Forex Trading Glossary, Learn About Currency Trading

Forex Trading Glossary, Learn About Currency Trading

The price pattern, isolated by the two gaps, is known as Island Reversal. A Technical Analysis chart pattern signaling a bullish reversal. It consists of three bottoms and their corresponding Ripple trading tops. The lowest bottom is known as the Head, where the bottom to the left is known as the Left Shoulder and the bottom to the right is known as the Right Shoulder.

You want to buy USD and sell CHF. The quoted rate is 1.4525 / 1.4530. If you trade on a 1% margin, for instance, for every USD 100 that you trade, you need to put down a deposit of USD 1.

Market order

Take the time to get to grips with forex jargon because understanding forex vocabulary is an important step in a trader’s journey. an indicator that allows users to compare volatility and relative price levels over a period of time. Made up of a Simple Moving Average (SMA), an Upper Band (SMA plus two standard deviations), and a Lower Band (SMA minus two standard deviations). Momentum indicators that show subtle reversals in non-trending prices, and also indicate short-term overbought or oversold conditions.

Sloppy Choppy trading conditions that lack any meaningful trend and/or follow-through. SNB Swiss National Bank, the central bank of Switzerland.

The use of two moving averages to generate trading signals. A buy signal is generated when the shorter moving average crosses above the longer moving average.

It is generally traded on an exchange such as the Chicago Board Options Exchange. In financial markets being short refers to selling something you don’t own (with the intention of buying it back at a lower price in order to profit). Its the same in the FX market.

Basically, margin trading involves a loan from the forex broker to the trader. For example, if the EUR/USD is quoted at 1.4568/1.4570, the first figure is the bid price at which you can sell the currency pair. Because currency rates change all the time, and you want to know when to buy one currency and when to sell another to make a profitable deal. We introduce people to the world of currency trading, and provide educational content to help them learn how to become profitable traders. We’re also a community of traders that support each other on our daily trading journey.

Gold certificate A certificate of ownership that gold investors use to purchase and sell the commodity instead of dealing with transfer and storage of the physical gold itself. Gold contract The standard unit of trading gold is one contract which is equal to 10 troy ounces.

Discount rate Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank. Divergence In technical analysis, a situation where price and momentum move in opposite directions, such as prices rising while momentum is falling. Divergence is considered either positive (bullish) or negative (bearish); both kinds of divergence signal major shifts in price direction. Positive/bullish divergence occurs when the price of a security makes a new low while the momentum indicator starts to climb upward.

Forex Trading Vocabulary

It’s the difference between a 5-period simple moving average and a 34-period simple moving average, applied to bar’s mid-point prices (H-L)/ 2. A technical analysis price pattern, where price action is contained within two upward sloping parallel lines. The basic line is drawn through the bottoms, whereas the return line is drawn through the tops.

A Japanese candlestick pattern signaling a bullish reversal. The presence of a hammer at the end of a downtrend or decline, alerts for a possible bullish reversal. Traders enter the market with short positions, pushing prices even lower in the direction of the prevailing trend, to form the lower shadow. Eventually, the downward move is proven short-lived, as bulls take over the control and manage to close the session at the upper area of the candle.

  • The oscillator values are normalized by using a divisor based on mean deviation.
  • Takeover Assuming control of a company by buying its stock.
  • A speculator does not use the futures market in connection with the production, processing, marketing or handling of a product.
  • Exinity Limited is a member of Financial Commission, an international organization engaged in a resolution of disputes within the financial services industry in the Forex market.
  • The rollover credits or debits could either add to this gain or detract from it.
  • Trinidad and Tobago Dollar.

Other Terms Used in FX Trading

Forex Trading Vocabulary

A market where delivery takes place immediately (almost) after the trade of financial instruments. It gives a trader the right to buy a financial instrument at a specific price, before the expiration date.

Forex Trading Vocabulary

A daily accounting entry that is the bedrock of regulated futures bookkeeping. It’s the end-of-day adjustment made to trading accounts to reflect profits and losses on existing positions.

The rollover credits or debits could either add to this gain or detract from it. From a historical standpoint, foreign exchange trading was largely limited to governments, large companies, and hedge funds.

There are so few people like you who understand the markets and are also able to masterfully convey their knowledge to others. I am so glad I signed up to learn how to trade at Pure Financial Academy.

The line connecting the two bottoms is known as the neckline. A prerequisite of any reversal is the existence of a trend, an uptrend in this case. In the course of an uptrend, as defined by consecutive higher tops and higher bottoms, the presence of a lower top warns for a potential reversal.

He supported that a 40-month cycle was present in the stock markets. In the course of a decline, a long white candle gaps above the previous black Marubozu and rallies higher, closing at the high of the session, demonstrating strong bullish power. A buy signal is generated when price moves above the most recent high whereas a sell signal is in place when it moves below the last low.

Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

When it comes to stock market trading, the terms long and short refer to whether a trade was initiated by buying first or selling first. A long trade is initiated by purchasing with the expectation to sell at a higher price in the future and realize a profit. A short trade is initiated by selling, before buying, with the intent to repurchase the stock at a lower price and realize a profit. An order which closes out a market position once a certain price level trades in the market.

Traders often say they are “going long” or “go long” to indicate their interest in buying a particular asset. If you go long on 1,000 shares of XYZ stock at $10, the transaction costs you $10,000. If you are able to sell the shares at $10.20, you will receive $10,200, and net a $200 profit, minus commissions. This is the desired result when going long.

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