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FPG Trading Glossary

FPG Trading Glossary

KNOW THE WORDS, MASTER THE MARKETS

Empowering Traders with clear definitions and Deeper Insights.

Abandoned Baby

A rare reversal doji pattern with gaps. Strong signal of trend reversal.

Accumulation/Distribution Line

An indicator combining price and volume to measure buying or selling pressure. Detects divergences between price and volume.

Acquisition

An acquisition occurs when one company takes over another by purchasing a majority or all of its ownership stake. This strategy is often used for business expansion or gaining competitive advantages.

ADR (American Depositary Receipt)

ADR allows US investors to trade shares of non-US companies on American stock exchanges without needing access to foreign markets.

Alerts

Trading alerts notify traders when specific criteria are met, such as economic announcements, price levels, or indicator movements. They help traders stay informed and act promptly.

Algorithmic Trading

Trading based on automated systems or bots. Removes emotions and speeds execution.

Alpha

Alpha measures a portfolio’s performance relative to a benchmark index. Positive alpha indicates better-than-market returns, while negative alpha suggests underperformance.

Amortization

Amortization refers to spreading loan repayments or intangible asset costs over a set timeframe, often involving interest rates determined by lenders.

Annual General Meeting (AGM)

An AGM is a yearly meeting where shareholders and directors discuss the company’s performance, financial reports, and future strategies.

Arbitrage

Arbitrage involves simultaneously buying and selling an asset in different markets to profit from price discrepancies. Exploits inefficiencies for risk-free gains.

Aroon Indicator

Measures time since highest high or lowest low. Signals start of new forex trends.

Ascending Channel

A bullish channel where both support and resistance trend upward. Indicates strong uptrend structure.

Ascending Triangle

A bullish continuation pattern with rising lows and flat resistance. Signals strong buying pressure.

Ask Price

The ask price is the price at which sellers are willing to sell an asset or security. It represents the lowest price a seller will accept.

Asset Classes

Asset classes are categories of financial instruments grouped by similar characteristics, such as stocks, bonds, commodities, and currencies.

Assets

Assets are resources owned or controlled to generate future benefits or profits. In trading, assets include stocks, forex pairs, commodities, and cryptocurrencies.

At the Money (ATM)

An ATM option has a strike price identical to the current market price, making it highly active due to its proximity to profitability.

ATR (Average True Range)

An indicator that measures market volatility. Useful for setting stop loss levels. 

Auction Market

An auction market facilitates competition between buyers and sellers, with buyers bidding their maximum price and sellers offering their minimum acceptable price.

Automated Trading

Also known as algorithmic trading, automated trading uses algorithms to execute trades based on pre-set criteria like price movements or technical indicators.

Average Directional Index (ADX)

A tool that measures trend strength. Confirms if a forex market is trending or ranging.

Averaging Down

Averaging down occurs when traders buy more of an asset after its price drops, lowering the average purchase price per unit.

