Glossary Industry’s most common terms at a glance. A The Abandoned Baby is a three-bar reversal candlestick pattern, formed by three candles: one doji and two candles with real bodies. This pattern can be expressed as either a Bullish Abandoned Baby or a Bearish Abandoned Baby. Both patterns signify a rapid shift in the market price. Absolute drawdown is the decrease of the initial deposit amount in a trading account to zero, after a series of unsuccessful trades. Account history is a report that keeps track of all the trading activity that takes place within an account. An account statement report is a record of all the transactions made in a trading account within a specific period. The account balance shows the total amount of money you have in your trading account. It is only affected when you deposit more funds in your account, close a position, or leave a position open overnight. The accumulation/distribution indicator uses volume flow and asset price to determine whether an asset is being accumulated or distributed. It can show how supply and demand can affect price. The accumulative swing index is a trendline indicator used to measure long-term trends in asset prices to determine possible buy or sell signals. It uses the asset’s opening, closing, high and low prices. Actionary waves theory is a technical analysis method. It is based on the idea that the market forms the same kinds of waves or patterns on a shorter timeframe as on a longer timeframe. These patterns could be indications as to which direction the market may move in next. Also known as the ADP Jobs Report, the ADP National Employment Report is a monthly national report tracking the level of nonfarm private employment in the US. It is considered a preview of the Bureau of Labor Statistic’s employment situation report. The advance/decline index, also known as the advance/decline line or A/D index or line, is a breadth indicator representing the progressive difference between the number of climbing and falling stocks in an index. An increasing A/D index indicates the market is gaining momentum while a declining value indicates the market is losing momentum. Algorithmic trading involves automated pre-set trading instructions and rules. The trader attempts to make trading decisions by taking advantage of the speed and accuracy of a preset code that executes trading orders. Alligator is a technical indicator that uses smoothed moving averages. It can help the trader read trading signals and confirm the presence of a trend and its direction. It is called the alligator because it involves three overlaying lines on a chart, that altogether represent the mouth of the animal. The term Altcoin is short for “alternative coin” and refers to any cryptocurrency other than Bitcoin. An analyst is an individual who examines the market through fundamental or technical analysis. Market analysis usually involves studying relevant financial data and conditions affecting the market. Currency appreciation refers to the rise in the value of one currency against another. Currency appreciation can occur because of multiple reasons including government policies, trade balances, interest rates and more. Arbitrage refers to buying and selling a financial asset at the same time at two separate prices to possibly benefit from price differences. The trader places an equal and opposite order on the same asset to possibly capitalize on the difference with minimal risks. The ascending trend line refers to a bullish chart pattern with two or more higher lows connected with a straight line, creating an upward sloping trend line. The Asian session is the first trading session of each day and is considered to run between 11:00 pm and 08:00 am GMT. The ask price is the price at which a trader accepts to buy a financial asset. The ask rate is the lowest price at which a seller is willing to sell a security. The term “asset” refers to a commodity, cryptocurrency, currency pair, index, or stock. It is the financial instrument on which the price of a derivative, such as a contract for difference (CFD), is based. Asset allocation involves apportioning the assets in a portfolio according to a person’s risk tolerance goals, and investment horizon to balance risk and reward. At the Money, also known as ATM, refers to a trade breaking even. No profit or loss is made. All time high also known as ATH is the highest price an asset has ever reached on the market breaking all past records. Average true range is an indicator used for technical analysis. It measures the volatility of an asset on average, within a specific timeframe. An attorney in charge is an individual who is authorized to act on behalf of another trader. “Aussie” is a popular nickname for the Australian dollar or AUD – the Commonwealth of Australia’s official currency. Sometimes “Aussie” is used to refer to the AUDUSD (Australian Dollar vs US Dollar) currency pair. Automated trading systems automatically place buy and sell orders on electronic exchanges based on a predefined set of rules. “Average hourly earnings” refers to an average of the amount of money employees make per hour in the US for a specific month. Average directional movement index is a technical analysis indicator that measures the strength of a trend. It helps traders determine whether they should take a long or short position or open a trade at all. Awesome oscillator is a technical indicator of market momentum plotted above and below a zero centerline as a histogram of the average of two simple moving averages – one of recent momentum and another one covering a longer period in the market. It can be used to forecast potential trend direction or trend reversal. B Account Balance is the amount of money a trader has in their trading account. Balance of trade (BOT) is a country’s value of exports minus the value of its imports. The balance of trade can be used to gauge the relative strength of a country’s economy. Bank Of International Settlement also known as BIS is an international financial institution that acts as a bank for central banks. It is dedicated to promoting international monetary and financial stability through cooperation. Bank interest rate is the interest rate charged by a central bank to its domestic commercial banks when lending them money. A bar chart consists of multiple price bars showing an asset’s highest and lowest prices for a given period. The bars are placed next to each other making up a chart – a visual representation of the asset’s price movements. The barrel is a unit of volume amounting to 42 US gallons and it is used for measuring the amount of Brent oil, Crude oil, and other petroleum products. The price of oil is defined per barrel while the barrel can also be used to define contract sizes when trading oil. A base currency is the currency that appears first in a forex currency pair. Base rate is the interest rate charged by a central bank to its domestic commercial banks when lending them money. Also known as bp, bps or bips, it is 0.01% or 0.0001 or 1 per cent of 1 per cent. It is usually used to refer to interest rate changes which are below one per cent. A currency basket is a group of currencies with various weightings. It can be used by monetary authorities such as central banks to help determine the value of their currency. A bear is a trader who’s pessimistic about the markets and expects prices to drop from recent highs. A bear candle is a red candle with a close lower than the open price. A Bear Market is a state in which the asset prices in a market have fallen by 20% or more. Bearish refers to the negative sentiment of expecting market prices to fall. A bearish engulfing pattern is a technical chart pattern signaling lower prices to come. Traders consider this to be a bearish reversal pattern. It includes 2 candlesticks – a smaller up candle followed by a larger down candle that “engulfs” the first candle. Bid is the amount of money for which