Forex is one of the fastest growing areas for news traders to get started. The main reason for this is the low entry level (only a few hundred dollars for mini accounts) and the fact that it is fairly straightforward to trade.
The word FOREX is derived from Foreign Exchange and is the largest financial market in the world. Forex is often abbreviated to FX. As the name implies Forex is the exchange of one currency for another at an agreed upon rate.
To help you gain more understanding on forex, here are several terms and commonly used expressions:
Account: The bookkeeping records of a customer’s transactions and credits or debits. The record usually includes confirmation of the transactions and open positions, cash and cash equivalents and beginning and ending liquidity value.
Account balance: The amount of money or debit in an account.
Account executive: The broker or clerk who is assigned to work with the client on behalf of the financial institution.
Ask: An indication by a trader or dealer that he/she is willing to sell a market at a given price. The price at which someone is willing to accept for a tradable.
Available balance: The balance at the disposal of the account owner at the close of a statement period.
Base currency: Currency in which general ledger and P/L account is maintained.
Bid: An indication by a trader of his/her willingness to buy a currency. The price at which a trader can sell.
Breakaway gap: When a security exits a range by trading at a level that leaves a
price area.
Breakout: The point when the market price moves out of the price range.
Bottom fishing: Buying markets whose price appears to have bottomed out or fallen to low levels.
Broker: An individual or firm that facilitates the exchange of tradables between buyer and seller. They can sometime charges a fee or commission for executing buy and sell orders placed by other individuals or firms.
Channel: In charting, a price channel contains prices throughout a trend.
Central Bank: The government bank that coordinates the nation’s banks and flow of payments between different banks. Can also be the central regulatory authority in a country for banks.
Client: A client also called a party, is a person or corporate body involved in any transaction with a financial institution.
Closing price: The price at which transactions took place just before the close on a given day.
Commissions: A fee charged by a broker to a customer for performance of a specific duty, such as buying or selling a currency.
Correction: Price reaction within the market leading to an adjustment.
Currency: A medium of exchange that circulates in an economy. Also referred to as a countries official unit of exchange. The currency may be represented by a currency code.
Daily Range: The difference between the high and low price on a given day.
Dead cat bounce: Rebound in the market that sees price recover and come back up somewhat.
Dip: A slight decline in the market followed by a rise.
Divergence: When two or more averages fail to show confirming trends.
Entry: Point at which a trader gets into the market.
Exit: Point at which a trader closed out of the market.
Exponential average: A mathematical formula where more weight is given to the most recent price.
Fill: An executed order. Sometimes the term refers to the price at which an order is executed.
Limit order: An order to buy or sell when a price is fixed.
Market order: Instruction to a broker to immediately sell or buy at the best available bid or offer.
Moving average: Mathematical procedure to smooth data fluctuations and to assist in determining when to buy and sell.
Open trades: Current trades still held open in customer’s account.
Overbought: Market price that has risen too steeply or too sharply.
Overshoot: To pass beyond or over a specific target range.
Oversold: Market price that has declined too steeply or too fast.
Rally tops: Price level that concludes a short-term rally in an ongoing trend.
Retracement: In technical analysis, price movement in the opposite direction of the prevailing trend.
Skew: The measure of lopsidedness.
Slippage: The difference estimated and actual transaction cost.
Stop-Loss: Risk management technique in which the trade is liquidated to halt any further decline in value.
Tick: Minimum fluctuation of a tradable.
Trailing stop: Stop loss order, which follows the price in a prevailing trend.
Trend: The tendency of statistical data.
Trend channel: Parallel probable price range centered around a price line.
Trend line: A line that connects a series of highs or lows in a trend.
Whipsaw: Price moves back and forth in a tight range without finding direction.