Backtesting Testing a strategy on historical market data. Shows potential effectiveness before live trading.
Balance The amount of money in an account, excluding open trades. The starting point for equity calculations.
Balance of trade The balance of trade sometimes referred to as the trade balance, is the difference between the value of a country’s exports and the value of a country’s imports over a set period. Countries that import more goods and services than they export (in terms of value) have trade deficits, and countries that export more goods and services than imports have trade surpluses.
Bank for International Settlements The Bank for International Settlements (BIS) is a global financial institution owned by central banks. Based in Basel, Switzerland, there are representative offices in Hong Kong and Mexico City. The BIS’s original members were Switzerland, Germany, Belgium, France, Britain, Italy, the United States, and Japan.
Bank of China The Bank of China is one of China’s four largest state-owned commercial banks. It is a subsidiary of the People’s Bank of China. However, it maintains close relations in management, administration, and cooperation in several areas with the subsidiary.
Bank of England The Bank of England (BoE) is the central bank for the United Kingdom, acting as the government’s bank and lender of last resort. With headquarters in the City of London, it issues currency and oversees monetary policy. It is the UK equivalent of the Federal Reserve in the United States.
Bank of Japan The Bank of Japan (BOJ) is Japan’s central bank, responsible for monetary policy, issuing currency, maintaining a stable financial system, and providing settling and clearing services. The Bank of Japan compiles economic data, research, and analysis, and then makes the information available to the public. The Bank of Japan is not independent of Japan’s government, and its headquarters are in Tokyo.
Bar Chart A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar; the opening price, which is marked with a horizontal line to the left of the bar; and the closing price, which is marked with a horizontal line to the right of the bar.
Barrier level A certain price of great importance included in the structure of a barrier option. If a barrier level price is reached, the terms of a specific barrier option call for a series of events to occur.
Barrier option Any number of different option structures (such as knock-in, knock-out, no touch, double-no-touch-DNT) that attaches great importance to a specific price trading. In a no-touch barrier, a large defined pay-out is awarded to the buyer of the option by the seller if the strike price is not ‘touched’ before expiry. This creates an incentive for the option seller to drive prices through the strike level and creates an incentive for the option buyer to defend the strike level.
Base Currency In forex trading, the base currency is the first currency quoted in a currency pair (e.g., EUR in EUR/USD). It can also refer to the accounting currency used by banks or businesses.
Base rate The base rate, or base interest rate, is the interest rate that a central bank – like the Bank of England or Federal Reserve – will charge to lend money to commercial banks. Adjusting the base rate helps a central bank regulate the economy by encouraging or discouraging spending as required.
Basing A chart pattern used in technical analysis 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 Basis points, also known as bps (pronounced ‘bips’), describe the percentage change in the value of financial instruments or the rate change in an index or other benchmark. Basis points mostly refer to changes in interest rates and bond yields. One basis point is equivalent to 0.01%.
Bear market A bear market is any market that experiences a fall of around 20% or more from its recent high. Most commonly applied to stock markets, the term can also be used for anything that is traded, including currencies and commodities. A bear market is the opposite of a bull market.
Bearish Engulfing A large red candle that fully covers the previous green candle. Suggests strong bearish reversal.
Bid price Bid price, or simply bid, describes what a buyer is willing to pay for a security. It is contrasted with the ask price, the amount a seller is willing to sell a security for. The difference between the two is known as the ‘spread’, which is the cost traders pay to open and close positions.
Bid/Ask spread The bid/ask spread is the difference between a market’s buy (bid) price and sell (ask) price. For example, if the actual price of a market is $100, the bid price might be $101 and the ask price $99. This makes the spread $2.
Black box The term used for systematic, model-based or technical traders.
BOE (Bank of England) The central bank of the United Kingdom. Major influence on GBP and UK bonds.
BOJ (Bank of Japan) Japan’s central bank, known for ultra-low interest rates. Major factor in JPY valuation.
Bollinger Bands A tool used by technical analysts that consists of a band plotted two standard deviations on either side of a simple moving average. It is used to find support and resistance levels.
Bonds A bond is a fixed-income investment that represents a loan made by an investor to a borrower (who is typically corporate or governmental). It can be illustrated as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.
Breakout When price moves outside support or resistance levels. Often signals strong new trends.
Broadening Formation Expanding highs and lows. Indicates market volatility and uncertainty.
Broker A financial broker is a third-party coordinating the sale of financial securities between parties selling securities and those purchasing them. Brokers are individuals or firms acting as intermediaries between investors and trading exchanges. Exchanges only accept orders from their members, either individuals or firms. Therefore, traders and investors require exchange members’ services to make financial transactions. Brokers get compensated for their services in several ways; commissions, fees, or paid directly by the exchange.
Buck The word buck is a slang term for one US dollar. The word’s use traces back to 1748, forty-four years before the first US dollar became minted.
Budget Deficit When government spending exceeds its revenue. Persistent deficits may weaken currency.
Budget Surplus When government revenue exceeds spending. Often supports currency strength.
Bull market A bull market describes any market in which prices are rising or are expected to rise imminently. Typically applied to stock markets, the term can also be used for anything that is traded, including currencies and commodities. A bull market is the opposite of a bear market.
Bullish Engulfing A large green candle that fully covers the previous red candle. Signals potential bullish reversal.
Bundesbank The Bundesbank (German Federal Bank) is the Federal Republic of Germany’s central bank. Established in 1957, it is the most influential member of the European System of Central Banks (ESCB). Like the European Central Bank (ECB), the Bundesbank is based in Frankfurt, Germany.
Business Confidence Index A survey of company outlook on the economy. Reflects investment and hiring intentions.
Business Cycle The recurring pattern of economic expansion and contraction. Guides long-term currency and market trends.
Buy Taking a long position on a product.
Buy dips ‘Buy the dips’ is a phrase used in trading, referring to opening a trade on a market as soon as it experiences a short-term price fall. ‘The dip’ is quite literally a dip shown on a market’s chart when its price falls after a bullish period.
Cable The GBP/USD (Great British Pound/U.S. Dollar) pair. Cable earned its nickname because the rate was originally transmitted to the US via a transatlantic cable beginning in the mid 1800s when the GBP was the currency of international trade.
CAD The Canadian dollar, also known as Loonie or Funds.
Call option Call options are financial contracts that give you the right, but not the obligation, to buy a market at a specific price within a specific time. The buyer of a call option can profit when the underlying market rises in price.
Canadian dollar The Canadian dollar is the currency of Canada. Managed and overseen by the Bank of Canada, it is frequently traded as part of pairs such as USD/CAD, GBP/CAD, and EUR/CAD. Although not as popular as its US counterpart, the Canadian dollar is still one of the most commonly traded currencies in forex and is often known as a ‘commodity currency’ due to the correlation between its value and commodity prices. It was first used in 1858 as a replacement for the Canadian pound, and the Canadian dollar has since become a benchmark currency that is kept in reserve by countries across the world. The nickname ‘Loonie’ is used in trading to refer to the currency, with the deriving from the aquatic bird ‘the loon’ that is featured on the nation’s $1 coins.
Candlestick Chart A candlestick chart is a type of chart used to analyze a market’s price in trading. Unlike bar charts, candlestick charts show the market’s high, low, open, and closing price within each period. Its name comes from its candlestick-like appearance, with the body resembling the candle and the lines above and below resembling the wick. Although its origin can be traced back to 18th century Japan, the candlestick chart was adopted and popularized in the US much later. Candlesticks have now become a staple of trading and are one of the most popular ways to view and track a market’s price. This is due to the extensive amount of information shown and the relative ease with which this can be interpreted. For day traders, candlestick charts are especially useful because of this abundance of information. A bar chart is similar to a candlestick chart as it shows the same information. There are some subtle differences, however, one being the bodies in bar charts are thinner than in candlestick charts.
Candlestick Pattern A chart formation created by one or more candlesticks. Provides insights into price action and trader psychology.
Capitulation Capitulation is the act of surrendering or giving up. In financial market trading, the term indicates when investors and traders have decided to stop trying to recapture lost gains or maintain their positions, due to falling or rising prices.
Carry trade A carry trade is a strategy that involves borrowing at a low-interest rate and investing in an asset that provides a higher rate of return. Carry trades typically involve borrowing in a low-interest rate currency and converting the borrowed funds into a high-interest rate asset. The proceeds of the high-interest rate asset are then close out in the original low-interest currency. Carry trades can be used in forex, stock, commodities, or any other asset denominated in a currency with a higher-interest than your own base currency.
Cash market A cash market is a marketplace where securities are immediately paid for and delivered at the point of sale. For example, a stock exchange is classed as a cash market – because investors receive their shares as soon as they have paid for them. Cash markets are also called spot markets, because the transactions get settled on the spot. They differ from futures markets, where buyers pay for the right to receive goods at a specific future date. Cash market transactions may take place on exchanges like stock markets or via over-the-counter (OTC) methods. Regulated exchanges offer institutional and structured protection against counterparty risks. OTC markets, on the other hand, allow the parties involved to customise their contracts.
CCI Divergence A divergence between price and Commodity Channel Index. Suggests weakening forex trend.
Central banks A central bank is a financial institution with special authority to issue government-backed currency. It is often responsible for formulating monetary policy and regulating member banks. Examples of central banks include the Bank of England in the UK and the Federal Reserve in the US.
Chaikin Oscillator A momentum indicator derived from the Accumulation/Distribution line. Helps forecast short-term trend changes.
Channel Two parallel trend lines showing price movement in a range. Helps identify breakout or reversal setups.
Channel Pattern Parallel trendlines guiding price action. Helps forex traders trade with trend.
Chart Pattern A recognizable price formation on a chart. Provides signals of continuation or reversal.
Chartist A chartist is a trader that analyses a market’s price history to determine future price trends. A chartist will use a range of analytical tools, as well as indicators, to conduct technical analysis on a market’s price chart. Chartists look for patterns in a market’s price behavior. By identifying these patterns, chartists can then try to predict future price movement and make trades to capitalize on them. For example, they might try to identify a trend as it forms, then profit from the resulting move. A chartist’s trading strategy relies heavily, but not always exclusively, on technical analysis. Sometimes, a chartist can incorporate fundamental analysis along with technical analysis into their trading strategy.
Choppy market A choppy market is when an asset’s price shows no clear trend but instead experiences many smaller fluctuations. A choppy market can occur when buyers and sellers of a market are at an equilibrium. If there is high liquidity (large trading volumes) in a market and neither bears nor bulls can dominate, the result is often a choppy market. Choppy markets are associated with rectangular price ranges. A rectangular price range is a pattern that occurs on charts that continuously hits the same support (the lower limit) and resistance (the upper limit) levels. This prevents the market from breaking out into a trend, as its price is instead confined between these two levels – creating a rectangle.
