Pinnacle Forex Group

Forex Glossary:

ADX (Average Directional Index)- This standard technical indicator measures the strength of a trend.

Ask (Offer Price)- The price at which the trader enters the market in a long or buy position in the forex market. This is the price where the trader buys the base currency.

Aussie- Common name for reference to the Australian dollar.

Bank Rate- The percentage rate at which a central bank of a country lends money to their commercial banks.

Base Currency- A base currency is the first currency in any currency pair. It shows how much the currency’s exchange is worth compared against the second currency. (ex. USDCHF, USD is the base pair).

Bid- The price that the trader enters the market in a short or sell position in the forex market. This is the price where the trader sells the base currency.

Broker- The market entity which serves as the middleman between retail traders and larger commercial institutions.

Cable- Common name for reference to the British Pound currency pair.

Carry Trade- Holding a position overnight with hopes of gaining profits on the central bank’s interest rate difference.

CCI (Commodity Channel Index)- A cyclical technical indicator that is commonly used to spot overbought/oversold areas of the market.

Closed Position- (Settled) Completed trades both profitable and losses that are no longer live on the markets.

Commission- These are broker commissions for handling operations.

CPI (Consumer Price Index)- the measurement of inflation based on the change of prices of a specific set of goods.

EA (Expert Advisor)- An automated program which is used by the trading platform to manage orders and functions automatically or with little, or no manual control.

ECN Broker- A type of forex brokerage that provides individual clients direct access to forex market participants. An ECN broker will not discourage scalping, will not trade against the trader/client, will charge low spread (defined by current market conditions and prices). ECN brokers will charge commissions for every trade placed.

ECB (European Central Bank)- The central banking regulatory body of the European Union. Comparable to the US central bank; the Federal Reserve.

Equity- Total account balance plus total open positions. The net worth of the account after all positions have been closed.

Fed (Federal Reserve)- The central banking regulatory body of the United States of America.

FOMC (Federal Open Market Committee)- A group that regulates, among many other things, federal interest rates. FOMC works in conjunction with the Fed.

Fibonacci- A mathematical calculation based on the Fibonacci sequence of numbers named after Leonardo of Pisa, later became known as “Fibonacci”.

Retracements- Fibonacci levels shown to have a high probability of a trend break or bounce, Fibonacci sequences are calculated as the 23.6%, 32.8%, 50% and 61.8% of the trend range.

Fundamental Analysis- Analysis of a market based only on news events, economic indicators and events happening globally.

Gartley Pattern- A complex formula of price patterns based on advanced Fibonacci calculations. Forex traders use it to determine buy and sell positions by measuring Fibonacci retracement points.

GDP (Gross Domestic Product)- A very important measurement of the total national income and total output for a country's economy.

Hedging- A market position in the opposite direction which secures the existing open positions. Possibly in the same pair or even adversely related pairs.

Jobber- A term for a trader which focuses on fast but small, short-term profits from intra-day trading.  Much like what could be seen in a scalper. Jobbers rarely leave trades open overnight.

Kiwi- Common name for reference to the New Zealand dollar.

Lagging Indicators- An economic indicator set to change after the economy has already made its changed. A lagging indicator in the forex market is used to give a signal of a trend after a new trend or reversal takes place.

Leading Indicators- An economic indicator set to give indication of change before the market changes. A leading indicator in the forex market is used to give a buy signal in advance before a new trend or reversal takes place.

Limit Order- A pending order style trade set to buy the currency pair for a fixed or lesser price, or sell the lot for fixed or better price. Such price is called limit price.

Liquidity- The ability to buy or sell a currency without a major effect on the entire pair movement. The more liquid a currency pair is, the less it will move when large buying or selling orders are executed.

Long- A buy position or buy direction. In the forex, a long is when the primary currency is bought and another is sold.

Loss- Closing a long position at lower market value than when opened.  In a short position closing at a higher market value than when opened. Loss may also be the profit from a trade closing equals less than brokers commission on the trade.

Lot- A unit used to measure the amount of a trade. The value of the trade consists of a certain number of lots. The actual trading value of each lot varies depending on if you are trading a standard account or a mini account.

