BrokerYard Introduction to Forex


An official change permitted by a decision from an official body representing the economic policies, to correct an imbalance in the official currency rate. For example raising interest rates.



When a large number of traders or price actions are in the same direction, and acting with conviction.



An investment professional who specializes in evaluating investments, and is licenced to offer advice on sell and buy orders.



When a price rises. The USD appreciated, means the U.S. dollar strengthened.



A trading method where one trader opens the same position on two different platforms, to take advantage of the small price differentials between markets, and sometimes see a change on one platform before it happens in the other, giving him/her warning on how to proceed with the trade.


Asian session

Also referred to as the Tokyo session, and it is a period of time in which a number of markets are open, mainly Asian ones. The Asian session runs roughly between 14:00 – 23:00 GMT.


Ask (offer) price

The price at which a client may BUY a certain currency pair at and at which a broker is willing to sell.


AUS 200

The Australian Securities Exchange also known as ASX 200 which lists the top 200 companies in Australia which are listed on the Australian stock exchange.



A nickname for the Australian dollar and the AUD/USD pair.



Balance of trade

The value of a country's exports minus its imports.


Bar chart

The bar chart is made up of lines, each line on the chart is an indicator to a piece of information. The straight vertical bar at the top end represents the high and at the bottom end represents the low. A small horizontal line on the left of the vertical bar represents the opening price, and a small horizontal line on the right of the vertical bar represents the closing price.


Base currency

The first currency in a currency pair. For example in the EUR/USD pair the Euro is the base currency. The term ‘base currency’ is also used when referring to the main currency in a trading account.


Base rate

The lending rate of the central bank of a given country.



A method used in technical analysis – a chart pattern that shows when demand and supply of a product are almost equal. It results in a narrow trading range and the merging of support and resistance levels.


Basis point

The minimum change in the price of a product.


Bearish / Bear market

A bear market is a market which is declining and has low lows and low highs. Bearish means a market is expected to decline. A bearish pair means the base currency in the pair is declining.



Traders expecting prices to decline – they tend to be holding short positions.


Bid price

The price at which a client may sell a certain currency pair at and at which a broker is willing to buy at.


Bid/ask spread

The difference between the bid and the ask price.


Big figure

The first three digits of a currency quote.


BIS (Bank for International Settlements)

The BIS is located in Basel, Switzerland and it serves as the central bank of central banks.


Black box

Used when referring to a systematic, model based or technical trader.


Blow off

When traders with short positions give up and cover any remaining short positions.


BOC (Bank of Canada)

The central bank of Canada.


BOE (Bank of England)

The central bank of the UK.


BOJ (Bank of Japan)

The central bank of Japan.


Bollinger bands

A tool used in technical analysis. It is used to indicate support and resistance levels.



Debt issues for a specific period of time.



In financial and professional terms a ‘book’ is the summary of a trader’s or desk’s total positions.


British Retail Consortium (BRC) shop price index

The measure of rate inflations at surveyed retailers in Britain which studies price changes and goods purchased in retail outlets.



A company that is licensed to act as an intermediary between traders and the market (buyers and sellers). Brokers offer platforms through which traders can place orders and trade for a small commission.



Slang for the U.S. dollar or 1 million units of a dollar based currency pair.


Bullish / Bull market

A bull market is a market which is moving upwards and its highs are high and lows are high. The term bullish is used when there is expectation for a rise in a market. Calling a currency pair bullish means the base currency is expected to rise.



Traders holding long positions in expectation for prices to rise.



The central bank of Germany.



Taking a long position on a product.




A nickname for the British Pound, U.S. dollar pair (GBP/USD).



The Canadian dollar – also nicknamed the Loonie or Funds.


Canadian Ivey Purchasing Managers (CIPM) Index

A monthly measurement of Canadian Business Sentiment released by the Richard Ivey Business School.


Candlestick chart

The candlestick chart is one of the most popular charts in use today. It was developed in Japan and started gaining popularity in the eighties. The reason it is called ‘candlestick’ is because it displays blue and red bars which can be longer or shorter than each other like a candle.