Cleared funds Cleared funds refers to the balance in a trading account and means that these funds are ready to be traded with. Once funds have cleared, they are free from any obligation and can be used to either make a trade or be withdrawn. If funds aren’t cleared, they might be pending, which will limit what a trader can do with them. On occasion, a deposit of funds can take some time to arrive in a trading account. As a result, a $100 deposit could show up in the account but just not be cleared. At that point, restrictions on how the funds can be used are also likely to apply until the funds are fully cleared.
Clearing The process of settling a trade.
Clearing house A clearing house is an organization, institution or third party that settles a financial obligation between a buyer and seller. It’s the job of a clearing house to ensure that all parties in a financial transaction honor the agreements that they’ve committed to and settle them as such. Clearing houses ensure that transactions run efficiently. The buyer receives what they paid for, and the seller receives the amount of money agreed on for the sale. The idea of a clearing house has been around for centuries. Various forms existed in Japan, Italy and France before the first modern-day clearing house as we know them was established in London in 1773. They make up an integral part of financial ecosystems and play a vital role in instilling financial stability.
Closed position A closed position is a trade that is no longer active and has been closed by a trader. To close a position, you need to trade in the opposite direction to when you opened it. For instance, if you take a long position on a stock, you will have to sell an equal amount of stock to close your position. Once a position is closed, it cannot be reopened. At the point of closure, any profit or loss is realized, and your account balance will be updated accordingly. Closing a position is not always a manual task. Stop-loss and take-profit orders, for example, automatically close your position if a market’s price falls or rises to a certain level.
Closing The process of stopping (closing) a live trade by executing a trade that is the exact opposite of the open trade.
Closing price A closing price is a market’s final price level before it closes for the day. A market’s closing price is used as the price level shown on a typical line chart. Closing prices are the benchmark used to measure a market’s daily performance. A market’s price can fluctuate during the day, but a close price is a fixed number that can not only be compared with previous close prices, but also compared with close prices of other markets.
Collateral Collateral is something pledged as security for the repayment of a loan, which can become forfeited in the event of loan default. Examples of collateral include real estate, vehicles, cash, and investments.
Commodity Channel Index (CCI) A momentum indicator showing overbought/oversold levels. Useful in forex to time trades during cycles.
Commodity trading advisors A commodity trading advisor (CTA) is a type of financial advisor that only supplies advice on commodities trading: typically the buying and selling of futures contracts, commodity options or swaps. US commodity trading advisors must be certified. Registration requires CTAs to advise on all forms of commodity investments. To register as a CTA, the applicant must pass proficiency requirements, such as the Series 3 National Commodity Futures Exam – although alternative tests can also prove proficiency.
Components The dollar pairs that make up the crosses (ie EUR/USD and USD/JPY are the components of EUR/JPY). Selling the cross through the components refers to selling the dollar pairs in alternating fashion to create a cross position.
COMPX Symbol for NASDAQ Composite Index.
Confirmation A document signed by counterparts to a transaction that states the terms of said exchange.
Consolidating market In technical analysis, a consolidating market is a market that is neither continuing nor countering a long-term trend. Instead, its price is only experiencing rangebound price activity. This is also seen as market indecisiveness. A market’s price during a period of consolidation will still fluctuate, but it won’t break out of a certain price range. As soon as the market breaks out and moves either above or below the stagnant trading pattern, the period of consolidation ends. Sometimes a market’s trend will reverse after a continuation. This is known as a transition. For example, if EUR/USD consolidates after an uptrend then experiences a selloff, it has transitioned from bullish to bearish. Many successful trading strategies involve identifying and capitalizing on consolidation periods. The aim is not necessarily to trade the consolidation itself, but rather anticipate the market’s next move and benefit from entering the market early before the next move comes. One way to do this is by identifying bullish or bearish flag formations.
Consolidation A sideways market where price trades within a range. Signals indecision before a breakout.
Construction spending Construction spending is the amount of money the government or businesses have spent on construction, labor, and materials over a monthly period. This can refer to either residential and non-residential construction and includes engineering costs. Residential construction refers to the construction of housing and other forms of accommodation. This is significant to traders as the housing market can often reflect the economic health of a country. Non-residential construction refers to businesses and corporations spending money on infrastructure like new factories, offices, or branches. Non-residential construction has an even stronger correlation with economic performance as gross domestic product (GDP) is derived from the output of these businesses, which is a direct measure of economic strength. Although construction spending is not the strongest economic indicator, its relation to GDP makes it significant to traders. If construction spending is high, this implies economic growth as new infrastructure is being built – increasing the capacity of an economy.
Consumer Confidence Index (CCI) Measures consumer optimism about the economy. Strong confidence boosts spending and growth.
Contagion The tendency of an economic crisis to spread from one market to another.
Contract size Contract size is the deliverable amount of a market that makes up a futures or options contract or spot forex. These vary between markets and assets. For instance, in forex the standard size of one contract is typically 100,000 units of the currency. Whereas for stocks, the typical size of a futures contract is 100 shares. A benefit of having contract sizes is that traders and investors know how much of a market they trading are. The size of the contract is a definitive quantity that is often standardized across the board, meaning regardless of the broker, the size of one contract for a market is usual the same. It’s crucial to know the size of the contract you are trading as this will help you know exactly how much exposure you have. This is also significant when thinking about risk management, as you’ll need to know how much you might potentially lose based on the amount you are trading.
Contracts for difference (CFD) A contract for difference (CFD) is a financial contract in which you agree to exchange the difference in the settlement price between the open and closing trades on a particular asset. CFDs enable traders and investors to speculate on whether a market will go up or down, and profit from the price movement without owning the underlying asset.
Controlled risk Controlled risk is where the amount of risk on a trade is capped at a certain level, typically through a guaranteed stop-loss order. This enables you to set the maximum possible amount you can lose on a trade, giving you full control of your risk. A guaranteed stop is a stop-loss order that you set at a price level of your choosing. Once the price of the market you’re trading hits the level of the guaranteed stop, your position is automatically closed out. Using guaranteed stops to control your risk are effective as, unlike regular stops, they close out your position regardless of market slippage or gapping.
Convergence of mas A technical observation that describes moving averages of different periods moving towards each other, which generally forecasts a price consolidation.
Core Inflation Inflation measure excluding food and energy prices. Gives a clearer picture of long-term inflation trends.
Corporate action A corporate action is an effort made by a public company to alter or change its securities (equity or debt). Corporate action is agreed on by the company’s board of directors with authorization from shareholders. For most events, shareholders and/or bondholders get to vote on corporate action proposals.
Corporates Refers to corporations in the market for hedging or financial management purposes. Corporates are not always as price sensitive as speculative funds and their interest can be very long term in nature, making corporate interest less valuable to short-term trading.
Correction A moderate decline in price after a strong move. Normal part of market cycles.
Corrective Wave A counter-trend move following an impulse wave in Elliott Wave theory. Provides retracement opportunities before continuation.
Correlation The relationship between two assets moving in similar or opposite directions. Helps identify risk overlap.
Counter currency The second listed currency in a currency pair.
Counterparty A counterparty is any other party who participates in a financial transaction. Every transaction must have a counterparty for the deal to become completed. Buyers need pairing with sellers, and vice versa. Counterparties can be individuals, businesses, governments, or any other organization.
Country risk Risk associated with a cross-border transaction, including but not limited to legal and political conditions.
CPI (Consumer Price Index) CPI stands for Consumer Price Index. It is the most popular reference for day-to-day inflation. CPI gets calculated as a measurement of price change using a weighted average basket of consumer goods and services purchased by households.
Crater The market is ready to sell-off hard.
Cross-Currency Pair (Exotics) Forex pairs that don’t include USD, often more volatile. Gives traders diversification and opportunities in less liquid markets.
Crown currencies Refers to CAD (Canadian dollar), Aussie (Australian dollar), Sterling (British pound) and Kiwi (New Zealand dollar) – countries off the Commonwealth.
Crude Oil A major global energy commodity. Moves currencies and inflation rates.
Cup and handle The cup and handle is a technical analysis pattern that got its name by resembling a tea cup. It features candlesticks that resemble a shallow, rounded saucer with a downward trending handle extending from the cup’s righthand side. The formation can occur over a timeframe as short as several weeks up to an entire year.
Currency Currency is the money underpinned by the legal tender system unique to a particular country or economic area. Currency gets used as a medium of exchange for goods and services. Currency in the form of paper or coins gets issued by governments and central banks, and is usually accepted at face value as a payment method.
Currency pair A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets: They are known as the base currency and the quote currency. The exchange rate of a currency pair indicates how much of the quote currency is needed to purchase one unit of the base currency.
Currency Peg A fixed exchange rate system linking one currency to another. Provides stability but limits flexibility.
Currency risk Currency risk is the danger of losing capital due to changes in forex prices. In the context of trading, this is the risk to a trader’s portfolio if currency markets experience strong price changes. Trading forex itself can be risky, but it’s not just the forex markets that can be directly affected by currency risk. Due to the interconnectivity of the financial markets, a significant price change in one currency can impact several other currencies, or even other markets such as shares, indices or gold. Imagine you’ve bought gold in USD. If a Federal Reserve interest rate decision causes a depreciation of the dollar, your position would profit as a result of currency risk. This is because gold is a safe-haven asset that’s invested in during times of volatility or market uncertainty due to its intrinsic value.
Currency symbols A currency symbol is a graphical representation of a currency’s name, often used when referring to an amount of money. Currencies like the US dollar ($) and the British pound sterling (£) are immediately recognized throughout the world by their symbols. In forex trading, you may also see three-letter codes used to abbreviate a currency. This shorthand often appears in international markets instead of using formal currency names.
Currency War When countries devalue their currencies to boost exports. Leads to volatility and trade imbalances.
Current account The current account records a nation’s global transactions such as imports and exports of goods and services, payments to and from investments abroad, and transfers such as foreign aid and remittances. Together the current account and the capital account make up a nation’s balance of payments.
Dark Cloud Cover Bearish reversal two-candle pattern. Indicates potential top.
