Forex Trading Glossary, FX Terminology, Currency Trading Terms

Any colour can be used and the colour is set by the trader depending on their personal preference. The colour will change automatically as the candle either forms as a bearish or a bullish candle. Many brokers break the price down even further and will include a 5th number called a fractional pip, or pipette – they publish the price as 1.57000. Do not be surprised to see five figures after the decimal when you are looking at the price of most currency pairs on your trading platform.

Short selling definition

A trader whose outlook on the market or a specific financial instrument is positive. A trader who expects prices to rise. It is subdivided into 100 chhertum. The currency of Bolivia (Plurinational State of).

VIX or volatility index Shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. Round trip A trade that has been opened and subsequently closed by an equal and opposite deal. RUT Symbol for Russell 2000 index.

The Ask represents the price at which a trader can buy the base currency, which is shown to the right in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the ask price is 1.4532, meaning you can buy one US dollar for 1.4532 Swiss francs. At best An instruction given to a dealer to buy or sell at the best rate that can be obtained at a specific time.

It gives a trader the right to buy a financial instrument at a specific price, before the expiration date. The close of the Bitcoin Trading candlestick is higher than the open price, revealing positive sentiment. A technical indicator developed by John Bollinger.

The pennant pattern causes a brief pause in the market that lasts less than 3 weeks. The interest rate at which financial institutions in Canada borrow and lend money among themselves. It is updated 8 times per year and released by the Bank of Canada. When a trader’s position is kept open and carried over to the next trading day. The traditional way of trading forex was ‘over the counter’, meaning traders made forex transactions over the telephone or on electronic devices.

It is subdivided into 100 centimos. It also known as arithmetic moving average. The result is known as the average.

• What’s important when trading on leverage is to always keep an eye on your free margin.
• Medley report Refers to Medley Global Advisors, a market consultancy that maintains close contacts with central bank and government officials around the world.
• This can seem a little confusing at first, so we will explain how there is one single price for a pair of currencies.
• It is expressed as a percentage or a fraction.
• When the close price is above the mid-point of the daily range, then a positive number is returned implying buying pressure (accumulation).
• Sovereign names Refers to central banks active in the spot market.

For example if in Europe, the exchange rate between the euro and the dollar would be USDEUR. The decline continues to record lower prices as reflected by the presence of a long black candle. Next session is characterized by a smaller black forex vocabulary body that is completely engulfed by the previous long black body, signaling weakness, setting the stage for a bullish reversal. Gann considered the 45 degrees line the most important line, where the market has some form of balance.

Usually, one pip equals to the fourth decimal of most currency pairs. Given its nature, the bid price is always lower than the ask price.

The more times the support/resistance is checked, the more credible it is for future use. When the price level is penetrated, the roles of support and resistance reverse. Sometimes after the violation of an up trendline, prices will decline a bit before rallying back to the bottom of the old up trendline (now a resistance line).

The default value is 14 but 9 may also be used. RSI is bounded between 0 and 100. When the oscillator moves above 70 it is considered overbought and a reversal warning is indicated.

It is subdivided into 100 kuruş. In the course of a rally a long white candle reaffirms the positive sentiment in the market. The last candlestick is a long black body, signaling a reversal.

This means that the trader has entered a buy position. In forex trading, if the trader believed that the GBP/USD currency pair is going to rise, and they bought that pair, they would be described as “entering a long position”. It forms at the end of a decline or near a support area.

FOMC Federal Open Market Committee, the policy-setting committee of the US Federal Reserve. FOMC minutes Written record of FOMC policy-setting meetings are released three weeks following a meeting. The minutes provide more insight into the forex vocabulary FOMC’s deliberations and can generate significant market reactions. Foreign exchange/forex/FX The simultaneous buying of one currency and selling of another. The global market for such transactions is referred to as the forex or FX market.

Watch this quick video for an overview of forex trading:

Traders enter the market with short positions, pushing prices even lower in the direction of the prevailing trend, to form the lower shadow. Eventually, the downward move is proven short-lived, as bulls take over the control and manage to close the session at the upper area of the candle.