The point at which traders realize it’s the end of a trend and start exiting their positions (which were driving that trend). This is usually the point when a trend reversal is about to happen.


Cash market

The actual underlying market on which derivatives contracts are based.


Cash price

The price of a product in the specific moment.


CBs( Central Banks, Central bank)

A bank (independent or governmental) which serves as the gatekeeper for the country’s monetary policy. A central bank is expected to maintain the economy at a certain level, and intervene when need be.



CFD stands for Contracts for Differences and it is a contract between two parties (the buyer and the seller) stating that the seller will pay the buyer the difference between the current value of an asset and its value at contract time if the difference is positive, if the difference is negative the buyer will pay the seller the difference.



A technical trader who bases his/her trading mainly on charts and graphs.



Short and ‘choppy’ price moves which do not follow through and keep changing.


Cleared funds

freely available Funds which are sent in to settle a trade.



The process of settling a trade.


Closed position

A position which is no longer open in the market. The position is closed when an equal and opposite position is placed to offset the open position. For example a long position on EUR/USD can on be closed by selling the EUR/USD.



When one live trade is stopped by executing a trade that is equal and opposite to the open trade.


Closing price

The price of a product at which the position is closed. The term is also used to describe the price of a product at the closing time of a session.



An asset given to secure a loan or as a guarantee of performance.



A fee charged for buying or selling products. Usually used by money transfer companies (i.e. moneybookers), and some brokers.


Commodity currencies

Currencies from countries which are known to export commodities in high numbers to the point that commodities are bound to affect the prices of their currencies on a regular basis. These countries are mainly Canada, New Zealand, Australia and Russia.



The NASDAQ Composite Index.



A document exchanged by counterparts to a transaction which states the terms of the transaction.



Once a price makes a big move, it remains in a certain range until it settles on a price – this end period is referred to as consolidation.


Construction spending

A measure of the amount of spending on new construction, released every month by the U.S. Department of Commerce’s Census Bureau.



When an economic crisis moves from one market to other markets.



The Forex trading standard unit.


Contract note

A set confirmation outlining the exact details of the trade.


Contract size

The number of units one contract has.


Controlled risk

When a position has risk management tools applied to it, allowing the trader to take risk while limiting the possibility of losses.


Conversion Rate

Rate at which one currency may be exchanged for another.


Corporate action

Changes executed by a company which affects the stock’s equity structure and share price. Acquisitions, dividends and mergers are all corporate actions.


Counter currency

The second currency in a currency pair also referred to as the quote currency. For example in the EUR/USD pair the U.S. dollar is the counter currency.



One of the participants in a financial transaction.


CPI (Consumer Price Index)

A measure of a country’s inflation.



When the market is ready to sell off aggressively.



A currency pair that does not include the U.S. dollar. For example a Yen Cross, means it is a currency pair including the yen and another currency which is not a U.S. dollar.


Crown currencies

Currencies which belong to countries of the commonwealth; the Canadian dollar, the Australian dollar, the British Pound, and the New Zealand dollar.


CTA (Commodity Trading Advisor)

The term is referred to a trader which speculates and trades in a manner which can resemble that of a hedge fund. These are usually futures oriented traders.



Money which is issued by a government or central bank and is the official money (legal lender) of a country.


Currency pair

Two currencies placed together where the value denotes how much of the second currency the first currency is worth. e.g. EUR/USD 1.2510 means that 1 Euro is worth 1.2510 dollars.


Currency risk

The probability of an adverse change in exchange rates.


Currency symbols

The abbreviations of currencies which consist of three letters and are generally used to represent the currency. Like the USD for U.S. dollar, and GBP for British pound. They all stand as initials of a bigger word, for example GBP stands for Great Britain Pound even though the currency is generally referred to as the British Pound.


Day trader

A trader who opens and closes positions within the same day and doesn’t leave any positions open overnight.


Day trading

A trading method in which traders open and close positions within the same day and don’t leave any positions open overnight.



An individual who performs trades on the market in the place of another person or with another person – distinctively different from a broker who serves as an intermediary between the traders and the market, but does not intervene in the trades.