Day order A day order is a limit or stop order given to a broker to execute a trade at a specific price before the markets close that day. If the price is not reached before the markets close, the order is canceled. A day order is the most common of the several types of limit orders. Other limit orders include good ‘til canceled (GtC) and fill or kill (FoK) orders.
Day trading Day trading takes advantage of small, short-term changes in the market to buy and sell a financial instrument multiple times within one trading day. Day trading typically has a lower success rate than other methods of trading, but it can pay off for well-educated, well-funded traders.
Deal A deal, also known as a trade, is the name given to any forex transaction. The most common deal is a spot contract, a purchase or sale of a foreign transaction based on the exchange rate at that current moment. Other deals include forward contracts, window forwards, limit orders, stop loss orders, and fx swaps.
Dealer A dealer is a financial institution working with their country’s regulatory body to trade foreign currencies. Most dealers are banks who trade securities on their own behalf and in such large amounts that they help maintain liquidity in the market and regulate bid and ask quotes.
Dealing spread The dealing spread is the difference between the bid (sell) price and the ask (buy) price for different currency pairs. It is also known as the ‘spread’ or ‘bid-offer spread’ and is represented by the number of pips between the bid price and the ask price.
Death Cross A bearish signal where the short-term MA crosses below the long-term MA. Suggests a possible downtrend in forex markets.
Default Risk The risk that a borrower fails to repay debt. Higher risk leads to weaker bonds and currencies.
Defend a level Action taken by a trader, or group of traders, to prevent a product from trading at a certain price or price zone, usually because they hold a vested interest in doing so, such as a barrier option.
Deficit A deficit occurs when more money is spent than received. This term can be used to describe imports and exports, expenses and revenues, and liabilities and assets. Governments may intentionally spend in a deficit to help raise countries out of recessions or create future economic growth.
Deflation A general decline in prices of goods and services. Signals weak demand and economic slowdown.
Delisting Delisting is removing a quoted security from an exchange. Delisting can either be voluntary or involuntary. Involuntary delisting usually occurs when a company fails to meet the compliance or listing requirements of the exchange. Listing requirements for an exchange usually involve operating in a specific sector and achieving a specific market cap threshold.
Delta Delta is calculated as a ratio comparing an option’s price change to the price of its underlying asset. If a stock option’s delta is 0.50, and the underlying stock increases by $1 per share, the finance option will rise by $0.50 per share.
Department of Communities and Local Government (DCLG) UK House Prices A monthly survey produced by the DCLG that uses a very large sample of all completed house sales to measure the price trends in the UK real estate market.
Deposit rate The deposit rate is the interest rate paid by financial institutions on cash deposits such as checking, savings, and Money Market accounts in exchange for the institutions use of that cash while on deposit.
Depreciation Depreciation is an ongoing decrease in the value of a currency caused by dovish financial policies, a weakening economy, or even a surge in imports. This currency depreciation is viewed in terms of its exchange rate versus other currencies on the forex market.
Derivative A derivative is a financial security with a value derived from one or more underlying assets. Common derivatives are futures contracts, forwards, options, and swaps. Derivatives are often traded over the counter but can also be traded on an exchange. Many derivatives are leveraged.
Descending Channel A bearish channel where both support and resistance trend downward. Indicates strong downtrend continuation.
Descending Triangle A bearish continuation pattern with falling highs and flat support. Suggests sellers dominate the market.
Diamond Hands Holding positions despite extreme volatility. Shows confidence but carries risk.
Disinflation A slowdown in the inflation rate, not a full decline in prices. Indicates inflation is easing but still present.
Divergence When price moves opposite to an indicator. A strong reversal signal in forex trading. Divergence occurs when a financial security’s price displays deviation from the indicator you might see on your chart. For example, a specific technical indicator might indicate bullish trading conditions, but the price is falling. Alternatively, the indicator might be showing bearish signals, but the price is rising. Price is moving in the opposite direction to the trade direction the indicators are suggesting.
Diversification Spreading investments across assets to reduce risk. Protects accounts from single-market losses.
Dividend A dividend is a share of profits and retained earnings a company usually pays out annually to its shareholders after it has used a portion to reinvest in the business. A dividend is often regarded as a measurement of a company’s health and good management. Mostly profitable or cash-rich firms pay out dividends and some investors rely on these annual returns for investment income.
DMI (Directional Movement Index) Measures directional price strength. Confirms trend continuation in forex.
Doji A candlestick with nearly equal open and close prices. Signals indecision and potential reversal.
Doji Star A doji after a trend. Warns of possible change in direction.
Donchian Channel An indicator showing the highest high and lowest low over a set period. Helps spot breakout opportunities.
Double Bottom A bullish reversal pattern with two lows at similar levels. Signals trend reversal and buying interest.
Double Top A bearish reversal pattern with two highs at similar levels. Suggests trend exhaustion and selling pressure.
Dove Like bull and bear market descriptors, dovish is one of two ways to describe monetary policy from the Federal Reserve. A dovish policy advocates for low interest rates aimed at reducing unemployment and stimulating economic growth.
Dovish A stance favoring lower interest rates to support growth. Signals possible currency weakness.
Dow Jones Industrial Average The Dow Jones Industrial Average is an equity index. It tracks the performance of thirty large public firms quoted on the NYSE and NASDAQ in the USA. The index also gets called the DJIA and DJIA 30. Many financial brokers refer to the index as the US30 on trading platforms.
Downtrend A downtrend is a sustained decrease in price over time, which is created when bearish traders (sellers) take control of a market. The chief characteristic of a downtrend is a step-like descent of candlesticks or bars making lower highs and lower lows. Technical analysts will attempt to identify a downtrend because they’re more significant than a temporary decline in price. Downtrends are usually spurred on by changes in the valuation of an asset, whether that’s as a result of macroeconomic factors, technical indicators reaching key levels, negative news, or disappointing company earnings. These can have a lasting impact on the market price. While most traditional trading takes place within an uptrend, you can go short on market prices with derivatives, enabling you to take advantage of downtrends.
Dragonfly Doji A doji with long lower wick and no upper wick. Bullish if found at strong support.
Drawdown The percentage decline in account equity from its peak. A key measure of trading risk.
Dry powder The term dry powder refers to the amount of cash reserve or liquid securities kept readily on hand by an investor to cover potential future costs and obligations. Dry powder includes any and all marketable securities that can be liquidated on short notice.
DXY$Y Symbol for the US Dollar Index.
ECB (European Central Bank) ECB stands for the European Central Bank, which is the central bank for the euro and Euro Area. The headquarters are in Frankfurt, Germany. It administers monetary policy within the Eurozone, which comprises 19 member states of the European Union, one of the world’s largest trading blocs. The central bank of the Eurozone. Influences EUR currency strength.
ECN (Electronic Communication Network) A system that connects traders directly to liquidity providers. Offers tighter spreads and transparency.
Economic indicator An economic indicator is economic data used by analysts, traders, and investors to determine investment and trading opportunities. The data is usually delivered on a macroeconomic level and defines the overall health of an individual economy.
Elliott Wave Theory A technical framework where price moves in repeating wave patterns. Used to predict long-term forex market cycles.
End of day order (EOD) An end of day order (EOD) is an instruction to your broker to keep a buy or sell order open only until the end of a trading day. An EOD, also known as a day order, can be to open a new position or close an existing one, but either way it will close on the same business day it’s placed, usually by way of a stop or limit.
Engulfing Pattern A candlestick where one body fully covers the previous candle. A strong reversal signal in forex trading.
Equity The total value of a trading account, including open positions. Shows account health and risk exposure.
EST EST stands for Eastern Standard Time. It is five hours behind Coordinated Universal Time (UTC) and Greenwich Mean Time (GMT). The EST time zone gets used during standard time in North America, Central America, and the Caribbean. EST is often called Eastern Time Zone.
ESTR The Euro Short-Term Rate (ESTR) is the interest rate benchmark for overnight borrowing costs throughout the euro area. It’s calculated and published by the European Central Bank (ECB) as a replacement for the Euro Overnight Index Average (EONIA) and the Euro Interbank Offered Rate (EURIBOR).
ESTX50 The ESTX50 is a common abbreviation for the Euro Stoxx 50, which lists the top 50 most highly-capitalised stocks on the EURO STOXX – another European index. It’s weighted based on each company’s free float market capitalisation.
EURIBOR EURIBOR is an interest rate benchmark for the eurozone, standing for Euro Interbank Offered Rate. It is calculated using the average rates that eurozone banks offer each other on unsecured short-term loans of various maturities. EURIBOR represents the rate at which banks will lend capital to each other for short periods (short in this instance meaning less than one year). The rates quoted by various different banks are averaged together to make the benchmark, which is quoted daily. Like other IBORs, EURIBOR rates are used in various financial products – including OTC derivatives.
Euro The Euro is the single European currency that replaced national monetary systems for 19 member states of the European Union. In forex markets, the Euro is abbreviated to EUR, and is the second-most traded currency after the US Dollar. It came into being on January 1, 1993, at which point only 11 EU members used the currency –France, Germany, Spain, Italy, Greece, Portugal, Luxembourg, Austria, Finland, the Republic of Ireland, Belgium, and the Netherlands. However, as the EU has expanded, so has the adoption of the currency. Now, 19 of the 27 member states are part of the eurozone.
European Economic and Monetary Union (EMU) The European Economic and Monetary Union (EMU) was introduced when the founding members of the European Union (EU) set up a centralized economic system for the supranational body. The EMU was formed in 1991 and was enshrined in the Treaty on European Union or the Maastricht Treaty. The policies of the EMU are aimed at establishing free trading among EU member states and was also the body behind the adoption of the euro currency.
European session The European session is the second session of the forex trading day. While the FX market is open 24 hours a day, it’s split into three major sessions – Asian, European, and North American, also known as Tokyo, London, and New York. The European session in forex runs from 2:30 am to 10:30 pm EST, while the City of London is within business hours. This is the session that experiences the most volatility but is most active when it overlaps with the other major session hours.
Eurozone labour cost index Measures the annualised rate of inflation in the compensation and benefits paid to civilian workers and is seen as a primary driver of overall inflation.
Eurozone Organisation for Economic Co-Operation and Development (OECD) leading indicator A monthly index produced by the OECD. It measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices and interest rate spreads.
Evening Star A bearish three-candle reversal pattern. Signals possible shift from bullish to bearish trend.
Ex-dividend Ex-dividend means without dividend, referring to the sale of a security after a dividend payment is announced but before it gets distributed. Ex-dividend is the interval between the recorded date and the payment date during which the stock trades without its dividend. Buyers of stocks sold ex-dividend do not receive the recently declared dividend.
Exchange Rate The exchange rate is the value of one currency compared to another in forex trading.
Execution Model The way a broker processes client orders (ECN, STP, MM). Affects spreads, costs, and transparency.
Execution Speed The time it takes for an order to be filled. Crucial for scalpers and high-frequency traders.
Expert Advisor (EA) An automated trading program for platforms like MetaTrader. Executes strategies without manual input.
