by positive economic data or market sentiment.

The rate in forex is the exchange rate that specifies how much of one currency is needed to buy another.

Real money refers to large institutional investors, such as pension funds or asset managers, making currency trades for long-term investment purposes rather than speculation.

The rollover is the process of extending the settlement date of a forex position, with traders paying or earning interest based on the interest rate differential between currencies.

Risk management involves strategies to limit potential losses in forex trading, such as setting stop-loss orders, diversifying, and maintaining appropriate position sizes.

The Retail Price Index or RPI measures inflation by tracking changes in the price of a basket of goods and services. Forex traders use it to predict currency movements based on inflation trends.

A recession is a period of economic decline, often identified by two consecutive quarters of negative GDP growth. It usually weakens a country’s currency in the forex market.

A reserve currency is a currency held by central banks as part of their foreign exchange reserves. The US Dollar is the most common reserve currency.

In forex, a resistance level is a price point where upward movement tends to pause or reverse due to increased selling pressure.

A retail investor is an individual trader participating in the forex market using personal funds, typically trading smaller volumes compared to institutional investors.

Revaluation occurs when a country’s central bank increases the official value of its currency relative to a benchmark, usually in fixed exchange rate systems.

In forex, a round trip refers to completing both a buy and a sell transaction of the same currency pair, capturing profit or loss from the entire trade cycle.

RUT often refers to the Russell 2000 Index, a benchmark for small-cap stocks. While not directly forex-related, it can indicate broader economic trends affecting currency values.

A spot transaction refers to the purchase or sale of a currency pair for immediate delivery, typically within two business days. The spot price is the current exchange rate at which the trade is executed. Spot trades are common in forex due to their simplicity and immediacy, making them a foundation for most currency transactions. Traders use spot trading to speculate on price movements or to fulfill immediate currency conversion needs.

A short position is taken when a trader sells a currency pair, expecting its value to decline. For instance, shorting EUR/USD means selling Euros and buying US Dollars, anticipating the Euro will weaken against the Dollar. Profits are made if the price decreases and the position is closed at a lower rate. Shorting is a key strategy in forex, allowing traders to profit in both rising and falling markets.

The U.S. Securities and Exchange Commission (SEC) regulates financial markets, primarily equities and securities. While not directly overseeing forex trading, the SEC’s actions impact global markets, including forex, by influencing investor sentiment and cross-border capital flows. Regulatory changes or enforcement actions by the SEC can indirectly affect currency values, particularly for countries with strong trade or financial ties to the U.S.

Selling in forex refers to opening a short position on a currency pair, predicting its price will fall. For example, selling GBP/USD means selling the British Pound against the US Dollar. Traders sell to profit from a declining market or to hedge existing positions. Selling involves speculating on bearish market movements, an essential tactic in forex trading.

Short covering in forex occurs when a trader buys back a currency pair to close an existing short position. This happens when the trader expects the price to rise further or to lock in profits. For example, if a trader shorted EUR/USD and the price starts climbing, they may buy the pair to avoid additional losses. Short covering often causes temporary upward price movements in the market.

Slippage is the difference between the expected execution price of a trade and the actual price at which it is executed. It typically occurs during high volatility or low liquidity conditions. For instance, if a trader sets a buy order at 1.2000 for EUR/USD, but it executes at 1.2005 due to market gaps, the 5-pip difference is slippage. Effective risk management helps minimize its impact.

A stop-loss order is a predefined instruction to automatically close a trade at a specific price level to limit potential losses. For example, if a trader buys EUR/USD at 1.1000, they may set a stop loss at 1.0950 to cap losses at 50 pips. Stop-loss orders are essential tools for managing risk and protecting capital in volatile markets.

The spread is the difference between the bid (selling) price and the ask (buying) price of a currency pair. It represents the cost of trading and is typically measured in pips. For example, if the EUR/USD bid price is 1.1000 and the ask price is 1.1002, the spread is 2 pips. Lower spreads benefit traders by reducing transaction costs.

Short selling in forex involves selling a currency pair the trader doesn’t own, anticipating its value will decrease. For example, shorting USD/JPY means selling US Dollars against Japanese Yen with the intention of buying them back later at a lower price. Profits are made if the currency pair depreciates, making it a critical strategy for bearish markets.

Strike price is the pre-agreed price at which the holder can buy or sell a currency pair. For example, a trader holding a EUR/USD call option with a strike price of 1.1200 can purchase the pair at that price, regardless of the current market rate. The strike price is pivotal in determining the profitability of an options trade.

Share prices of multinational companies can influence forex markets through cross-border investments and economic sentiment. A rising share price in a major economy may strengthen its currency, as foreign investors buy more shares and, consequently, the currency of that country.

Shares represent ownership in a company and indirectly affect forex markets. When international investors buy shares of foreign companies, they increase demand for that country’s currency. Similarly, large movements in stock markets can influence currency trends through investor sentiment and economic outlooks.