a trader is willing to sell a security. Bid/Ask spread refers to the difference between the ask and bid price of an asset. The bid-offer spread refers to the difference between the ask and bid price of an asset. “Binary options” is a type of investing in which investors can only choose between two possibilities. They can forecast whether the price of an asset will exceed or drop below a specified amount and either receive a pre-determined amount of money or nothing at all. Bitcoin is a decentralized digital currency and the largest cryptocurrency by market cap. A block is a space in a blockchain where transaction information is encrypted and permanently stored. Blocks work as permanent records of information that cannot be modified or removed. A blockchain is a system in which a secure and decentralized digital record of transactions is kept, duplicated, and shared across a large network of computers on the system. This makes the information difficult or impossible to alter or remove. Blue Chip or Blue-Chip stocks refer to the shares of large companies that have exceptional reputation. Coca-Cola Co. and Boeing Co. are two examples of blue-chip stocks. The term “Bollinger Bands” refers to a technical analysis tool and a volatility indicator. Bollinger Bands can measure volatility, can be used as indicators for levels of support and resistance and can generate oversold or overbought signals. The bands comprise an upper and a lower band, plotted above and below a simple moving average. A bond is a financial debt instrument that involves lending money to an institution and getting repaid with the principal and a predefined interest upon the maturity date. Bond yield is the expected earnings an investor realizes on a bond. It is expressed as a percentage or as an interest rate. A bottom is a significant low on a price chart that can signal the end of a downtrend. Break even is a point of zero-profit / zero-loss at which a trader neither makes nor loses money. A trader closes the position at the price at which they entered it. A bearish breakaway is a five-candle formation that occurs during a bearish reversal. A long green candle appears first. The second candle is green and opens above the previous closing price creating a gap. The third and fourth candles also open above the previous closing price. The last candle has a long red body. A bullish breakaway is a five-candle formation that occurs during a bullish reversal. A long red candle appears first. The second candle is red, and opens below the previous closing price creating a gap. The third and fourth candles also open below the previous closing price. The last candle has a long green body. A breakdown occurs when the price of an asset falls below an identified support level signaling possible further drops. A breakout occurs when an asset’s price climbs above a resistance area or drops below a support area. Brent Crude also known as Brent oil is a light-sweet crude oil blend drilled out of the North Sea. Its price is considered as a benchmark for other oil prices. A broker is a firm or an individual that executes buy and sell orders on behalf of retail clients or financial and commercial institutions. A bull is a trader who is optimistic about the markets and expects prices to rise. A bull candle is a green candlestick that reveals positive sentiment. The close of a bullish candlestick is higher than its open price. A bull market is the condition in financial markets during which asset prices go up or are expected to climb higher. “Bullish” is used to talk about rising prices in the financial markets, or about the optimistic view that asset prices will go up. The bullish engulfing pattern includes two candlesticks, and it is a reversal pattern that appears in a downtrend. The first candle has a small body and short wicks while the second candlestick has longer wicks and a bigger real body that “engulfs” the previous candle’s body. A bullish reversal occurs when a bearish market – a market in which prices keep falling for a prolonged period of time – starts to move in the opposite direction. Bundesbank is the Federal Republic of Germany’s Central Bank. Business climate is the overall economic environment in a financial system which pertains to the operational and political business activity within an industry or a group of enterprises. Business climate surveys are usually conducted to measure the state of a territory’s business environment on a monthly or yearly basis. Business confidence expresses companies’ expectations based on survey data for finished goods, orders, and production. The business confidence index can also indicate possible growth and forecast fluctuation in economic activity. A buy limit order is an order that allows you to purchase an asset at a specified price or below it. A buy order, also known as purchase order, is an instruction to a broker to buy a certain number of assets at a specified limit price. Buy – side is the part of the financial markets that includes investing institutions like insurance firms, mutual funds, pension funds or hedge funds which buy securities with the intention of generating profit either for their own accounts or for investors. C Cable is used to refer to the exchange rate between USD and GBP, or just the British pound. CAD is the currency abbreviation that refers to the Canadian dollar, also known as the “loonie”. The Caixin China General Manufacturing Purchasing Managers’ Index (PMI) is a composite indicator. It measures the overall activity of the manufacturing sector for China. It is considered a leading indicator for China’s economy and is closely watched by investors every month. A reading below 50.0 indicates a declining economy while a reading above 50.0 indicates an expanding economy. Candlestick charts contain multiple candlesticks showing the open, close, high, and low prices of a financial asset for a specific period. The charts are used by traders to forecast possible price movements based on previous patterns. The capacity utilization rate expresses the percentage at which an organization achieved its production’s full potential. Any number below 100% signals that an organization has produced less than the capacity it can reach. The Fed publishes capacity utilization rates for the US economy every month. Capital expenditure or CapEx refers to the money a government spends on the development of long-term assets including building roads, railways, health or education facilities. Capital expenditure can also refer to the money spent on fixed assets or on investments that could generate profits or dividend in the future. Capital gain is the gain you receive once you sell an asset for a higher price than what you bought it for. Capital loss is the loss you incur once you sell an asset for a lower price than what you bought it for. A carry trade in forex occurs when a trader tries to profit from the interest rate differential between two currencies. Traders buy a high yielding (high-interest) currency against a low yielding (low-interest) currency to receive the interest rate difference between the two currencies from their broker. Carry-over charges are finance related charges referring to the storage of commodities or forex contracts. In CFD trading, it refers to the rollover or swap fees. Cash flow refers to the total sum of money that moves in and out of a business. Consumer Confidence is a survey conducted and released by the Conference Board and it reflects consumer attitudes and confidence. It measures the degree of optimism or pessimism consumers feel about a country’s economic activity and their own personal financial situation. The Fed highly regards this report which could be a determining factor in shaping the US monetary policy. A central bank is a public financial institution in charge of a nation or a group of nations’ currency. It controls the currency supply by issuing banknotes and coins. It is also responsible