Expiration date and options values An expiration date for derivatives – such as options or futures contracts – is the last day that the contract is valid. Either before or on this day, traders usually decide what to do with their financial position. Before an option expires, the owner can choose to take up the option, close the position to realise the profit or loss, or let the contract expire as worthless.
Exponential Moving Average (EMA) A moving average that gives more weight to recent prices. Reacts faster to price changes.
Exporter An exporter is a person, company, or country that sends goods or services to a counterparty in another country. Exporting is a global trade function whereby goods produced in one country get moved to another country to trade or sell.
Factory orders Factory orders are a common economic indicator, used to assess the dollar value of goods from factories. The data for factory orders are released in monthly reports by the US Census Bureau and are split into two major groupings: durable and non-durable goods. Each factory orders report includes new orders, unfilled order, shipments, and inventories.
Falling Wedge A bullish pattern where price falls but trendlines converge. Suggests reversal to the upside.
False Breakout (Fakeout) A move beyond support or resistance that quickly reverses. Traps traders and highlights market manipulation.
Fear and Greed Index A measure of market sentiment based on risk appetite. Helps spot extremes in optimism or panic.
Federal Reserve The Federal Reserve System, referred to as the Federal Reserve or the Fed, is the United States of America’s central banking system. On December 23, 1913, the Federal Reserve Act created the system after a series of financial shocks caused the need for central control of monetary policy to prevent future crises.
Fibonacci Extension Levels projected beyond retracement to forecast target prices. Helps traders set profit-taking zones.
Fibonacci Retracement A tool using Fibonacci ratios to identify support and resistance. Commonly used in trend trading.
Figure/the figure Refers to the price quotation of ’00’ in a price such as 00-03 (1.2600-03) and would be read as ‘figure-three.’ If someone sells at 1.2600, traders would say ‘the figure was given’ or ‘the figure was hit’.
Fill or kill A fill or kill (FOK) order is an instruction sent to a broker or directly to a trading venue that must be carried out immediately and in its entirety. If either of those stipulations cannot be met, the order is canceled. No partial or delayed execution of the order is allowed.
Filled orders A filled order, of fill for short, is simply an executed order in the markets. It is an order that has had its parameters filled, whether it was an order to buy or sell an asset, to open or close a position. For example, if you were to create an order to buy a stock at $45, and your order is accepted, it would be said to have been ‘filled’ and $45 would be the ‘fill price’.
Financial analyst A financial analyst conducts financial analysis for external or internal clients. Their primary duty is to examine data to identify opportunities or evaluate outcomes for investment recommendations or business decisions. In the financial services industry, analysts provide regular reports on forex, equity, commodity, and cryptocurrency markets to assist traders’ decision making.
Financial contract A financial contract is a legally binding document between at least two parties that defines and governs the parties’ rights and responsibilities under the agreement. A financial contract is legally enforceable when it meets the law’s requirements and approval. It usually involves exchanging money, goods, services, or promises to trade any of these products.
Financial liability A financial liability is an obligation that a company or individual has to pay for or deliver. Examples include bank loans, leasing agreements, other payables, and interest-bearing financial liabilities. Financial liabilities get classified into two main types based on the period they become payable: current liabilities and non-current liabilities. Current liabilities are typically payable within 12 months from the time of receipt. Examples include salaries, monthly utilities, and rent due. Non-current liabilities are due for payment after 12 months. For instance, if a debt is payable over 5 years, then the amount owed after one year would be classified under long-term liabilities.
First-In-First-Out (FIFO) First-In-First Out, also called FIFO, is an asset-management and valuation method where assets acquired or produced get used, sold, or disposed of first. FIFO is often used for tax purposes. Assets with the oldest costs get included in the income statements for the cost of goods sold (COGS). The remaining inventory assets then become matched with assets that were recently purchased or produced.
Fiscal Policy Government use of spending and taxation to influence the economy. Complements monetary policy in stabilizing growth.
Flag Pattern A small consolidation after a strong price move. A continuation signal for trend traders.
Flat Market A flat market describes when the price for a certain security neither rises or falls for a significant time period. Flat markets can occur when there is low trading volume or when increasing price movements on some securities are offset by declining price movements of other securities in the same index. In forex, a flat market occurs when a currency pair fails to move significantly up or down and does not contribute a significant loss or gain to the forex trading position.
Flat or square position Dealer jargon used to describe a position that has been completely reversed, eg you bought $500,000 and then sold $500,000, thereby creating a neutral (flat) position.
Flat reading Economic data readings matching the previous period’s levels that are unchanged.
Follow-through Fresh buying or selling interest after a directional break of a particular price level. The lack of follow-through usually indicates a directional move will not be sustained and may reverse.
FOMC minutes FOMC minutes are a detailed record of the Federal Open Market Committee (FOMC) meetings and are released three weeks after every meeting. The minutes offer more concise insights on the monetary policy stances of all members of the committee and how individual members see the value of the USD and other securities. Analysts comb through these minutes to determine if individual committee members are striking hawkish or dovish tones in their remarks, regardless of what tone the statement took weeks prior.
FOMO (Fear of Missing Out) The urge to enter trades because others are profiting. Often leads to poor decisions.
Forex Forex, also known as foreign exchange or FX, is the conversion of one country’s currency into another. It forms the basis of forex trading, one of the world’s most-traded asset classes.
Forward contract A forward contract is a non-standardized type of derivative instrument. It’s an agreement between two parties to buy or sell an asset at a specified future time at a price agreed on at the time of the contract’s conclusion. It differs from a futures contract, which is an agreement between parties to buy or sell the underlying financial asset at a specific rate and time in the future. The party who agrees to buy the underlying asset at a future date assumes the long position, and the party deciding to sell the asset takes a short position. The price agreed is the delivery price, equal to the forward price when the contract is agreed.
Forward Guidance Central bank communication about future policy direction. Influences market expectations ahead of action.
Forward Testing Applying a strategy in real time with demo or small accounts. Validates performance under live conditions.
FRA40 The FRA40 is a benchmark index containing 40 of the biggest companies on the Euronext Paris exchange. It’s commonly referred to as the French 40. Most of the companies included are international, representing 35 different sectors.
Fractals Chart indicators marking local highs and lows. Highlight reversal points and breakout levels.
FTSE 100 The FTSE 100 is an index of the 100 companies with the highest market capitalisation on the London Stock Exchange. Although, many of the listed companies are international, making it a somewhat weak indicator of the UK economy.
Fund A fund is an investment vehicle that enables people to pool their money together to invest in different securities like stocks, bonds, currencies, property, or commodities. Funds might have different objectives; either to deliver a regular income or capital growth for the investor.
Fundamental analysis Fundamental analysis is involves using related economical and financial factors to determine the value of a security. Both macro and microeconomic factors are considered when performing fundamental analysis from the overall economic health of an industry or country to specific details pertaining to one company such as specific management decisions made by the company to its revenue and profit. Fundamental analysis can be used on a range of securities including indices and individual stocks, forex, and commodities.
Futures Contract A futures contract is a standardized legal agreement to buy or sell a product at a set price at a specified time in the future. The contracts are standardized for both quantity and quality and are traded through exchanges.
FX Intervention When central banks buy/sell currencies to influence exchange rates. Stabilizes markets or defends a currency peg.
G7 The Group of Seven is an international governmental organization that includes France, Germany, Italy, Japan, the United Kingdom, Canada, and the United States. During recent decades, the G7 claimed to have ‘strengthened security policy, mainstreamed climate change, and supported disarmament programs’.
G8 The Group of Eight (G8) was an international governmental political forum that existed from 1997 until 2014. The discussion forum originated in 1975 as the Group of Six (G6) after France held the first summit.
Gann Fan Chart tool with angled lines showing trend levels. Helps spot support, resistance, and trend strength.
Gap A sharp price movement with no trading in between, often after news. Can trigger stop losses unexpectedly.
Gap/gapping Gapping describes when the price action of a security jumps to a new price not directly adjacent to the previous price, creating a gap between ticks on a price chart. Gapping can occur during a trading day, often when there is low liquidity and the asset price is heavily affected by a lower level of trading.
GDP (Gross Domestic Product) The total value of goods and services produced in a country. A key driver of currency strength.
Gearing ratio The gearing ratio is a financial ratio comparing a business owner’s equity (or capital) to the company’s overall debt and borrowed funds. It’s a measurement of financial leverage, illustrating how much of a firm’s operations get funded by equity capital instead of debt financing.
Geopolitical Risk Uncertainty from wars, conflicts, or political crises. Drives safe-haven demand and volatility.
Germany 30 index The Germany 30 index is FOREX.com’s name for its market based on the DAX 30, a German stock market index of the thirty biggest companies measured by market capitalization trading on the Frankfurt Stock Exchange. Prices get taken from the Xetra trading venue.
Given Refers to a bid being hit or selling interest.
Giving it up A technical level succumbs to a hard-fought battle.
GMT GMT stands for Greenwich Mean Time. Due to its maritime connection, back in 1884, the village of Greenwich, London, England, was chosen as the reference point for all time on Earth. Together with coordinated universal time (UTC), GMT is regarded as the standard time globally. Earth has been divided into twenty-four equal time zones, making it simple to convert GMT to local time.
Gold A precious metal and safe-haven asset. Gains demand during uncertainty and inflation.
Gold bullion The term gold bullion describes a large quantity of physical gold that is at least 99.5% pure metal, it can be cast in bars, ingots, or coins. Investors often purchase gold bullion as an alternative physical investment to hedge their risk against other financial exposure to markets. Gold bullion is a tangible asset that is regarded as both an alternative and safe-haven asset.
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.
Golden Cross A bullish signal where the short-term MA crosses above the long-term MA. Indicates potential trend reversal to the upside.
Good ’til Cancelled (GTC) An order that stays active until canceled. Useful for keeping forex orders open until filled.
Good ’til cancelled order (GTC) A good ‘til cancelled (GTC) order is an instruction to execute a trade that will remain active until the order is fulfilled or the trader cancels it. Brokerages typically limit the length a GTC order can remain open to 90 days.
Good ’til date A good ‘til date (GTD) order is an instruction to execute a trade that remains open until a future date specified by the trader. Once the date is reached, the order is canceled if it has not been fulfilled or canceled already.
Good for day An order that will expire at the end of the day if it is not filled.
Gravestone Doji Bearish doji with long upper shadow. Shows rejection of higher prices.
Greenback Greenback is a slang term for US paper dollars. The name is derived from the note’s color. Dollars were called greenbacks because the backs of the notes were printed in green. The term greenback originated in President Lincoln’s administration.
Gross domestic product Gross domestic product (GDP) is a measure of the market value of all the final services and goods produced in a specific period by a country or economic area. It’s a measurement of an economy’s size and health over a period, usually one quarter or one year. GDP is used to compare different economies’ sizes at various points in time.