The Sterling Overnight Index Average (SONIA) is a benchmark interest rate for overnight loans in the GBP market. It influences forex traders dealing in GBP pairs by reflecting the cost of borrowing and market liquidity. SONIA is vital for understanding short-term GBP rate movements.

The spot market is where currencies are traded for immediate settlement, typically within two business days. It contrasts with forward or futures markets. Spot transactions are straightforward and form the majority of forex trades, focusing on current exchange rates.

The spot price is the current market rate at which a currency pair can be bought or sold. It serves as the basis for spot market transactions and reflects real-time supply and demand dynamics.

A spot trade involves buying or selling a currency pair for immediate settlement at the prevailing spot price. It is the most common form of forex trading and is used by both speculators and businesses for currency conversion.

A stock exchange is a marketplace for trading equities, indirectly influencing forex markets through cross-border investments and economic indicators. Movements in major stock exchanges often correlate with currency strength.

A stop entry order is an instruction to buy or sell a currency pair when its price reaches a specific level. For example, a trader might set a buy stop order for EUR/USD at 1.1050, entering the trade only if the price rises to that level.

A swap refers to the interest fee paid or received for holding a position overnight. It depends on the interest rate differential between the currencies in a pair. Swaps are significant for carry trading strategies.

A tick represents the smallest incremental price change of a currency pair in the market. Ticks are used to track real-time price movements, providing a granular view of market activity. For example, if EUR/USD moves from 1.1000 to 1.1001, that’s a one-tick increase. Ticks are essential for high-frequency and algorithmic trading strategies, where even the smallest price changes matter. They also help traders identify trends in volatile markets. Unlike pips, which are standard units, ticks can vary across different platforms and instruments, depending on their decimal pricing structure.

Time value represents the portion of an option’s premium based on the time remaining until its expiration. The longer the duration until maturity, the greater the time value, as there’s more opportunity for the currency pair to move favorably. Time value diminishes as the expiration date approaches, a process known as time decay. It is calculated as the difference between the option’s premium and its intrinsic value. Traders consider time value when deciding whether to hold or sell an option, balancing the potential for profit with the impact of time decay.

Theta is a measure of time decay in forex options, representing the rate at which an option’s premium decreases as it nears expiration. It is expressed as the amount by which the option’s value declines daily, assuming all other factors remain constant. For example, a theta of -0.05 indicates the option loses $0.05 in value per day. Theta is higher for options close to expiration and low for long-dated options. Traders using forex options must account for theta to determine whether potential market movements will offset the inevitable time decay.

A takeover refers to the acquisition of a company, particularly when it involves cross-border transactions. Such takeovers often influence currency values due to significant capital flows. For instance, if a U.S. company acquires a European firm, there might be increased demand for the Euro, strengthening it against the U.S. Dollar.

A take-profit order is a predetermined instruction to close a trade when a specific profit level is reached. It helps traders lock in gains without manually monitoring the market. For example, if a trader buys EUR/USD at 1.1000 and sets a take-profit order at 1.1050, the trade will automatically close when the price hits 1.1050.

Technical analysis involves studying historical price charts, patterns, and technical indicators to predict future currency movements. Traders analyze tools like moving averages, Fibonacci retracements, and candlestick patterns to identify trends and entry or exit points.

The 10-year government bond yield is a key economic indicator influencing forex markets. It reflects the interest rate on long-term borrowing and serves as a benchmark for economic stability. In forex trading, rising 10-year yields often strengthen a country’s currency, as higher returns attract foreign investments. For example, an increase in U.S. 10-year Treasury yields typically boosts the U.S. Dollar. Conversely, declining yields may signal economic uncertainty, weakening the currency. Traders closely monitor 10-year yields to anticipate interest rate changes and their impact on forex pairs.

A thin market is characterized by low trading volume and liquidity, leading to higher volatility and wider spreads. Such conditions often occur during holidays, after major trading sessions close, or in less-traded currency pairs. For example, trading exotic currency pairs like USD/TRY might involve thin markets, resulting in unpredictable price movements. Thin markets pose risks for traders, as executing large orders can significantly impact prices.

Time to maturity refers to the period remaining until the option’s expiration date. It significantly affects the option’s premium, as more time provides greater potential for the underlying currency pair to move favorably. For example, an option expiring in six months will generally have a higher premium than one expiring in one week, assuming all other factors remain constant. As time to maturity decreases, the option’s time value diminishes due to time decay.

The Tokyo session is one of the major forex trading sessions, running from 09:00 – 18:00 (JST). It is particularly active for currency pairs involving the Japanese Yen (JPY), Australian Dollar (AUD), and New Zealand Dollar (NZD).

Tomorrow Next or Tom/Next is a swap transaction that rolls a position forward by one day, settling it on the next business day.

The trade balance measures a country’s exports minus imports. A surplus strengthens its currency, while a deficit weakens it in forex markets.

Trade size in forex refers to the volume of a currency pair traded, usually measured in standard, mini, or micro lots.

A trading halt occurs when market activity temporarily stops due to extreme volatility, news events, or regulatory intervention.

A currency is “trading heavy” when there’s consistent selling pressure, often indicating bearish sentiment or weakening fundamentals.

