Forex Glossary

Here are some of the most common terms used in FOREX trading.

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 UD dollars.

Bar Chart � A type of chart used in Technical Analysis. Each
time division on the chart is displayed as a vertical bar which
show 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 � the intermediary between buyer and seller. Most FOREX
brokers are associated with large financial institutions and
earn money by setting a spread between bid and ask prices.

Candlestick Chart - A type of chart used in Technical Analysis.
Each time division 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 price is rising.

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.

First In First Out (FIFO) � refers to the order open orders are
liquidated. The first orders to be liquidated are the first that
were opened.

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 or Margin � The ratio of the value of a transaction to
the required deposit. A common margin for FOREX trading is 100:1
� you can trade currency worth 100 times the amount of your
deposit.

Limit Order � An order to buy or 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 euro, German mark, Swiss franc, British
pound, and the Japanese yen are the major currencies.

Minor Currency � The Canadian dollar, the Australian dollar,
and the New Zealand dollar are the minor currencies.

One Cancels the Other (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 or Points � The smallest unit a currency can be traded in.


Quote Currency � The second currency in a currency pair. In the
currency pair USD/EUR the euro 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 bid and ask prices.

Volatility � A statistical measure indicating the tendency of
sharp price movements within a period of time.