Gross national product Gross national product (GNP) is an estimate of the total value of all products and services produced by a country in a specific period, often a financial quarter or year. GNP is calculated by adding personal consumption, private domestic investment, government expenditure, net exports, and income earned by residents from overseas investments. Income earned inside the domestic economy by foreign residents gets deducted.
Guaranteed order An order type that protects a trader against the market gapping. It guarantees to fill your order at the price asked.
Guaranteed stop A guaranteed stop-loss order (GSLO) is a type of order that ensures your position is closed out at the price you specify, regardless of market volatility, slippage, or gapping. Guaranteed stops are often free to attach, but your brokerage will charge you a premium if the order is triggered. This is due to the risks your broker is taking on for you.
Gunning/gunned Refers to traders pushing to trigger known stops or technical levels in the market.
Hammer A bullish reversal candlestick with a long lower wick. Suggests buying pressure after a sell-off.
Handle Every 100 pips in the FX market starting with 000.
Hanging Man Bearish reversal resembling hammer but at top. Warns of trend exhaustion.
Harami Pattern A small candle inside a large one. Signals trend pause or reversal.
Hawk/hawkish Hawkish is a term used in economics to describe a monetary policy that takes rigorous steps to control inflation, principally by means of raising interest rates. An inflation hawk will be less concerned with economic growth than they with reducing the likelihood of a recession. Although hawkish individuals are often viewed negatively, as high interest rates reducing borrowing and investments, the monetary policies often encourage saving and can lead to imported goods becoming cheaper.
Head and Shoulders A reversal chart pattern shaped like three peaks. Often signals trend reversals in forex markets.
Hedging Hedging is an investment technique to offset potential investment losses by purchasing correlated investments that are expected to move in the opposite market direction. Hedging techniques are popular methods for investors to protect themselves from risky positions; they hedge their bets. It’s like having investment insurance. If a sudden price reversal occurs, the damage gets limited due to the hedge position.
Heikin Ashi A modified candlestick chart that smooths out price action. Helps traders identify trends more clearly.
Hidden Divergence Occurs when an indicator suggests continuation despite pullbacks. Helps traders spot trend continuation opportunities.
High-Frequency Trading (HFT) Algorithmic trading using lightning-fast execution. Exploits tiny market inefficiencies.
Hit the bid The phrase ‘hit the bid’ refers to the bid-ask spread, the price difference between the highest price a buyer is willing to purchase a security at and the lowest price the holder of that security is willing to sell at. A trader willing to sell immediately at the given bid price will ‘hit the bid.’
HK50/HKHI Names for the Hong Kong Hang Seng index.
HODL Crypto slang for holding assets long-term despite volatility. Represents belief in long-term growth.
Hyperinflation An extremely rapid rise in prices, often above 50% per month. Destroys currency value and erodes confidence.
IBOR IBOR stands for Interbank Offered Rate – a type of interest rate benchmark that represents an average of the rates that banks will offer each other for loans of various maturities. The most well-known and widely used IBOR is LIBOR. However, you might also encounter EURIBOR, TIBOR and other rates. IBORs have been used in financial markets for a long time and feature in a huge variety of different products and transactions. Over-the-counter (OTC) derivatives in particular have long been associated with IBORs.
Ichimoku Cloud A Japanese indicator showing support, resistance, trend, and momentum. Provides a complete trading system in one tool.
Illiquid market An illiquid market is a market that is difficult to sell assets in due to a lack of interested buyers, available assets, or because the market itself is not viable as a financial asset. Assets in these markets are often difficult to convert to cash without losing a significant portion of its value because of their large bid-ask spreads. Illiquid markets can hold high-value assets, but if no willing buyers are found, sellers may be forced to lower their price or hold on to their assets longer than preferred.
Impulse Wave A strong move in the direction of the main trend within Elliott Wave theory. Shows the dominant market momentum.
Index components An index’s components are the individual companies that are listed on a stock index. For example, Apple is a component of the Nasdaq stock index. Components are also known as constituents. There is no set number of components an index must have.
Indicator A tool that uses market data to provide trading signals. Helps traders confirm entries and exits.
Industrial Production Tracks output from factories, mines, and utilities. Rising output reflects economic expansion. Industrial production is a measure of the output of the industrial sector of an economy. The industrial sector includes manufacturing, mining, utilities (like gas and electricity), and, at times, construction output. Industrial production is calculated over a period by recording the change in the volume of output produced.
Inflation Inflation is the decline of a specific currency’s purchasing power over time. It’s calculated by measuring the cost of a basket of widely consumed goods and services in an economy. Inflation reduces each unit of currency’s purchasing power and increases living costs; consumers must spend more to fill a shopping basket or get a haircut. As prices rise, money buys less, so inflation can reduce living standards over time.
Initial margin requirement The initial margin requirement is the amount of money required to open a position in a given market through a brokerage. It is usually represented as a percentage of the total amount you seek to open as a position. A trader looking to trade $100,000 in the forex marketplace may pay $10,000 to a brokerage as a 10% initial margin requirement and would still get the total $100,000 exposure through the brokerage.
Interbank rates The interbank rate is the interest rate charged by banks when conducting transactions of foreign currency with other banks. These rates are typically lower than interest rates paid by retail traders, but they are used to set those higher interest rates paid by individuals and institutions. Like all foreign currency exchange rates, these fluctuate constantly.
Interest rate An interest rate is the percentage of money charged above the lender’s principal – the amount of money loaned – for using its capital. Global central banks set base interest rates to manage their domestic economies. Base rates are the benchmark all banks use to decide their borrowing and investment rates.
Intervention Action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
Inverse Head and Shoulders A bullish reversal pattern forming at the end of a downtrend. Indicates potential upward trend reversal.
Inverted Hammer A bullish reversal candle with a long upper wick and small body. Signals potential trend change after a decline.
INX Symbol for S&P 500 index.
IPO IPO stands for initial public offering, a process by which a company can offer its shares for sale on a stock exchange for the first time. An IPO enables retail investors to take a stake in the company – turning it from a private enterprise into a public one. Businesses undertake IPOs to help them raise capital by selling stock to public investors. Listed companies tend to be subject to far more rules and regulations than private ones, though, so getting a business ready for an IPO can be a lengthy process. Once a company is ready to list, it will decide how many shares it wants to sell. It will then work with an investment bank to set an initial price for those shares and begin the selling process.
ISM manufacturing index The ISM manufacturing index is a survey of over 300 purchasing managers and supply management executives. The report is regarded as a vital indicator of the state of the US economy as it can affect investor and business confidence. The ISM manufacturing index gives equal weighting to production, employment, supplier deliveries, new orders, and inventories and seasonally adjusts each factor.
ISM non-manufacturing index The ISM Non-Manufacturing Index (now called the Services PMI) is an index used to assess the performance of services companies in the US. The reading, published monthly, is based on surveys of more than 400 purchasing and supply managers in non-manufacturing (services) firms. Monitoring the ISM Services PMI helps traders and investors gain insight into the country’s economic conditions. The index is compiled and published by the ISM (Institute for Supply Management) as part of the ISM Report On Business.
January Effect Seasonal trend where markets often rise in January. Traders use it to anticipate early-year forex and stock movements.
Japanese economy watchers survey Measures the mood of businesses that directly service consumers such as waiters, drivers and beauticians. Readings above 50 generally signal improvements in sentiment.
Japanese machine tool orders Measures the total value of new orders placed with machine tool manufacturers. Machine tool orders are a measure of the demand for companies that make machines, a leading indicator of future industrial production. Strong data generally signals that manufacturing is improving and that the economy is in an expansion phase.
Jawboning When officials influence markets with public statements. Forex traders watch it as it can move currencies without policy changes.
Jensen’s Alpha A measure of risk-adjusted investment performance. Helps traders evaluate strategy returns vs. market benchmarks.
Jobless Claims Weekly U.S. report showing the number of people filing for unemployment benefits. A key economic indicator that impacts USD volatility in forex trading.
JOLTS Report U.S. job openings and labor turnover survey. Impacts USD pairs as it signals labor market strength.
JPN225 Commonly referred to as “The Nikkei,” the JPN 225 is a Japanese index based on the market capitalization of the top 225 companies traded on the Tokyo Stock Exchange (TSE). The Nikkei is a price-weighted index calculated daily since 1950 by the Nihon Keizai Shimbun, Japan’s largest financial newspaper. The Nikkei operates in the Japanese Yen and displays a positive correlation to the value of the currency. When the Yen depreciates, prices of Japanese stocks listed on the index rise. Overall the Nikkei is popular for its day-to-day volatility.
Judgmental forecasting Market prediction based on experience and intuition. Traders may use it when data is limited but risk is higher.
Jump diffusion A model combining normal price changes with sudden jumps. Useful for understanding forex volatility during unexpected events.
Kagi Chart A chart style that tracks price reversals without time. Helps traders spot clear trends and reversals.
Keep the powder dry To limit your trades due to inclement trading conditions. In either choppy or extremely narrow markets, it may be better to stay on the side lines until a clear opportunity arises.
Keltner Channel A volatility-based indicator using ATR around a moving average. Identifies breakouts and trend strength.
Key Reversal A sharp price move that signals a trend reversal. Forex traders use it to catch turning points.
Key Technical Level Important price zones like support or resistance. Guides forex entry, exit, and stop placement.
Kicker Pattern A strong candlestick reversal signal. Traders see it as a high-confidence setup.
Kiwi Kiwi is the colloquial name for the New Zealand Dollar (NZD), coined after the flightless Kiwi bird featured on the island nation’s $1 coin. In forex pairs the NZD is often referred to as the ‘Kiwi.’
Klinger Oscillator Volume-based indicator measuring money flow. Helps traders confirm forex trend strength.
Knock-in options Option that nullifies a previously bought option if the underlying product trades a certain level. When a knock-out level is traded, the underlying option ceases to exist, and any hedging may have to be unwound.
Kondratieff Wave Long-term economic cycle lasting decades. Provides macroeconomic context for currency trends.
KST (Know Sure Thing) Momentum indicator based on moving averages. Useful for spotting long-term forex trend changes.
Lagging Indicator An economic measure that confirms existing trends. Supports analysis of past performance.
Last dealing day The last day you may trade a particular product.
Last dealing time The last time you may trade a particular product.
Last trading day The last trading day is one day prior to the expiration date of a derivatives contract. The last trading day is the final day you can trade or close out your position before the commodity is delivered or settled in cash the following day. Once the last trading day passes, the derivative is no longer tradable, and the settlement process begins.
Latency The delay between sending an order and execution. Lower latency improves trading accuracy.
Leading Indicator An economic measure that predicts future activity. Helps traders anticipate market moves.
Leading indicators Leading indicators are economic data that correspond with future movements or changes in an area of business interest. They can help predict and forecast future events and trends in markets and the economy. Leading indicators vary in their accuracy and precision. The purchasing managers’ index (PMI), consumer confidence index, initial jobless claims, average hours worked, and average earnings are examples of leading indicators.
