Source: ForexYard
Ask Price — sometimes called the Offer Price, this is the market price for traders to BUY currencies. Ask Prices are shown on the right side of a quote — e.g. EUR/USD 1.1965-68, means that one euro can be bought for 1.1968 US dollars.
Bar Chart — a type of chart used in Technical Analysis. Each time increment on the chart is displayed as a vertical bar which shows the following information: the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.
Base Currency — is the first currency in a currency pair. A quote shows how much the base currency is worth in the quote (second) currency. For example, in the quote — USD/JPY 112.13 — US dollars are the base currency, with 1 US dollar being worth 112.13 Japanese yen.
Bid Price — is the price a trader can SELL currencies. The Bid Price is shown on the left side of a quote — e.g. EUR/USD 1.1965-68 — means that one euro can be sold for 1.1965 UD dollars.
Bid/Ask Spread — is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker’s fee, and varies from broker to broker.
Broker — an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a ‘dealer’ commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
Cable – Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted via a trans-Atlantic cable beginning in the mid-1800’s.
Candlestick Chart — A type of chart used in Technical Analysis. Each time increment on the chart is displayed as a candlestick — a red or green vertical bar with extensions above and below the candlestick body. The top of the extension shows the highest price for the chart division and the bottom of the extension shows the lowest price. Red candlesticks indicate a lower closing price than opening price, and green candlesticks indicate the opposite.
Cross Currency — A currency pair that does not include US dollars — e.g. EUR/GBP.
Currency Pair — Two currencies involved in a FOREX transaction — e.g. EUR/USD.
Economic Indicator — A statistical report issued by governments or academic institutions indicating economic conditions within a country.
Foreign Exchange (FOREX, FX) — Simultaneously buying one currency and selling another.
Fundamental Analysis — Analysis of political and economic conditions that can affect currency prices.
Leverage — the ratio in which a trader can borrow funds to increase the movement of his profits/losses. A common leverage amount for FOREX trading is 1:100 — you can trade currency worth 100 times the amount of your deposit.
Limit Order — An order to buy/sell when the price reaches a specified level.
Lot — The size of a FOREX transaction. Standard lots are worth about 100,000 US dollars.
Major Currency — The US Dollar (USD), Euro (EUR), Swiss Franc (CHF), British Pound (GBP), and the Japanese Yen (JPY) are considered to be the Major Currencies.
Order Cancels Order (OCO) — Two orders placed simultaneously with instructions to cancel the second order on execution of the first.
Open Position — an active trade that has not been closed.
Pips — the smallest unit a currency can be traded in.
Quote Currency — the second currency in a currency pair. In the currency pair EUR/USD the dollar is the quote currency.
Rollover — Extending the settlement time of spot deals to the current delivery date. The cost of rollover is calculated using swap points based on interest rate differentials.
Technical Analysis — Analysis of historical market data to predict future movements in the market.
Tick — The minimum change in price.
Transaction Cost — The cost of a FOREX transaction — typically the spread between the bid and ask prices.
Volatility — A statistical measure indicating the tendency of sharp price movements within a period of time.
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Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.