for setting the official interest rate. Central Bank intervention refers to the selling or buying of a currency in the forex market by its central bank. The central bank is looking to increase or decrease the value of its currency against another currency. CFD stands for Contract for Difference. Contracts for Difference are financial contracts that allow traders to speculate whether the price of a financial instrument will go up or down. Trading channels or price channels refer to a technical analysis concept. Traders draw a trading channel on a chart by adding parallel trendlines that connect the support and resistance levels within which an asset trades at the time. Trend channels and envelope channels are popular with technical analysts as they often use them to identify optimal levels at which to buy or sell a specific asset. A trading chart is a graphical representation of an asset’s price that can help traders decide when to enter or exit a position. Bar charts, line charts, point and figure charts, market profile and candlestick charts are some of the most popular types of charts. A chart pattern is a graphical depiction of an asset’s price movement formed by lines that connect common price points such as highs or lows, during a given period of time. Patterns lie at the core of technical analysis and traders use them to forecast the future movement of an instrument’s price. Chartists are traders that use technical analysis when they trade. They analyze charts or graphs depicting an asset’s historical prices to forecast the asset’s future movement. CHF is the abbreviation for the currency of Switzerland – the Swiss franc. A choppy market is a market that moves sideways with no clear direction. Prices swing up and down and there is no clear progress. The Claimant Count records the number of individuals who claimed unemployment-related benefits in the UK. It’s a key indicator for unemployment in the UK. Cleared funds refers to the money in an account that’s available for immediate use or withdrawal. The MT4 client terminal is a multifunctional window on the Metatrader 4 platform through which traders can control their trading, view their account history, get informed about the latest news, set up alerts, use the internal mail and system journal. In CFD trading, a closed position refers to a trade that is no longer active and thus eliminated from a trader’s portfolio. Closing market rate is also known as closing price and it is the final price at which an asset is traded before the market closes. Closing price is the last price an asset traded at during a trading session. CNY is the abbreviation for the national currency of People’s Republic of China – the Chinese Yuan Renminbi. Collateral is an asset a borrower offers a lender as loan security. In CFD trading, you don’t have to pay the full underlying value of a contract, you can use a deposit margin – a percentage of the overall value – as collateral. Commission is a transaction fee the broker charges the trader. The Commitment of Traders (COT) report is a weekly report released by the Commodity Futures Trading Commission (CFTC). The report shows how futures traders are positioned in the market and traders can use the COT report to help determine whether they should take short or long positions. A commodity is a physical asset, usually used as raw material to produce other goods, that can be traded on the commodity markets. Oil, and metals like gold, silver, platinum, and palladium are examples of commodities. Confirmation is used by traders who perform technical analysis, and it refers to using an additional indicator or indicators to support a trend suggested by one indicator. The Consumer Price Index (CPI) shows the change in prices for a market basket of goods and services. The CPI, also known as the cost-of-living index, measures inflation in food, clothing, housing, energy, transportation, medical care, education, and entertainment – sectors in which price changes will affect everyday living expenses for consumers. Continuing jobless claims is a weekly US report released by the US Department of Labor that measures the number of US residents who have filed for unemployment benefits. This report only counts unemployed individuals who have already been receiving benefits. In trading, a contract could refer to Contract for Difference (CFD). Contracts for Difference are financial contracts that allow traders to speculate whether the price of a financial instrument will go up or down. Contracts for Difference are financial contracts that allow traders to speculate whether the price of a financial instrument will go up or down. Convergence is the process of futures contract prices and spot prices moving towards each other as the delivery date nears. Conversion rate, often used in forex markets, shows what amount of a specific currency needs to be exchanged for the equivalent value in another currency. The Core Consumer Price Index is a US report that tracks the changes in goods and services’ prices, excluding food and energy. The core durable goods orders refer to a monthly US report that measures the change in the overall value of new orders for durable manufactured goods. The report excludes transportation items, and a higher reading shows that the manufacturing activity has risen. A corrective wave is a wave moving opposite the trend and it is a concept appearing in the Elliot Wave Theory. In trading, correlation is a statistic that shows the rate at which two assets change together. Correlations between assets can be positive – when they move together – or inverse – when they move in opposite directions. The cost-of-living index refers to the Consumer Price Index (CPI) which measures the change in prices for a market basket of goods and services. The CPI measures inflation in food, clothing, housing, energy, transportation, medical care, education, and entertainment – sectors in which price changes will affect everyday living expenses for consumers. In finance, cover refers to taking action to decrease the risk exposure of a position, an investment, or a portfolio. Crack spread is the difference between the price of a barrel of crude oil and its petroleum by-products. A cross currency pair is a forex pair that does not include the US dollar. A cross rate refers to any currency pair which doesn’t include the US dollar. Crude oil is unrefined petroleum that can be extracted from the earth using large drills. Economists consider it the most important commodity in the world, and it is traded in global markets. Crude oil inventories refer to the stockpile of excess oil supply usually maintained by governments to keep in reserve. Inventories offer useful information on the commodity’s supply and demand, and they can affect its prices. A cryptocurrency is a virtual currency. Cryptos can often be decentralized networks based on blockchain technology. The main features of cryptos include using cryptography for security and theoretically not being at risk of government manipulation as they are in general not issued by central authorities. Bitcoin and Ethereum are well-known cryptos. “Cup and handle” is a price pattern on an asset’s price chart that looks like a cup and a handle. It’s considered a bullish signal and it could take between a few days to a year or more for the pattern to fully form. In short, currency is money issued by a government. It’s banknotes or coins used as a generally accepted method of payment for goods and services within an economy. A currency basket is a set of currencies with different weightings. The aggregated value of the selected currencies could be used by monetary authorities to determine the market value of another currency. A currency pair is a price quote between two different currencies. The value of the first currency – the base currency – is quoted against the price of the second currency – the quote currency. The quotation shows how much of the