Level A price zone or particular price that is significant from a technical standpoint or based on reported orders/option interest.
Leverage Leverage is a trading tool that enables you to control a large amount of capital without paying for the full value of your position upfront. Several financial products make use of leverage, including futures, options, and forex trades. Instead of paying for the total value of a leveraged trade, you put down a smaller amount known as your margin. When buying $10,000 of EUR/USD, for example, you might only have to put down 5% of your position’s value as margin ($500). Your profit or loss would still be based on the $10,000, however. It’s important to remember that leverage will magnify both your profits and your losses.
Leveraged names Short-term traders, referring largely to the hedge fund community.
Liability Liabilities are sums owed by a person or company, usually cash, that are settled through the transfer of cash, goods, or services. On balance sheets, liabilities are recorded on the right side against the figure’s assets. Liabilities include loans, accounts payable for goods or services, mortgages, deferred revenues, bonds, warranties, and accrued expenses. Liabilities may also refer to a legal or regulatory risk or obligation.
LIBOR LIBOR is a leading interest rate benchmark, set each day according to estimates from up to 18 global banks. It stands for London Interbank Offered Rate. There are LIBOR rates for multiple different currencies: including GBP, USD, EUR and more. LIBOR is calculated by surveying banks to find out the rates they would charge each other on loans of various maturities, based on the current economic outlook. The LIBOR rate is an average of what the banks will charge each other, and is then used across the global financial system, particularly for pricing derivatives. Usage of LIBOR (and other IBORs) is being phased out, to be replaced with a near-risk-free rate (RFR).
Limit order A limit order is an instruction to your trading provider or broker that tells them to execute a trade at a more favorable price than the current market price. You can use a limit order to enter or exit a position. Say, for example, that you have an open long position on Glencore stock, which is trading at $2.90. You decide that you want to take your profits if it hits $3.00. $3.00 is a better price for you than $2.90 because you’ll earn more profit from your position. So, you could use a limit order to tell your trading provider to sell your stock if it hits $3.00. Then, if Glencore moves to $3.00, your position will automatically close. The opposite of a limit order is a stop. These execute a trade at a price that is worse than its current level and are a crucial part of risk management.
Liquid market A liquid market is any market with a high volume of activity, allowing traders ample opportunity to buy or sell large quantities at any time and for low transaction costs. While the exact requirements of a liquid market vary among securities, liquid markets generally have tighter spreads, facilitate immediate transactions, have many available assets, and are resilient – meaning the asset’s price is largely unaffected by purchases and sales of that asset.
Liquidation Liquidation can have two meanings on the markets. The first is the process of distributing a company’s assets as it ceases to operate. The second is when you exit a position on a market, usually by selling an asset for cash. If a company goes into liquidation, then its available assets are used to pay the outstanding obligations it has to creditors – and sometimes to investors. In most countries, shareholders will only receive assets once all creditors have been paid.
Liquidity Liquidity means the ease with which a market can be traded without affecting its price. A market with lots of buyers and sellers at any given time is said to be highly liquid because you’d be able to find a counterparty to buy or sell it easily. If there are very few people interested in an asset, then it is illiquid. In this case, you might find it tricky to trade. Major forex pairs are an example of a highly liquid market. The extremely high volume of FX trades each day means that it is highly likely that you’ll be able to find a buyer or seller to take the other side of a deal. Unknown penny stocks, on the other hand, might be illiquid if few traders are interested in buying or selling them.
Liquidity Pool A collection of funds from multiple providers for smoother trading. Ensures tighter spreads and fast execution.
Liquidity Provider (LP) Institutions that supply buy and sell quotes to brokers. Ensure smooth trade execution.
London session The London session—also known as the European session—is one of three trading sessions responsible for keeping the forex market open 24 hours a day. The session opens as the Tokyo (Asian) session winds down and close several hours after the New York (North American) session begins. The London session runs during the city’s official business hours: from 7:30 a.m. to 3:30 p.m. GMT. The London session experiences the majority of forex trading of the three main periods and is known for increased volatility and higher liquidity following a typically drowsy Tokyo session. London has long been the hub of forex, with 43% of all transactions happening in London. The final four hours of the London session experience the highest volume of trades due to its overlap with the New York session.
Long position A long position is a trade that earns a profit if the underlying market moves up in price. You open a long position by buying a financial asset. If the asset then increases in value, you can sell it for a profit. If it falls in value, you may have to sell it for a loss. Going short is the opposite of opening a long position. Here, you sell an asset to open your trade – then make a return if it falls in price. Most investments are long positions. Traders who use derivatives, though, may go short just as often as they go long.
Longs Traders who have bought a product.
Loonie ‘Loonie’ is the nickname for the Canadian Dollar (CAD) that first originated among forex traders before becoming common in the public at large. The Loonie is the seventh most traded currency in the world and the sixth most held currency in foreign exchange reserves. The Loonie is a dollar-based currency, but it is sometimes denoted with ‘C$’ to differentiate it from others like the United States Dollar. The Canadian currency has had a free-floating rate since 1970 but holds a relatively lower value than the U.S. Dollar.
Lot A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots. (Forex Lot) A lot is the typical unit amount of currency traded in forex and equals 100,000 units of whichever specific currency is quoted. Lot sizes are so large in order to magnify the changes in currency values, which usually occur in a matter of only a few pips. For example, if the USD/JPY is trading at 119.80, a single pip change would amount in $8.34 difference when multiplied against a single lot. The math is: (.01/119.80) x 100,000 = $8.34
Lot Size The standardized unit of trade volume in forex. Defines trade size and pip value.
MACD (Moving Average Convergence Divergence) An indicator showing momentum and trend strength. Helps spot trend changes.
Macro trader A macro trader is an individual who tries to profit by analyzing economic data such as GDP growth, inflation, and unemployment. They base their decisions on the overall economic and political views of various countries and the macroeconomic principles. Forex trading is an example of macro trading, where traders try to capitalize by finding a relationship between currency price and the data.
Margin In trading, “margin” refers to the borrowed money from a broker to open a larger position than your own capital would allow, or the collateral you must deposit to do so. Margin allows for leveraged trading, which can amplify both potential profits and losses. There are two main types: initial margin (the deposit needed to open a trade) and maintenance margin (the minimum equity required to keep the position open).
Margin call Margin call is the term for when you no longer have sufficient funds in your account to keep a leveraged position open. If you are placed on margin call then your positions are at risk of being closed automatically. When you trade using leverage, you need to maintain a certain balance in your account as margin. If your losses from a trade mean that you no longer have the required margin in your account, you’ll be placed on margin call.
Mark to market Mark to market (MTM) is an accounting method that values an asset, portfolio, or account at its current market price instead of an assumed book value. An asset’s mark to market value reveals how much a company recieves if it sells the asset at that point in time. Mark to market is sometimes called fair value accounting or market value accounting. The alternative to mark to market is historical cost accounting, which keeps an asset’s value on the books at its original level. Investors need to be aware if a company’s assets have declined in value. If not, the company might overvalue its net worth. Mark to market should deliver an accurate, current value of an asset.
Market contagion Market contagion is the spread of economic disturbances from one market to another, causing both to fall in value. It can occur for many different reasons, but from a macro viewpoint contagion happens because almost every market is connected through financial systems. One forex pair can easily link to another, but there are also less obvious correlations between markets – for example, AUD/USD and Silver. Many markets also use the same goods and services, meaning if one market crashes, it’s likely another will too. When a crash does occur, this interconnectivity between markets causes the initial shock to be magnified. Contagion is a similar concept to market correlation. However, market correlation doesn’t always negatively impact a market – one market can also benefit from another‘s price movement.
Market Depth The level of buy and sell orders waiting in the market. Shows liquidity and potential price stability.
Market intervention Market intervention is any action taken by a government or other political-action group to modify or adjust the market. Market intervention through monetary policy is a common tool used by governments to regulate markets. Governments mainly intervene in markets by setting interest rates, subsidies and tariffs, and industry regulations.
Market maker A market maker is a trader or trading firm that quotes their own bid and ask prices on one or more assets. They’ll own a set amount of the assets that they buy and sell, so they can quickly facilitate deals and ensure liquidity remains high. You may, for example, see a market maker that quotes $2.00 per share to buy 100 shares of a particular company and $2.05 per share to sell them. The maker earns their profit from the difference between the two (the spread). Market makers are most typically seen on the equities markets. However, they can be found in other asset classes too.
Market order A market order is an instruction by a trader or investor (usually to a broker) to immediately buy or sell an asset or security at the current price. A market order is the most common type of transaction in financial markets. It is the default choice for most online broker transactions.
Market Psychology The collective emotions and behavior driving market moves. Explains irrational rallies and crashes.
Market-to-market Process of re-evaluating all open positions in light of current market prices. These new values then determine margin requirements.
Marubozu A strong bullish or bearish candle with no wicks. Reflects clear market conviction and strong momentum.
Maturity The maturity date is the date that a debt instrument—such as a note, draft, or acceptance bond—becomes due. The maturity date can be found quoted on the certificate received with the debt instrument. These dates can vary depending on the instrument and contract received. Maturity date may also refer to the expiration date for futures and options contracts or the date an instalment loan must be fully paid back.
Medley report The Medley Report refers to the Medley Global Advisors, a market consultancy based in New York that’s focused on macro policy. It serves some of the world’s largest hedge funds, asset managers, banks, and institutional investors. The Medley Reports contain coverage of global economies, commodities, indices, and various markets. The advisory maintains close contact with central banks and government officials around the world, allowing them to claim they have insider information which informs their reports.
Models Synonymous with black box. Systems that automatically buy and sell based on technical analysis or other quantitative algorithms.
MOM Abbreviation for month-over-month, which is the change in a data series relative to the prior month’s level.
Momentum The speed of price movement over time. Helps confirm trend strength.
Momentum Trading Momentum trading is a strategy that seeks to capitalize on momentum, or the rate at which a security’s price accelerates, whether up or down. The idea is to enter a position as price begins to surge, often with the help of technical indicators and recognized chart patterns.
Momentum players Traders who align themselves with an intra-day trend that attempts to grab 50-100 pips.