Margin- The amount of money the trader needs set aside from the account balance as a deposit to open a position with the broker in order to execute the trade and keep positions open. Margin is used as a leverage to be able to place trades with the interbanks as a “good faith deposit”.

Margin Call- When the equity in an account drops below the used margin level, a margin call will be given and some or all open positions will be liquidated based on size of the trade and the broker. The trades are then closed by the dealing desk at market value. At that point more investment capital may be needed for the account to enter more trades.

Market Order- An order to buy or sell a currency pair at accepted market price.

Market Price- Also called Price Action; it is the current price at which the currency pair is traded for on the market.

Momentum- The force or speed of the market movement and its ability to continue moving in a specific direction.

Moving Average (MA)- One of the most basic forms of technical indicators. A moving average shows the rate calculated over a given series of time periods plotted on a chart.

Exponential Moving Average (EMA), Weighted Moving Average (WMA) etc.- Ways of measuring the average movement of a pair over a period of time.

Offer (Ask Price)- The price at which the trader enters the market in a long or buy position in the forex market. This is the price where the trader buys the base currency.

Open Position (Trade)- Any current live running position; buying (long) or selling (short) for a currency pair.

Order- A request for the broker to open a buy or sell position on a currency pair at a specific rate and time.

Pivot Point- A specific range or price of a support/resistance level(s) calculated based on the previous highs, lows and close prices of a pair or time period.

Pip (Point)- Percentage In Point. One point of movement on the market. Pips are calculated to the 1/100 of 1 percent. (e.g. for GBP/USD 1 point = 0.0001).

Profit (Gain)- The positive amount of earnings gained after the position is closed.

Price Action- Also called Market Price; it is the current price at which the currency pair is traded for on the market.

Principal Value- The initial amount of capital invested into an account.

Quote Currency- A quote currency is the second currency in any currency pair. This half of the pair is commonly called the pip currency; any possible profits or losses are expressed in the quote currency.  (ex. USDCHF, CHF is the quote or pip currency).

Realized Profit/Loss- The net gain/loss for previously closed positions after all deductions.

Resistance- A price level or range where potential reversals are likely to occur off a buy position; frequently based off of past history and previous trends.  

RSI (Relative Strength Index)- A type of technical indicator that measures momentum by comparing the amount and movement of recent gains to recent losses. In the forex market we use this to determine overbought and oversold conditions of a pair.

Scalping- A fast paced style of trading done by holding many positions collectively or individually that are opened for numerous small and short-term profitable trades.

Settled Position (Closed)- Completed trades both profitable and losses that are no longer live on the markets.

Slippage- The execution of an order for at a price different than the traders order expectations. Some main reasons that cause slippage are fast moving markets, low liquidity and delay in the broker's ability to fill the order(s).

Spread- The difference between ask and bid prices for a given currency pair. This will vary according to pairs, brokers, and many other factors.

Standard Lot- The size of 100,000 units of the base currency with which you are buying or selling.

Stop Order- A pending order style setup to buy at a price higher than current price action; to setup a sell at a price lower than current price action.

Stop Loss- A price or range at which the trader sells or buys at when the market reaches an area to exit the market. In the forex we use a stop loss to avoid additional losses or decreases in gains when market turns in the opposite direction.

Support- A price level or range where potential reversals are likely to occur off of a sell position; frequently based off of past history and previous trends.

Swap- An interest charged or paid for holding a traders position overnight.

Technical Analysis- The study and analysis of the price movements on a chart.

Trend- The direction and movement of a currency pair over a given period of time, based on individual time frames.

Unrealized Profit/Loss (Floating)- Profits or losses for on all open positions.

Useable Margin- “leftover” funds in an account that can be used to leverage existing trades or for executing additional trades.

Used Margin- Funds in an account, set aside by the broker; that are currently being used to hold open positions.

Volatility- The amount of uncertainty or risk with regards to a currency pair. A higher volatility means that a trade can potentially make large movements in a relatively short period of time; thus increasing the risk of that trade.