quote currency is needed to buy one unit of the base currency. Currency trading or forex trading or foreign exchange trading refers to the buying and selling of currencies in the forex market with the purpose of making a profit. The Cyprus Securities and Exchange Commission (CySEC) is a public legal entity and the financial regulatory body of Cyprus. D A daily chart is a graph that shows the price movement of a security within a day of trading. The price action could be shown on bar, candlestick, or line charts. A day order is an instruction to buy or sell a specific instrument at a specific price. If the order is not filled in the trading day for which it was made, it automatically expires. A day trader is a trader who opens and closes positions within a trading day, holding no positions overnight. A day trader aims to profit from very short-term intraday price movements. Day trading is the buying and selling of financial assets within the same trading day, holding no positions overnight. Day traders aim to profit from small intraday price fluctuations. Deflation is a significant reduction in the price levels of goods and services. During deflation, the purchasing power of a currency gradually increases. A demo account is a trading account that’s funded with virtual funds. It allows traders to practice trading or test trading strategies without risking real funds. Currency depreciation refers to the decline in the value of a currency against another currency. An economic depression is a period of a severe long-term downturn in economic activity. It is considered as an extreme recession; it can last for many years, and it can lead to an up to 10% reduction in real gross domestic product (GDP) within the period of a given year. Depth of market (DOM) tracks the supply and demand for a tradable asset. It records the number of open orders for an asset at different prices and the higher the number of open orders, the more liquid a market is considered to be. A dealing desk is the physical space at which market makers trade financial assets. In forex trading, it can be a space within a bank or a financial institution where forex dealers sit. Dividend is the part of a company’s profits shared among its shareholders. In trading, drawdown refers to a drop in your trading account due to a single or multiple unsuccessful trades. It’s usually expressed as a percentage. E ECN or electronic communication network refers to a section of automated trading that connects traders to liquidity providers directly. This allows traders with various account types and balance sizes to enter the markets. An ECN Broker is a type of forex broker that uses an electronic communication network (ECN) – a computerized trading system- to directly match buy and sell orders in the forex market. An ECN broker usually offers tighter bid/ask spreads and faster execution of orders. An economic calendar shows when significant events or releases, which have the potential to move asset prices or markets as a whole, are scheduled to take place. The effective exchange rate is an index that shows how strong a currency is in relation to a basket of other major currencies. The Elliot Wave theory or Elliot Wave Principle is a form of technical analysis that suggests that future asset price movements can be forecast through the study of price history. According to the theory, the markets move in wave-like patterns driven by investor sentiment and psychology. The theory was named after its creator Ralph Nelson Elliot. An End of Day Order is also known as day order. It refers to an instruction to buy or sell a specific instrument at a certain price. In the case that the order is not executed during the trading day it was placed on, it automatically expires. An entry order is an instruction from a trader to a broker to automatically open a buy or sell position when the price of an asset reaches a specific level. Market orders, limit orders and stop orders are entry orders. Ethereum is a blockchain based decentralized platform with smart contract functionality. Its native cryptocurrency is Ether or ETH – the second largest cryptocurrency by market cap. Exchange rate is the value a currency can be exchanged for in another currency. Execution or trade execution refers to the process of a buy or sell order for an asset being completed or filled. Exotic currency is a foreign exchange term used to describe a thinly traded currency. An exotic currency is illiquid, exchanged in low volumes, lacks market depth and can be highly volatile. An expert advisor also known as EA is a program or a trading robot that can be installed onto a trading platform to automate trading. The program automatically opens and closes trades according to certain conditions that it has been programmed to monitor. An exponential moving average or EMA is a technical indicator that tracks the price of an investment over a specific period but places more weight on recent prices. F Failure Swing is a type of reversal pattern that traders can use as a buy or sell signal. It occurs when in an uptrend the price trend doesn’t manage to set new highs or when in a downtrend the price trend doesn’t manage to set new lows. Fakeout, also known as “false breakout” or “failed break”, refers to a situation in which a price moves outside a technical price structure and shortly moves right back inside it. Fiat, also known as fiat money or fiat currency, refers to currencies issued by governments. Fiat money is backed by the authority that issued it. In trading, Fibonacci refers to a popular technical analysis tool based on the Fibonacci numbers that traders use to identify support and resistance levels. Fibonacci arcs are concentrical half circles with radii based on Fibonacci ratios. Fibonacci arcs are plotted at the end point of a trendline and after an uptrend, they could show support levels while after a downturn they could show resistance levels. The Fibonacci channel is a tool used in technical analysis that uses the Fibonacci numbers to identify support and resistance levels. Fibonacci channels are variants of the Fibonacci retracement tool, but with the channels the lines run diagonally instead of horizontally. Fibonacci extensions or fib extensions are a type of technical analysis tool based on the Fibonacci number ratios. Traders use Fibonacci extensions to determine profit targets or how far the next price wave could go after the end of a pullback. Fibonacci retracement is a technical analysis tool which uses horizontal lines to identify where support and resistance might occur. Traders use this tool to determine potential retracement – temporary dips – within a trend. The Fisher Effect is an economic theory formed by Irving Fisher and it refers to the relationship between interest rates and inflation. According to the Fisher Effect theory, the nominal interest rate minus the expected inflation equals the real interest rate. A trading flat in forex trading refers to the situation where a trader breaks even – their trade neither makes nor loses money – as the asset price has not changed significantly. A floor trader is a member of an exchange that trades on the exchange floor for their own account. The Federal Open Market Committee is the section of the Federal Reserve System that defines the direction of the US monetary policy. FOMC has eight scheduled meetings per year where they discuss developments in the markets, talk about economic and financial forecasts and determine whether to tighten or loosen the money supply in the economy. Foreign Exchange (Forex or FX) refers to the exchange of one currency for another. The forex market – the largest financial market in the world – allows its participants that range from banks, hedge funds, companies, forex brokers to retail investors to buy, sell, exchange, and speculate on currencies. Foreign Exchange (Forex or FX) refers to the exchange of one currency for another. The forex market – the largest financial market in the world – allows its participants that range from banks, hedge funds, companies, forex brokers to retail investors to buy, sell, exchange, and speculate on currencies. Forex scalping is a day trading strategy. Forex scalpers buy and sell currency pairs but leave the positions open for a short period of time ranging from seconds to minutes to make profit from the small price movements. They open a lot of trades within a single day aiming to make a series of small quick gains. Forex spot rate is the live exchange rate at which a trader can either buy or sell a currency. Forex trading is the exchange of a currency for another currency with the aim of making a profit. Fundamental analysis is an analysis method traders use to evaluate a security’s intrinsic value and forecast its future price. Fundamental analysts base their analysis on external events and influences, industry trends and financial reports – factors outside charts and the security’s price movements. Fundamentals are divided in macroeconomic and microeconomic fundamentals. Together they make up the factors that can affect the value of an asset. FX swap is an agreement according to which two parties exchange a specific amount of one currency for the equivalent amount of another currency at the current forex spot rate and then, a predetermined amount of time later, exchange the original amounts at a predefined forward rate. G Going Long in an asset refers to a long position. It means that a trader buys an asset expecting its price to go up. Going short in an asset refers to a short position. It means that a trader sells an asset expecting its price to go down. Grid is an MT4 chart property (feature). If enabled, a grid shows on the price chart. In MT4 trading history, gross loss is the sum of the money lost in unprofitable trades. In MT4 trading history, gross profit is the sum of the money earned in profitable trades. H A hammer is a bullish candlestick pattern. Visually resembling a ‘hammer’, this candlestick is made of a short upper body, a long lower wick and a little to no upper wick. When hammers appear in a downtrend, they indicate significant buying which may be a sign that the price will rise. A head and shoulders pattern refers to a technical indicator with a chart formation of three tops and two bottoms that forecasts bullish-to-bearish trend reversal. In this formation, the highest top is the Head, the right top is the Right Shoulder, and the left top is the Left Shoulder. A hedge is an investment made to decrease existing exposure to risk. Hedging very often involves opposite investments to minimize potential losses by unfavourable price movements in an asset. A hedge fund is a financial partnership according to which various investors pool funds and a professional fund manager invests them in various assets aiming to earn active returns for them. High-frequency trading (HFT) is a method of algorithmic trading that uses special powerful computers to process large numbers of orders at exceptionally high speeds. It is primarily used by large institutional investors such as investment banks and hedge funds. A bag holder is an investor who clings to an investment that drops in value hoping it will turn profitable. Holders usually hold their positions for extended periods of time during which the position may turn worthless. Hot potato trading refers to the speedy passing of currency inventory imbalances around the interdealer market which is typically accessible to banks and financial institutions. I The Ichimoku Kinko Hyo or Ichimoku is a technical analysis indicator investors use to measure momentum and identify future support and resistance levels. The indicator comprises five lines: tenkan-sen, kijun-sen, senkou span A, senkou span B and chikou span. A market index is a notional portfolio of financial assets in which the constituent securities represent a portion of the financial market. The value of the index is determined by the prices of the underlying assets. An indicative quote is an estimate of a currency’s current market price. It is provided to an investor by a market maker upon request, but the market maker is not obliged to honor the quote. Technical indicators are mathematical calculations derived from historical data. They can be applied to price and volume data and they are used by traders who perform technical analysis to forecast future price trends. Technical indicators can be added to charts; they appear as lines below, on top or above the price information. Inflation refers to the rise in goods and services’ prices in an economy. As inflation levels rise, the purchasing power of a currency unit drops. In general, central banks seek to limit inflation and keep deflation under control to have a smoothly running economy. Initial margin is the minimum capital you need to have in your trading account to be able to open a position. The required amount of money is “locked” for as long as the trade is open. Interest rate is the money a borrower needs to pay a lender for a loan. Interest rates are often expressed as a percentage of the loan amount. Central banks adjust interest rates as a means to curb inflation and limit spending. An investment fund is a capital pool in which individual investors add funds. A fund manager invests the accumulated capital in a portfolio of financial instruments that may include stocks, bonds, and other assets. L Leverage refers to using borrowed capital or credit from your broker to open larger trading positions than what the value of your balance alone would allow you to. When your broker “lends” you the capital, funds in your account act as collateral. For example, if you trade with 1:100 leverage, your buying power will increase by 100 times and you will need to have at least 1% of the total value of the trade in your trading account as collateral. Leverage can magnify both profits and losses. A limit order is an order from an investor to a broker to open a buy or sell position on an asset at a particular price or better. A limit order is only executed if the price conditions are met by a specific time or until the trader cancels the order. A line chart is a price chart that connects multiple price points using one continuous line to show an asset’s price history. Often, line charts only include closing prices. Liquidity refers to the level of ease with which an instrument can be bought or sold at a relatively stable price. In trading, liquidity plays an important role as it determines how easily the price of an asset can change within a specific time. In a liquid market, trades can be executed quickly while in an illiquid market, trades cannot be executed as fast. Going Long in an asset refers to a long position. It means that a trader buys an asset expecting its price to go up. A long candle is a Japanese candlestick with a long body. The length of the body represents a period of intense buying and selling and it signals a big gap between the open and close price. A long position refers to buying an asset because you expect its price to rise. Long term trading, also known as position trading, is a trading style according to which the investor holds on to a position for a considerable period of time that could last from weeks to years; in the belief that they could generate profit from the asset’s long-term performance. A lot is a standardized measure of quantity for a tradable asset. In forex trading, one lot is equal to 100,000 units of the base currency. M Margin is the amount of funds you are required to have in your trading account to open a position with leverage and keep it open. A margin call is a notification from your forex broker notifying you to deposit more funds in your trading account to maintain your margin sufficiently high to keep your existing positions open. Traders who use leverage may receive margin calls. Margin requirement expresses the percentage of the value