Forex Terms and Definitions
Important Forex Terms and definitions explained in this glossary document. all other articles about What is Forex.
Important Forex Terms ordered by first letter, forex glossary.
Forex Terms starting with "A"
Ask referst to the price that traders buy a currency. Ask may be known as offer. It is the accepted price by the traders for selling.
Forex Terms starting with "B"
Boc stands for Bank of Canada. It is central bank of Canada.
Boe stands for Bank of England. The central bank of UK.
Boj is related to Bank of Japan. The central bank of Japan.
As we mentioned before base currency is used for determining a pair. For example in USDJPY pair Usd is the base currency.
Bear stands for a person that believes market is going to decrease in Forex market.
Bear Market stands for a market that the prices decreases quickly contrast of the Bull Market.
Bid stands for a price that the currencies will be soldy by the forex traders.
In forex market, ask spread term refers to spread.
Broker stands for an agent or a person who manages traders buying or selling operations. Generally in Forex market brokers earn money from the spread.
Bull stands for a person that believes market will increase again.
Bull market is related to a market that determined by increasing prices.
Forex Terms starting with "C"
Cable stands for a slang word. It refers Sterling/Us Dollar exchange rate.
In forex market, call rate is related to overnight interest rate of interbak.
Cash market stands for a market that physical currencies can be bought and sold.
Central bank refers to a organization which directs a countrys monetary policiy.
This term is used to explain a customer or bank that foreign deals are made. It also refers interest and currenct swaps markets.
This terms stands for an exchange rate between two different currencies. It is measured against to USD.
Currency option refers an opportunity that trade a currency at determined exchange rate for a specific time period.
This term is a risk of a loss that occurs in case of reverse change in rates.
Currency swap refers to a contract to exchange main amounts in different currencies at an exchange rate which decided before.
This term stands for OTC Option to get into a currency swap contract.
OTC Option refers to currenct option that effective more than a year.
Forex Terms starting with "D"
Day trading stands for single days or same positions opening and closing time.
It doesn’t matter the dealers country or what currency is he going to trade foreign currencies are quoted against one USD.
Forex Terms starting with "E"
Ecb stands for Central bank of Europe.
Exchange Rate Risk
This term has the same meaning with Currency Risk.
Forex Terms starting with "F"
Federal Reserve (Fed)
Federal Reserve stands for United States Central Bank.
Fixed Exchange Rate
This term stands for a official rate set of some currencies. It is determined by monetary authorities.
Flat / Square
Long or short positions is not the same with flat or square. If you decide not trade it is called flat or square position.
Floating Rate Interest
Floating rate interest stands opposite to fixed exchange rate. In this type, the rate can fluctuate with market rates.
Foreign Exchange (or Forex or FX)
Foreign exchange stands for buying and selling currencies concurrently through the counter market.
Foreign Exchange Swap
This term refers to operations that includes exchanges between currencies. This exchange occurs on specific day at the rate which agreed at the day of the conclusion of the contract ( it is called short leg) or in the future at the rate that agreed at the day of the contract ( which is called long leg).
Forward term stands for a deal which will start at the agreed time in future. In fx market, forward trades are generally stated as a margin above or below spot rate.
Forex Terms starting with "G"
Gtc stands for "Good Till Cancelled". It is an order to for dealers to trade at fized price. This order can stay until client cancels it.
Forex Terms starting with "H"
Hedging is an operation which is made for entering an investment for avoiding loss in another investment. If hedges decrease losses, they may also decrease profits.
High and low terms are used for explaining highest and lowest traded price fort he base instrument on day of current trading.
Forex Terms starting with "I"
Initial margin stands for a primary deposit. It is required and necessary to enter in a position as a guarantee of next performances.
In forex market Interbank rates stands for the exchange rate. This rate is quoted by the international banks to large international banks.
Forex Terms starting with "L"
Limit order term expresses an order for buying below a significant price or selling above this price.
Long position is a forex market position that currencies are bought by the traders without owning. Generally Long position used in base currency terms.
Forex Terms starting with "M"
Margin stands for a fund is deposited by the traders for avoiding from any losses in case of adversing movements in prices.
Margin call term is used for explaining a demand of additional stocks. It happens when there is no enough money for supporting open trades.
Market Maker term stands for a dealer that procure the price. Dealer is a person who applies the trading book.
Maturity explains an expiration and date of settlement of a financial instrument.
Forex Terms starting with "O"
In forex market offer stands for the price or rate which the trader want to sell at.
One Cancels Other Order (O.C.O. Order)
It refers an order which is canceled by the one part.
Open position term stands for a deal that hasnt been happened by payment or reversed by different deal.
Over The Counter (OTC)
Over the Counter term means a transaction which is not performed over an exchange.
Overnight Trading stands for a purchase or sale operations. These operations happen in between 9.00 am and 8.00 am on the next day.
Forex Terms starting with "P"
Pip (or Points)
Pip term explains small moves of exchange rates. It measures amount of changes in rate of exchange for a currency pair. It is equivalent of 1/100 of one percent.
There may be uncertainty on an insvment because of the goverments actions. Political risk term explains this situation. And it can be harmful for traders.
Forex Terms starting with "R"
Resistance stands for a level of price that you are expecting to sell.
Risk Capital term is used for explaining the money which a person can pay for investing. Loosing this money doesnt change his financial condition.
Rollover term is used for explaining the situation where the deal settlement is postponed to another date which is determined upon rate differential of the interest of currencies.
Forex Terms starting with "S"
This term stands for an actual exchange of currencies.
Short term refers to going short. It means selling an instrument without owning and holding short position with belief of the decline of the price. In this case, this instrument can be bought again in following days.
Spot refers an operation which happens suddenly. In this type of trade, stocks change hands in two days after the deal is struck.
Spread stands for a difference between bid and ask prices. It is used for surveying the forex market liquidity.
Stop Loss Order
This term stands for an order to trade in the forex market that can be occured in the time specific price is reached.
Support levels is related to a price level that you expect for buying.
Forex Terms starting with "T"
This term stands for operations that includes analyzing the charts, price trends and volumes for estimating the future.
Tomorrow to Next (Tom Next)
Tomorrow to Next is a term that refers synchronous buying and selling of currency for delivery in the next day. In this type of trade the position is closed at closing rate and it is established again in the next day.
This term is related to Rates for that bid and also offer are quoted.
Forex Terms starting with "U"
US Prime Rate
US Prime Rate refers a rate that United States banks lend it to the prime corporate customers.