The transaction date is the day a forex trade is executed, with settlement occurring typically two business days later.

Turnover refers to the total value of all currency trades executed within a specific time period, reflecting market activity and liquidity.

A unit trust is a pooled investment fund where investors’ money is combined to purchase a diversified portfolio of assets. In the forex market, unit trusts may include currency-related investments, such as foreign exchange derivatives or bonds denominated in foreign currencies. These trusts provide investors with exposure to forex without requiring direct trading. The value of a unit trust is determined by the performance of its underlying assets, making it a useful tool for diversification and risk management.

Undervaluation occurs when a currency is priced below its perceived fair value based on economic fundamentals like purchasing power parity (PPP) or trade balance. For example, if the USD/JPY exchange rate suggests the Japanese Yen is undervalued, it means the Yen’s market price is lower than its theoretical value.

Ugly describes a currency experiencing extreme weakness due to adverse economic data, political instability, or market sentiment. An ugly currency might face significant selling pressure, leading to sharp declines in its value. For example, if a country’s GDP contracts unexpectedly, its currency might be labeled as “ugly” by traders, reflecting its unattractive outlook.

The underlying refers to the primary asset or currency pair on which a derivative, such as an option or contract for difference (CFD), is based. For example, in an option contract on EUR/USD, the underlying asset is the EUR/USD currency pair.

An uptick is a price movement where the current price of a currency pair is higher than the previous one. For example, if EUR/USD moves from 1.1000 to 1.1002, it is considered an uptick. Upticks are often monitored in bullish markets or as part of technical analysis to identify upward momentum.

The value date refers to the day on which the actual settlement of a currency transaction occurs. It is the date when the exchanged currencies are delivered and payment is made, typically two business days after the trade date in a spot transaction.

Volatility refers to the degree of variation in the price of a currency pair over time. High volatility indicates significant price fluctuations, which can provide both opportunities and risks for traders. It is typically measured using indicators like the Average True Range (ATR) or Bollinger Bands. Volatility is influenced by factors such as economic reports, geopolitical events, or market sentiment. Traders often look to capitalize on volatility, especially in short-term trading, but must manage the risks associated with unpredictable price swings.

Vega is a measure of an option’s sensitivity to changes in the volatility of the underlying asset in the forex market. Specifically, it indicates how much an option’s price is expected to change in response to a 1% change in volatility. For example, if an option has a vega of 0.10, its price will increase by 0.10 units if volatility rises by 1%.

A vanilla option in forex refers to a standard, straightforward option contract that gives the holder the right, but not the obligation, to buy or sell a currency pair at a predetermined price (strike price) on or before a specified expiration date. Vanilla options come in two types: call options (right to buy) and put options (right to sell). These options are typically contrasted with more complex derivatives and are widely used by forex traders for hedging or speculative purposes.

Variation margin refers to the additional funds that a trader must deposit or receive to maintain a position in a leveraged account. It is calculated on the basis of the daily changes in the market value of a position that moves against the trader’s open position.

The wedge chart pattern is a technical analysis pattern that signals potential trend reversal or continuation. It forms when the price moves within converging trendlines, either upward (rising wedge) or downward (falling wedge). A rising wedge often indicates a bearish reversal, while a falling wedge suggests a bullish reversal. Traders monitor the breakout point, where the price moves outside the wedge, for potential trading opportunities.

A whipsaw refers to a situation where the price of a currency pair moves sharply in one direction, only to reverse quickly and move in the opposite direction, trapping traders. This sudden price movement can trigger stop-loss orders and cause significant losses for traders who are caught off-guard.

Wholesale prices refer to the price charged for goods sold in bulk to retailers or other businesses before they reach consumers. In forex, wholesale price indices, such as the Producer Price Index (PPI), are closely watched as they give insight into inflation trends. Rising wholesale prices may lead to inflation, which could influence central bank monetary policy and affect currency values.

A working order is an order that remains active until it is either executed or canceled. It can be a buy or sell order set at a specific price or within a specific time frame, such as a limit order or stop-loss order. A working order may remain unfilled if the market does not reach the predetermined price or conditions.

Xenocurrency is a foreign currency that is held or traded outside its country of origin. For example, US dollars held in Europe or Japanese Yen held in the US are considered Xenocurrencies.

The Yen (JPY) is the official currency of Japan and one of the most widely traded currencies in the global forex market.

A yard is a slang term for one billion units of a currency.

Yield refers to the return on an investment, usually expressed as an annual percentage rate. It is often associated with government bonds or other debt securities and is used to compare potential returns from different currencies or financial instruments.

YOY (Year Over Year) is a financial metric used to compare the performance of a variable, such as currency value or economic indicators, from one year to the next.

The Yuan (CNY), also known as the Renminbi (RMB), is the official currency of the People’s Republic of China.

A yield curve is a graph that plots the interest rates of bonds (or other debt securities) against their maturities, from short-term to long-term.

A zero-coupon bond is a type of bond that does not pay periodic interest but is issued at a significant discount to its face value.