Defend a level

A price level for a trading instrument that is being actively maintained by a trader (usually a big trader) or a group of traders because they have an interest in keeping that level.



A trade’s or payment’s negative balance.



When a stock’s listing on an exchange is removed.



The ratio between the change in the product’s price and the change in the underlying market’s price.


Department of Communities and Local Government (DCLG) UK house prices

A measure of completed house sales that indicates price trends in the UK real estate market which is released on a monthly basis.



When the value of a currency or a currency pair declines. Saying the EUR/USD depreciated it means the pair lost value.



A financial contract based on the value of an underlying asset like indices, equities, commodities and currencies.



When the value of a currency is purposefully weakened by a governmental or official representative body.



Divergence is when a price and momentum of a certain market or instrument are moving in opposite directions.



The amount distributed to a company’s shareholders, taken from its earnings.


DJIA or Dow

The Dow Jones Industrial Average or US30.



When policymakers are most likely going to suggest lower interest rates or easier monetary policy. It is also called dovish.



When the price is declining and consists of lower lows and lower highs.



The US Dollar Index.

EA (Expert Advisor)

Software which is used with the MT4 trading platform that will perform trades based on a pre-written script. Little or no manual intervention is needed.


ECB (European Central Bank)

The ECB is the central bank for the countries using the Euro.


Economic indicator

An official report of statistics or numbers regarding economic growth and different economic sectors which could indicate the possibility of certain price movements. Gross Domestic Product (GDP) and inflation are considered indicators.


End of day order (EOD)

A buy or sell order which remains open until the end of a trading day.



Stands for Eastern Standard Time/Eastern Daylight Time – it is the time zone of New York City in the United States.



A name for the Euronext 50 index.



The currency of the Eurozone.


European Monetary Union (EMU)

An umbrella name for the group of policies that aims to coordinate economic and fiscal policies across EU Member States.


European session

Also referred to as the London session, it takes place between the opening and closing time of the UK market, it roughly extends between 07:00 – 16:00 GMT.


Eurozone labour cost index

A measure of rate inflation in the compensation and benefits paid to civilian workers on an annual basis.


Eurozone Organization for Economic Co-operation and Development (OECD) leading indicator

A measure of overall economic health produced monthly by OECD. It combines the measure of ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits and more.



Corporations and entities which sell goods to countries other than their own. Exporting increases the buying of the local currency, because the importers have to pay the local currency for the items exported, and therefore exporters are big buyers of their domestic currency and tend to play a part in the movements of the local currency. For example Sony is considered a seller of the USD/JPY because in its major exports it sells the US dollar and buys the Japanese Yen.



A market which has moved too fast and too far.




Abbreviation of Foreign Exchange.



In a nutshell leverage allows a trader to magnify the amount he may trade so that he may be able to perform higher transactions than his initial capital allows for. E.g. If a client deposits $100 and has a leverage of 1:100, he may trade as much as $10,000 worth of financial instruments.


Long/ Long Position

A position in the market denoting the purchase of a particular currency/currency pair.



Term to define the units being traded. (in currency pairs, 1 lot represents 100,000 units)



The amount required to open a certain position



The former smallest movement which could be denoted in Forex. For most currency pairs his is denoted by the 4th decimal place. Nowadays there has been the introduction of a fractional pip for most currency pairs and commodities, which denotes one tenth of a pip.


Quote Currency

Refers to the second currency in a currency pair. e.g. in EUR/USD the quote currency is the USD.


Roll-Over (Swap)

The name given when a position moves from being open from one day to another. The time at which a rollover occurs is 5 EST or 22:00 GMT



A term used to describe when a trader opens and closes a position in a short period of time; this period often refers to less than 5 minutes.



The difference between the bid and the ask price for a particular currency.


Standard Lot

Denotes 100,000 units for currency pairs. For Gold 1 standard lot is 1 ounce, for Silver 1 ounce and for Oil it is 100 barrels.


STP (Straight Through Processing)

An order processing system in which trades are processed automatically with no manual intervention. At FXNET we use an STP system, where the orders that come from our clients are passed to our Liquidity Providers (Counterparties) for execution.

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