Forex Terminology and Slang Expressions

Forex Terminology and Slang Expressions

Forex Terminology

When you start a new profession or even a hobby, you are destined to come across various terminologies that you will not understand at the moment but with time, they will come clear. The major problem with not understanding the sector's terminologies is the fact that it impedes your progress in the field you have chosen.

There are many people, especially the older ones, who openly reckon that they will never be able to understand things like the computers as the terminology used sounds just like a foreign language to them. The same point of view applies when it comes to Social Forex Trading. To clarify the Forex terminology, we prepared the following article.

Of course, this list isn't finished and we'll update it from time to time so make sure to visit this page once in a while.

Active BalanceAskBase CurrencyBearBetter Price
CFDChangeChange %Close PositionCurrency Risk
Day TradingECBExecution WarrantFOREX / FXGTC
Indicative QuotesIndicators GraphicInitial MarginLeverageLimit
Liquidation BalanceLockLossLotMargin
Margin OrderMarket LiquidityMarket MakerOCOOmega
Open PositionPip or PointsResistanceSpreadStop Loss Order
Technical AnalysisUsable MarginUsed Margin

Forex Terminology:

Active Balance - refers to the cash count.

Ask - refers to the rate at which the dealer (bank) sells a financial instrument or the price at which a trader is going to purchase a currency. Basically, it is the price of the seller.

Base Currency - this is the currency that is used to quote all the trades in Foreign Exchange Market. Although some set-ups will allow a trader to select the base currency, it will normally be the USD.

Bear - refers to someone who believes that the position or the market will go down.

Better Price - (better selling price) it describes the better price in case it is higher than is currently available in the market. (Better purchasing price) describes the better price in case it is lower than is currently available in the market.

Bid - refers to the rate at which the dealer (bank) buys a financial instrument. For instance, if you come across a quote such as EUR / USD = 1.2234/38 at a rate of 1.2234 (bid), you are going to buy the bank Euros for US dollars.

Broker - this is whereby the market participants perform transactions using specific set of instruments at the expense and on behalf of the clients or on its behalf and the client's account using the basis of onerous contracts with the client.

Brokerage - refers to the commission or the fee that a broker is paid for the rendered services. The brokerage's amount is normally proportionate to the value of the deal. In other words, it is the person who deals with and puts the trader for the trader.

Bull - refers to someone who has belief that the position or the market will rise.

Cable - this is the slang for the dealers for the USD/GBP exchange rate.

CFD - refers to the transactions of any product in shares excluding their actual delivery.

Change - this is the difference between the closing price of the previous day of trading and the current price.

Change % - it is determined as the ratio of Change and the instrument's current price [% Change = (Change / Price) * 100].

Close Position - a transaction that once made leads to the closure of the position that was open.

Currency Risk - refers to the risk of incurring the losses that ensue from any unfavorable change of the exchange rates.

Day Trading - refers to opening and closing at the same positions or position within a one day's trading (day trading).

ECB - stands for the European Central Bank.

Execution Warrant - this is whereby a transaction broker is committed in line with the warrant (order) and cancellation of orders.

Foreign Exchange or Forex, FX - is the international market exchange. It is basically the buying of one currency and selling of another at the same time. The currencies are written in pairs such as GBP/USD.

GTC (Good Till Cancelled) - this implies that an order is left with the dealer to sell or buy at a price that has been pre-established by the trader. The trade will automatically be carried out the moment the price is met.

Indicative Quotes (Composite) - these are the quotes that come from various banks. They show the Forex market's general trends and allow for their analysis.

Indicators Graphic - refers to the means of technical analysis that assist in the behavior prediction of the market.

Initial Margin - this refers to the first deposit of necessary collateral so as to enter into a position. It acts as a future performance's guarantee.

Leverage - this is the credit that is offered by the banks' client in order to perform various transactions. It indicates how many times the margin required is less than the price of the contract. The most common leverage amount is 100:1. This means that for every $100 traded the trader only needs to pay $1 to open trade.

Limit - refers to an order to sell or buy currency at a price that is specified or even better. This warrant is normally exposed so as to capture profits. It can also be used for positions that are open.

Liquidation Balance (Enquiry) - it is evaluated as the difference between the total and the active balance of loss / profit on all the positions that are open.

Lock - refers to the opening two positions for one specification, one instrument and the same size in various directions. For instance, both buying and selling EUR/USD at the same time is a good example of locking a position.

Loss - refers to the loss of transaction (or in the position that is open).

Lot - refers to the target volume transaction financial instrument. Differentiate standard and minimum lots when trading on Forex. Standard lots are 100,000 units.

Margin- in order to cover any likely losses due to unfavorable currency prices movements, the clients are required to deposit funds as collateral.

Margin Order - refers to the order of immediate sale / purchase of currency at a price that is prevailing at the moment on the market.

Market Liquidity - a liquid market is a market in which there is relative frequently committed transaction of selling and buying. It is characterized by the opportunity for the seller (buyer) to rapidly sell (buy) products or goods.

Market Maker - refers to situation whereby financial companies and large banks determine the level of current exchange rate at the expense of a significant portion of its operations in the total market. They set the current exchange level rate via a transaction with smaller banks and each other. A market maker keeps a trading book.

OCO (Order Cancel Order) - this type of order is a combination of two separate orders for the sale or purchase. The moment one part of the order is executed (the first that can be executed), the other order is cancelled automatically.

Omega- also one of the most powerful and popular programs used in analysis technically.

Open Position - this is any deal that has not been settled monetary payment reversed by opposite and equal deal for the same value date.

Pip - refers to the smallest move that an exchange rate is capable of making. This could be 0.01 in the case of USD/JPY or 0.0001 in the case of USD/CHF, GBD/USD, and EUR/USD.

Resistance- this is the level at which the charts are suggesting that selling is going to take place.

Spread- refers to the difference between the offer (ask) and bid prices. Used in measuring the liquidity of the market. When the spreads are narrower, this is an indication of high liquidity.

Stop Loss Order - this is an order to sell or buy when a certain price is reached either below or above the price that was prevailing when the order was being given.

Technical Analysis - this is an attempt to predict the future market activity with the help of analysis obtained from historical market data.

Usable Margin - refers to funds that may be used open new positions or removed from the account.

Used Margin - refers to funds which are involved to maintain all the open positions available at the time of the data.

We hope it was helpful.