Complete A-Z dictionary of forex and trading terms with practical examples
The price at which a broker or market maker is willing to sell a currency pair. Also known as the "offer price." This is the price you pay when buying.
The practice of buying an asset in one market and simultaneously selling it in another to profit from price differences. In forex, this might involve exploiting price discrepancies between different brokers or markets.
An increase in the value of a currency relative to another currency. When a currency appreciates, it can buy more of another currency than before.
The price at which a broker or market maker is willing to buy a currency pair from you. This is the price you receive when selling.
A market characterized by falling prices and pessimistic sentiment. In forex, this typically refers to a currency experiencing sustained depreciation.
A market characterized by rising prices and optimistic sentiment. In forex, this refers to a currency experiencing sustained appreciation.
The first currency listed in a currency pair. It's the currency you are buying or selling. The value of the base currency is always 1.
A strategy where traders borrow in a low-interest-rate currency and invest in a high-interest-rate currency to profit from the interest rate differential.
Two currencies traded against each other in the forex market. The first currency is the base currency, and the second is the quote currency.
A currency pair that doesn't include the US Dollar. Also called "crosses." These pairs are derived from the major pairs.
The use of borrowed capital to increase potential returns. In forex, leverage allows you to control a large position with a relatively small amount of capital.
The unit of measurement for trading forex. Standard lot = 100,000 units, Mini lot = 10,000 units, Micro lot = 1,000 units, Nano lot = 100 units.
Buying a currency pair with the expectation that it will rise in value. Going long means you profit when the base currency strengthens.
The amount of money required to open a leveraged position. It acts as a security deposit to cover potential losses.
A broker's demand for additional funds when your account equity falls below the required margin level due to losing trades.
A broker or financial institution that provides liquidity by quoting both buy and sell prices for currency pairs, profiting from the spread.
The smallest price movement in a currency pair, typically the fourth decimal place (0.0001) for most pairs, or the second decimal place (0.01) for JPY pairs.
The process of determining how many units or lots to trade based on your account size, risk tolerance, and stop-loss distance.
A predetermined price level at which a trader plans to close a position to secure profits. Often set at key resistance/support levels.
The difference between the bid and ask price of a currency pair. This is essentially the broker's commission for executing your trade.
An order to close a position automatically when it reaches a certain loss level. Essential for risk management to limit potential losses.
The difference between the expected price of a trade and the actual price at which it's executed, often occurring during high volatility.
Interest paid or earned for holding a position overnight, based on the interest rate differential between the two currencies in the pair.
The degree of price fluctuation in a currency pair over time. High volatility means larger price swings, offering more opportunities but also more risk.
The total amount of currency traded during a specific period. Higher volume typically indicates stronger price moves and better liquidity.