Forex Glossary

Valuable Trading Terms

Ask- the market price for the purchase of an asset

Asset/Instrument – a financial product traded on the global markets, such as a currency, stock, index or commodity

Bear Market – a weak market with falling prices that supports selling

Bid - the market price for the sale of an asset

Bond - a debt instrument, which is issued for a specific time frame, and used as a means of raising capital

Bull Market - a strong market with rising prices that supports buying

CFD’s (Contracts for Difference) - types of derivative including indices like the Nasdaq, or commodities like wheat, which enable the investor to trade virtually on the price movements of an underlying asset, without buying the actual financial product

Commodities- raw products traded on the markets including precious metals, like gold, energy products, such as crude oil, and agricultural assets such as corn.

Derivative - a type of financial contract for trading an underlying asset, frequently used as part of a hedging strategy to limit an investment portfolio’s exposure

Dividend - the share of a company’s profits which is distributed to its shareholders

Future - a contract with a transaction price established in the present, at the time contract is set, that is scheduled to automatically enter into effect at a prearranged future date

Fundamental Analysis - a means of predicting the price direction of an asset, based on financial, social, political, or climate news, as well as economic announcements and reports such as the GDP report, or the Unemployment Claims Report

Hedging – a way to minimize risk by opening a secondary trade to mitigate potential exposure in case the primary trade has an unsuccessful outcome

Index - a global financial exchange, like the American Dow Jones, or the German DAX, where stocks are traded

Leverage – a means for the investor to increase their market position to hundreds of times its size by borrowing from the broker to boost their investment power

Long Position - the purchase of an asset in advance of a projected increase in its market value

Lots - units of measurement, with one lot equal to 100,000 of the base currency for the trade

Margin – a form of collateral requested by a broker to cover the investors open trades

Margin Call - a request for further collateral to cover a position moving against the investor, which is made by the broker, who will close the position if the additional funds are not deposited

Overnight Position – a trade that is held open overnight until the next business day

Pip - the smallest currency unit possible, used to calculate market profits and losses, it is the fourth and last digit following the decimal point, a ten thousandth of a currency

Resistance - the peak level for the fluctuations in the asset’s price

Short Position - the sale of an asset in advance of a projected fall in its market value

Spread - the difference between the bid price and the ask price

Stock – a part of a company, which is owned by a stockholder, an investor who owns a percentage of the company’s profits

Stop Loss - an order that automatically closes a losing position once it reaches a preset price below the opening value, so as to prevent additional losses if the price continues to drop

Support - the bottom level for the fluctuations in the asset’s price

Take Profit – an order that automatically closes a favorable position once it reaches a pre-set price above the opening value, so as to prevent a loss of profits in the case of a price reversal, before the investor has had the opportunity to close the position

Technical Analysis - a means of identifying market trends, and projecting the price direction for an asset, using charts and graphs that show the asset’s performance history

Volatility - a state of heightened market activity, presenting greater investment opportunities, as a result of increased market fluctuation

Yield -the profit percentage earned on an investment