of a trade you need to have in your account to be able to open a buy or sell position with leverage. For example, if you wish to trade EURUSD with a 1:100 leverage, you will need to have at least 1% of the value of the trade in your account. A financial market is a place -virtual or physical -through which assets can be traded. It allows buyers and sellers to connect, and it facilitates the exchanges. For example, the forex market facilitates the exchange of currencies. A market order is a demand from a trader to a broker to execute an order at the best possible price. Metatrader 4 is an electronic trading platform offering trading on multiple assets. The MT4 is used by online speculative traders. Metatrader 5 is an electronic trading platform offering trading on multiple assets. The MT5 is used by online speculative traders. A micro lot is a unit of measurement used in trading. In forex trading, a micro lot is equivalent to 1,000 units of the base currency. For example, for a trade on EURUSD 1 micro lot would be equal to 1,000 EUR. Mining refers to the process of new cryptocurrencies being entered into circulation. The new cryptocurrencies are given as reward to the miners who help verify new transactions and add them to a cryptocurrency blockchain that uses a proof of work algorithm. Momentum trading is a trading strategy that involves taking short-term positions based on the strength of price trends. Momentum traders open buy positions on assets moving up and close them as soon as they show signs of going down or open sell positions on assets moving down and close them as soon as they show signs of going up. Money management can refer to how a trader manages their own capital. It can also refer to an investment professional managing and making investment decisions for a pool of funds that may include the capital of individuals and organizations. A moving average is a popular indicator used in technical analysis that processes price and data points for a specific period of time to give out a single trend line or an average. This average price is constantly updated (that’s why it’s called “moving”) and it helps traders track trends as it smooths out the impact of price fluctuations, or noise. Moving Average Convergence Divergence (MACD) is a momentum indicator that follows trends. MACD uses data from various moving averages and it is designed to identify changes in the momentum of an asset’s price. Investors use MACD to determine potential investment opportunities around support and resistance levels. Multiple time frame analysis refers to the process of monitoring the same asset across different time frames. N The nonfarm payroll report is a statistic showing how many new jobs were added to the US economy within the period of any given month. The data doesn’t include job additions in farms, the federal government, non-profit organizations, and private households. The NFP report is usually made public on the first Friday of any month for the previous month and it can cause significant movement in the markets. No Dealing Desk brokers work with multiple liquidity providers and aggregate pricing to offer the most competitive bid and ask prices while having no conflict of interest with their clients’ trades. Noise trading involves trading based on noise – gossip, hype, or rumours – rather than technical analysis. Noise traders believe that their actions are based on reliable signals and their presence in the financial markets can cause price and risk levels to deviate from expected levels. O An open order is an order that will be filled if a specific requirement is met before the client cancels the order or it expires. An open position refers to an active trade that has not been closed yet. An order is a set of instructions sent to a broker to buy or sell an instrument on behalf of a trader. A market order instructs its immediate execution, while a pending order is filled when a particular price is reached. An oscillator is a technical indicator that builds high and low bands to construct a trend that moves within these extremes. This trend indicator is used by traders to identify short-term overbought or oversold areas. When an instrument is overbought, it is thought to be trading at a price that is higher than its intrinsic or fair value. An asset being overbought indicates that the market is likely to correct its price in the future. In trading, oversold describes a situation in which an instrument has traded at a lower price and could revert back to its correct value. As an oversold state can last for long, there is no guarantee that a price rise will occur soon or at all. Over-the-counter market is used to describe a market in which financial assets are exchanged through a broker or dealer network rather than on a centralized exchange. Overtrading is the practice of opening too many positions. P A pip means percentage in point and refers to a measure of movement in forex trading equal to 0.0001 . It defines the change in price between two instruments. A position expresses the exposure of a trader to the movements of an instrument against another instrument. Positions are defined by size and direction – how much of an asset you either buy or sell. Price action refers to an asset’s price movement over time and it is used in technical analysis to generate entry and exit signals. In trading, Profit/Loss refers to the gain added or the loss incured on a trading account due to trading activities. It can also refer to the profit/loss ratio which is the average profit made from successful trades divided by the average loss from unsuccessful trades. The higher the ratio, the better performing the trading strategy is considered to be. A pullback is a quick move of prices against the main trend, indicating that the overall market trend has paused temporarily. Q Quote is the price at which a trader can open a buy or sell position. It can also be used to refer to the last traded price of an asset. A quote currency is the currency appearing second in a forex pair. Its price indicates how much of the quote currency is needed to buy or sell one unit of the base currency – the currency appearing first in the forex pair. For example, in the pair USD/JPY, JPY is the quote currency. R A rally is a period within which asset prices experience a strong upward move or momentum. The Relative Strength Index is a technical analysis indicator. It is used in momentum trading, it works as an oscillator, and it indicates overbought and oversold market conditions by analyzing the speed and magnitude of an asset’s recent price changes. Return on Investment (ROI) is a metric of performance for investments. ROI is expressed as a ratio or a percentage and it is calculated by dividing the profit or loss of the investment by the cost of the investment. Resistance or resistance level refers to a particular price level which an asset’s rising price has trouble moving beyond during a specific period of time. The more this level is tested without being broken the stronger the resistance is. Ripple is a blockchain open-source digital payment platfrom on which its own cryptocurrency, XRP can be used for transactions. In trading, risk refers to the probability and the ways in which trading actions can result into the loss of some or all of an investor’s initial capital. Market risk, liquidity risk, systematic risk are some of the types of risk present in trading. Risk Management refers to identifying and analyzing potential risks in trading and taking actions to mitigate the risks. Some popular risk management tactics include setting stop loss orders and limit orders, diversification and hedging. In trading, rollover refers to the interest charged or paid to the trader for holding a position overnight. The rollover fee indicates the amount a trader will pay or receive for holding a position overnight. S Scalping is a type of strategy in which a trader aims to benefit from small