In this article we will have a look at what some of the most common Forex terminology means. We will be gradually expanding this list to account for each Forex term out there.
Lets delve in!
ASK – The price at which buy orders are filled
BID – The current bid price, at which sell orders are filled
COMMISSION – A commission that some brokers charge for their trading and execution services.
FLAT (SQUARE) – Forex term which describes a neutral position, when no trades are currently open
GTC (Good Till Cancelled) – An order type, where a trade stays open until otherwise indicated by the customer or SL/TP target. The most typical trade type for Forex.
LIMIT ORDER – An order to the broker to purchase a certain instrument at the current price or lower, or an order to sell at the current price or higher. The specified price for such orders is called the limit price.
LOSS – Any trades that decrease initial investment after the order has been finalized.
LOT – Forex term which indicates a certain amount of units or sum used to determine the volume of each trade. Usually represented by a decimal number multiple to 100.
MARGIN – Forex term that indicates the amount of money or securities that a trader has to deposit with the broker in order to guarantee trades. This sum represents the amount that has to be set aside to cover any losses that may be incurred by margin trading.
MARGIN CALL – Occurs when deposit values drop below sum necessary to cover standing losses. In Stocks trading this is usually the point where additional guarantee funds would be required from the trader, while in Forex trading at this point most brokers liquidate standing trades to free up margin.
MARKET ORDER – An order to buy or sell a certain volume of a specific currency which the broker then executes at the best available price.
MARKET PRICE – In an open market this is the dynamically changing bid and ask price of a certain market instrument.
OPENED POSITION (TRADE) – A currently running trade that has not yet been finalized with a loss or gain. Sell trades are also called short trades, and buy trades are called long.
ORDER – A request to the broker to buy a certain instrument with user defined volume, and at a specific price.
PIPS (POINTS) – Forex term used to describe the last number (increment) in a quote (0.0001 = 1 pip).
PROFIT (GAIN) – The positive result of a trade, when such is finalized and closed.
RESISTANCE – The price level at which further trades can slow, halt, or reverse an uptrend.
SETTLED (CLOSED) POSITION – A finalized market order, which has been flattened by a reverse order, or accounted for.
SPREAD – The difference between the bid and ask prices.
STOP-LIMIT ORDER – A request to buy a certain lot after the price breaches a certain level.
STOP-LOSS ORDER – An order set to be liquidated if the market price moves to certain level against the trader. Typically used to limit potential losses.
SUPPORT – The market price level at which continued trading activity can halt or reverse a downtrend.
TREND – The direction in which the market price is moving for certain period of time.
UNREALIZED (FLOATING) PROFIT/LOSS – The currently standing Profit/Loss ratio undetermined until a trade is finalized i.e. flattened by a reverse trade (for Forex traders this would simply mean closing a trade).
USEABLE MARGIN – The amount of funds currently available on the traders account to cover for any potential trades. This amount is calculated by substracting the amount of margin locked up in running trades from the total sum of the deposit.
USED MARGIN – The sum of funds that is currently locked to guarantee a trade against potential losses.