price movements. It is usually associated with fast trading in which positions are closed within minutes or even seconds. A sell-off takes place when a large volume of a particular asset is sold in a short period of time causing its price to drop rapidly. The Sharpe ratio was developed by Nobel Laureate William F. Sharpe and it is used by investors to measure an investment’s potential return compared to its risk. A high Sharpe ratio shows that the investment return in relation to the amount of risk is higher and it indicates a smart investment decision. In trading CFDs, a short position occurs when a trader expects the price of an asset to drop and they open a sell position. If the price falls and the trader closes the position below the price they opened it, their short position will have generated profit for them. Slippage refers to when a position is executed at a different price than expected. Slippage occurs when the bid/ask spread changes between the time a market order is requested and the time it is executed. Social trading is a kind of trading that allows investors to copy the trades of other – possibly more successful and experienced – traders. Speculating is the act of engaging in a financial transaction that could lose value but at the same time it could generate significant returns. In CFD trading, it can refer to opening a buy position when an investor expects the price of an asset to rise or opening a sell position when they expect the price of an asset to drop. A spike is a larger than usual, unexpected, fast change in the price of an instrument in a short period of time. A spike can refer to both upward and downward movement, but it is most commonly used to describe up-moves. In financial markets trading, spread refers to the difference between the bid price – the price at which you can sell an assset – and the ask price – the price at which you can buy the asset. It is the commission a broker charges a trader for executing a trade. A stock, also known as equity, is a financial instrument that reflects ownership of a part of a company. A stop-limit order is a buy or sell order that combines the features of a stop and a limit order and is used to reduce risk, minise losses and maximise possible returns. Traders set the maximum or minimum prices for an order and once the price of an asset reaches the stop price, a limit order is triggered instructing the broker to buy or sell the asset at the limit price. A stop-loss, also called stop order, is used to limit losses from a trade. The order will trigger the trade to close once the price it is set to is reached, hence limiting further potential losses. A stop order also called stop-loss, is used to limit losses from a trade. The order will trigger the trade to close once the price it is set to is reached, hence limiting further potential losses. A stop out occurs when the margin level falls below a specific threshold – usually 50% in forex trading – and open positions begin to close automatically. The stop out is triggered because the margin level is so low that it can no longer support an open position. It is also triggered to protect the trader from incurring further losses in their trading account. A market strategist is a professional from the financial industry who forecasts future price movement using technical or fundamental analysis tools. The law of supply and demand shows how the relation betweeen price, supply and demand works. As the price of an asset goes up, supply increases and demand drops. As the price of an asset goes down, supply lowers and demand rises. Support and resistance are two levels on a price chart within which the price of an asset moves. The support level is the price point at which the price falls to and bounces back while the resistance level is the price point at which the price stops increasing and drops back down. Swap, swap fee or rollover fee, is the amount of money a trader’s account is charged or credited with when keeping a position open overnight. Swing trading is a trading style relying on technical analysis for capturing short-term to medium-term profit over of a few days or weeks. Swing traders try to identify points at which a market changes direction and they enter and exit positions at these swings. They focus on smaller, frequent returns while aiming to cut losses as fast as possible. T A take profit order (T/P) is a limit order type which specifies at which price to close an open position for a profit. If the price of the instrument does not reach the limit price, the take profit order does not get filled. A take profit order (T/P) is a limit order type which specifies at which price to close an open position for a profit. If the price of the instrument does not reach the limit price, the take profit order does not get filled. Technical analysis is an analysis method used for forecasting future price movements in the financial markets. Traders study past market data through historical price charts, market statistics and more and try to identify previous market patterns to forecast which direction an asset’s price may move in next. Trade balance is a country’s value of exports minus the value of its imports. The balance of trade can be used to gauge the relative strength of a country’s economy. A trader is someone who participates in any financial market by buying and selling financial assets aiming to make a profit, either for themselves or for other individuals or institutions. A trading style is a selection of preferences that determine the length and frequency of trades – how often a trader opens trades and for how long they keep them open. There are four major trading styles: position trading, swing trading, day trading and scalping. Trading volume, or volume in trading, is the amount of an asset, a group of assets or an entire market traded within a specific period of time. A trailing stop is a type of stop order that can also work as a limit order or a market order. A trailing order stays open as long as the price moves in a favorable direction for the trade but closes as soon as the price moves in the opposite direction by a specific percentage or amount of money. Transparency refers to clarity regarding information on activities. In trading, transparency could refer to openness about different fees charged to clients by brokers. A trend line is a chart pattern that’s a series of highs and lows joined together by a straight line. Traders use trend lines to identify support and resistance levels. In trading, turnover refers to the total value of all executed transactions within a specific period of time. U An uptrend is defined as an overall upward direction in a financial asset’s price. The uptrend is characterized by successive higher peaks and troughs and higher swing lows and swing highs. V Volatility is a measure that shows how much an asset’s price moved up or down within a certain period of time. Trading volume, or volume in trading, is the amount of an asset, a group of assets or an entire market traded in a specific period of time. W A wallet is a virtual space where you can store your cryptocurrencies. You can retrieve them when you need to make transactions. Also, when you open a Traders Trust account a wallet is automatically created for you to be able to make deposits, withdrawals, and internal transfers between your accounts. Wash Trading, also known as round trip trading, is an illegal form of market manipulation in which investors buy and sell the same financial instruments at the same time to create false activity in the markets. Wire transfer, also known as wire payment or bank transfer, is an electronic transfer from one person or business to another usually conducted via banks or financial institutions. For Traders Trust, a working day is any day from Monday to Friday from 9:00 – 18:00 (GMT+3, DST), excluding public holidays. A working order, or pending order, is either a stop order or a limit order.
Forex Glossary
Abandoned Baby
Absolute Drawdown
Account History
Account Statement Report
Account Balance
Accumulation/Distribution Indicator (A/D)
Accumulative Swing Index (ASI)
Actionary Waves
ADP National Employment Report
Advance/Decline Index
Algorithmic Trading
Alligator
Altcoin
Analyst
Appreciation
Arbitrage
Ascending Trend Line
Asian Session
Ask Price
Ask Rate
Asset
Asset Allocation
At The Money (ATM)
All Time High (ATH)
Average True Range (ATR)
Attorney In Charge
Aussie
Automated Trading System (ATS)
Average Hourly Earnings
Average Directional Movement Index (ADX)
Awesome Oscillator
Balance (Account Balance)
Balance of Trade (BOT)
Bank Of International Settlement (BIS)
Bank Rate
Bar Chart
Barrel
Base Currency
Base Rate
Basis Point (BP)
Basket
Bear
Bear Candle
Bear Market
Bearish
Bearish Engulfing Pattern
Bid
Bid/Ask Spread
Bid-Offer Spread
Binary Options
Bitcoin (BTC)
Block
Blockchain
Blue Chip
Bollinger Bands
Bond
Bond Yield
Bottom
Break Even
Breakaway (Bearish)
Breakaway (Bullish)
Breakdown
Breakout
Brent Crude
Broker
Bull
Bull Candle
Bull Market
Bullish
Bullish Engulfing Pattern
Bullish Reversal
Bundesbank
Business Climate
Business Confidence
Buy Limit
Buy Order
Buy – Side
Cable
CAD
Caixin Manufacturing PMI
Candlestick Chart
Capacity Utilization
Capital Expenditure
Capital Gains
Capital Loss
Carry Trade
Carry-Over Charge
Cash Flow
Conference Board Consumer Confidence
Central Bank
Central Bank Intervention
CFD (Contract for Difference)
Channels
Chart
Chart Pattern
Chartist
CHF
Choppy Market
Claimant Count
Cleared Funds
Client Terminal
Closed Position
Closing Market Rate
Closing Price
CNY
Collateral
Commission
Commitments of Traders Report (COT)
Commodity
Confirmation
Consumer Price Index
Continuing Jobless Claims
Contract
Contract for Difference (CFD)
Convergence
Conversion Rate
Core Consumer Price Index (CPI)
Core Durable Goods Orders
Corrective Wave
Correlation
Cost Of Living Index
Cover
Crack Spread
Cross Currency Pair
Cross Rate
Crude Oil
Crude oil inventories
Cryptocurrency
Cup and Handle
Currency
Currency Basket
Currency Pair
Currency Trading
Cyprus Securities and Exchange Commission (CySEC)
Daily Chart
Day Order
Day Trader
Day Trading
Deflation
Demo Account
Depreciation
Depression
Depth Of Market (DOM)
Desk
Dividend
Drawdown
ECN
ECN Broker
Economic Calendar
Effective Exchange Rate (REER)
Elliott Wave Theory
End Of Day Order
Entry Order
Ethereum (ETH)
Exchange Rate
Execution
Exotic Currency
Expert Advisor
Exponential Moving Average (EMA)
Failure Swing
Fakeout
Fiat
Fibonacci
Fibonacci Arcs
Fibonacci Channel
Fibonacci Extension
Fibonacci Retracement
Fisher Effect
Flat
Floor Trader
FOMC Meeting
Foreign Exchange
Forex (FX)
Forex Scalping
Forex Spot Rate
Forex Trading
Fundamental Analysis
Fundamentals
FX Swap
Go Long
Go Short
Grid
Gross Loss
Gross Profit
Hammer
Head And Shoulders
Hedge
Hedge Fund
High-Frequency Trading (HFT)
Holder
Hot Potato Trading
Ichimoku Kinko Hyo
Index
Indicative Quote
Indicator
Inflation
Initial Margin
Interest Rate
Investment Fund
Leverage
Limit Order
Line Chart
Liquidity (Liquid Market)
Long
Long Candle
Long Position
Long Term Trading
Lot
Margin
Margin Call
Margin Requirement
Market
Market Order
Metatrader 4 (MT4)
Metatrader 5 (MT5)
Micro Lot
Mining
Momentum Trading
Money Management
Moving Average (MA)
Moving Average Convergence Divergence (MACD)
Multiple Time Frame Analysis
NFP (Non-Farm Payroll Report)
No Dealing Desk (NDD)
Noise Trading
Open Order
Open Position
Order
Oscillator
Overbought
Oversold
Over-the-Counter (OTC)
Overtrading
Pip
Position
Price Action
Profit/Loss
Pullback
Quote
Quote Currency
Rally
Relative Strength Index (RSI)
Return On Investment (ROI)
Resistance
Ripple (XRP)
Risk
Risk Management
Rollover
Rollover Fee
Scalping
Sell-Off
Sharpe Ratio
Short Position
Slippage
Social Trading
Speculating
Spike
Spread
Stock
Stop Limit Order
Stop Loss
Stop Loss Order
Stop Out
Strategist
Supply and Demand
Support and Resistance
Swap
Swing Trading
Take Profit
Take Profit Order (T/P)
Technical Analysis
Trade Balance
Trader
Trading Style
Trading Volume
Trailing Stop
Transparency
Trend Line
Turnover
Uptrend
Volatility
Volume
Wallet
Wash Trading
Wire Transfer
Working Day
Working Order