Monetary Policy Monetary policy in trading refers to the strategies a central bank uses to manage the economy by controlling interest rates and the money supply to influence financial markets and trading activity. In trading, understanding these policies is crucial because they impact asset prices, economic growth, and investment opportunities. Central banks use a tightening policy (raising rates) to slow down an overheating economy and control inflation, and an easing policy (lowering rates) to stimulate economic growth during a recession.
Money Flow Index (MFI) A momentum indicator using price and volume to measure buying and selling. Identifies overbought and oversold zones.
Month-Over-Month (MoM) Compares data to the previous month. Forex traders track it for short-term economic shifts.
Morning Star A bullish three-candle reversal pattern. Indicates a potential shift from bearish to bullish trend.
Moving Average (MA) An average of past prices that smooths market trends. Simplifies trend direction.
Naked Position A trade without a hedge or protection. Increases forex risk exposure if the market turns.
Narrow Market A low-liquidity market with limited activity. Leads to wider spreads and higher slippage for traders.
NDD (No Dealing Desk) Intervention Broker model that sends orders directly to liquidity providers. Favored by forex traders for transparency and fast execution.
Net position Net position can either refer to the total value of all open positions, or the balance of long positions and short positions. In trading, this can mean the difference in value of all open trades in profit and all open trades running a loss, resulting in a net positive or net negative position. However, it can also refer to if a trader is net long or net short.
Net Profit Margin Net profit margin measures profitability by dividing net income by total revenue.
Netting Offsetting multiple positions to reduce exposure. Helps traders manage risk and margin in forex.
Neutral Market Market without clear bullish or bearish trend. Signals traders to wait for stronger setups.
New York session The New York session is a trading session that opens at 8:00 AM ET and closes at 5:00 PM ET. Typically, the first 45 minutes of the session are characterized by high volatility.
News Trading Trading based on economic announcements. Creates big opportunities in forex but also high risk.
No touch A no-touch option is a type of binary option where a trader would choose a strike price above or below the current market price and an expiration date. In order that you make a profit, the price of the underlying asset must not touch or exceed the strike price before the option expires.
Noise Random market movement without clear direction. Traders filter it out to avoid false signals.
Non-Directional Trading Strategies that profit regardless of market direction. Useful in forex during sideways or volatile markets.
Non-Farm Payrolls (NFP) Non-Farm Payrolls (NFP) is a monthly report from the U.S. Bureau of Labor Statistics that measures the net change in employment, excluding farm workers, private household employees, and non-profit and government employees. Traders use NFP data as a key indicator of U.S. economic health, as it influences currency values (especially the U.S. dollar), stock prices, and commodities by providing insights into economic growth and potential shifts in monetary policy like interest rates.
Non-Market Risk Risks not related to market moves, like politics. Traders monitor it as it impacts forex unpredictably.
NYA.X Symbol for NYSE Composite index.
Offer/ask price The offer price is the price at which you as a trader can buy an underlying asset trading in the market. The offer price is also referred to as the ‘ask’ or the ‘asking’ price.
Offered If a market is said to be trading offered, it means a pair is attracting heavy selling interest, or offers.
Offsetting transaction An offsetting transaction is a trade that cancels or offsets some or all of the market risk of an open position.
On top Attempting to sell at the current market order price.
On-Balance Volume (OBV) A volume-based indicator tracking buying and selling pressure. Confirms price trends with volume data.
One cancels the other order (OCO) A one-cancels-the-other order (OCO) is an order whereby, if one order is executed, then the other order is automatically cancelled. It is used when you want to place two orders at the same time: usually with one going long and the other going short. When market movements cause either order to be filled, the unfilled order is automatically cancelled. You might place this kind of order when you expect a big move in the market but can’t decide whether it will go up or down. The OCO ensures at least one of your trades will open and move in the direction of the next move.
One touch A one-touch option is a is a type of binary option with a strike price above or below the current market price and an expiration date, where the price of the underlying asset only needs to hit the strike price once before the option expires.
Open order An open order is an unfilled working order that will get executed when the specific requirements have been met unless it’s cancelled by the customer or it expires. Open orders can be subject to delayed executions because they’re not market orders. A lack of market liquidity could cause an order to remain open.
Open position An open position is a live trade that can generate a profit or incur a loss. It can be long or short. When the profit or loss becomes realized the trade becomes a closed position.
Option expiry date/price The precise date and time when an option will expire. The two most common option expiries are 10:00am ET (also referred to as 10:00 NY time or NY cut) and 3:00pm Tokyo time (also referred to as 15:00 Tokyo time or Tokyo cut). These time periods frequently see an increase in activity as option hedges unwind in the spot market.
Options Contract An options contract gives traders the right (but not the obligation) to buy or sell an asset at a specific price before expiration. The two types of options contracts are: Call options: an agreement to buy an asset, Put options: an agreement to sell an asset. Both can be purchased to speculate on the market direction or generate income.
Order An instruction to execute a trade.
Order Block An “Order Block” is a price zone on a chart where large institutional traders placed significant buy or sell orders. These zones are created by clusters of orders that cause a large price move and often act as future support or resistance levels. Traders look for these blocks as a way to “read the footsteps of smart money” and anticipate how the price may react when it returns to these areas.
Order book An order book is a list of orders for a specific market, recorded by an exchange to measure market depth and interest from buyers and sellers. Order books are often used by traders to identify market sentiment. For short-term traders in particular, order books are valuable as they show whether bulls or bears are dominant in the market. Typically, order books are made up of three main components: Buy orders – shows buyer information including volume and price, Sell orders – shows seller information including volume and price, Order history – shows the orders that have been made in the past. Order books don’t cover every order in the market, as ‘dark pools’ also anonymously take orders. Dark pools are private exchanges that don’t show the identity, nor the intent (e.g. buy or sell) of an order. These are orders from whales – large traders in the market such as banks or corporations – who don’t want their trading activity to be publicly available. Given the large volume of whales’ trades, if this information was widely available it would give traders a clear indication of how a market’s price might move.
Order Types Instructions for entering or exiting trades, such as market or limit orders. Gives traders control over execution.
Over-the-Counter (OTC) Trading done directly between parties, not on an exchange. Forex is mostly OTC, giving 24-hour global access.
Overbought A market condition where prices are considered too high. Signals possible reversal or slowdown.
Overnight Trading Holding positions beyond the trading day. Involves swap fees and overnight risks.
Oversold A market condition where prices are considered too low. Suggests potential rebound.
Paid Refers to the offer side of the market dealing.
Pairs Trading Trading two correlated assets by buying one and selling the other. Profits from relative price differences.
Panelled A very heavy round of selling.
Paper Hands Selling positions quickly at the first sign of loss. Reflects low risk tolerance.
Parabolic SAR An indicator placing dots above or below price to show trend direction. Useful for trailing stop-loss strategies.
Parallel Channel A sideways channel where support and resistance move horizontally. Highlights consolidation phases in forex.
Partial fill A partial fill happens when only a portion of a limit order is executed, the share price surpasses the specified limit order target during the trade. In this instance shares will only be exchanged up to the price on the limit order, and the rest remain unfilled. For example, an order for 500 shares at $50 may limit the fill to 20 shares as the share price tips up to $50.01 mid-trade, leaving the order short of 480 shares. Partial fills are common when using limit orders.
Patient Waiting for certain levels or news events to hit the market before entering a position.
Pending Orders Orders set to activate when price reaches a chosen level. Automates entries and exits.
Pennant Pattern A triangular continuation pattern after sharp movement. Confirms momentum continuation.
Physical settlement A physical settlement requires the option seller to deliver the underlying asset if it’s a call. For puts, the option seller must buy the underlying asset from the buyer at the strike price. Physical settlement is more common for stocks and commodities than other financial securities. Most derivative transactions do not get exercised as they’re traded before the delivery dates. However, physical delivery of the underlying asset can occur with some trades, mostly with commodities. Clearing brokers and agents organise settlements by physical delivery. After the last day of trading, regulated exchanges’ clearing departments report the transactions of underlying assets at the previous day’s settlement (closing) prices.
Piercing Pattern Bullish reversal two-candle setup. Signals potential bottom.
Pip A pip is the smallest unit of price movement in forex, usually 0.0001. Used to calculate profit, loss, and spreads.
Pip (Percentage in Point) A “pip” (percentage in point) is the smallest unit of price movement for a currency pair in the forex market. For most major currency pairs, a pip equals \(0.0001\) (the fourth decimal place), while for pairs involving the Japanese Yen, it is \(0.01\) (the second decimal place). Pips are used to calculate profit and loss and are a fundamental concept for traders to manage risk. 
Pipette A pipette is a fraction of a pip (\(0.00001\)), or one-tenth of a pip, and represents the smallest possible price movement on a currency pair quote. It is shown in the fifth decimal place for most currency pairs, and the third decimal place for pairs involving the Japanese yen (JPY). 
Pivot Points Price levels calculated from the previous session’s data. Popular for spotting support and resistance in forex.
PMI (Purchasing Managers’ Index) Survey measuring business activity in manufacturing/services. A forward-looking indicator of economic health.
Point and Figure Chart A chart showing price movements without time factor. Focuses purely on price direction and reversals.
Position Trading A long-term style where trades last weeks or months. Focuses on big market trends.
PPI (Producer Price Index) Tracks price changes from the perspective of producers. Often signals future inflation trends.
Price Action The analysis of raw price movement without indicators. Many forex traders use price action for clarity and simplicity.
Price level A price level is the cost of goods or services that a consumer or other party has to pay to purchase a service or product. Price levels rise as demand increases and drop when demand decreases.
Price transparency Price transparency is the extent to which all relevant information is available around trading quantities, bid prices, and ask prices of a security so all agents are operating with the same information. Higher transparency allows traders to make better decisions about what securities to invest in and limits barriers to entry. Price transparency varies between different exchanges. Some, like the NYSE, offer limited price information, such as the highest and lowest bid. Others, like Nasdaq, provide a full suite of information against each stock including trading quantities, bid prices, and ask prices.
Profit Profit is the revenue earned for a business activity or transaction after subtracting any related expenses. When analysts look for potential investments, profitability will be a crucial indicator of business health. The most common types of profit are gross profit, operating profit, and net profit. Gross profit considers only sales and the cost of goods sold (COGS.) Operating profit takes gross profit and subtracts the operational costs. Finally, net profit will deduct the taxes and interest from the operating profit to give a complete picture of a company’s overall profit.
Pullback A pullback is a moderate drop or a slowdown in an asset or commodity’s price after a continuous upward trend. Because pullbacks are considered a temporary pause before resuming its upward journey, it can offer a great opportunity to invest, especially for traders looking to make an entry into an aggressive market. Pullbacks don’t represent a change in the price direction of an asset or commodity but a profit-making opportunity following a strong run. Retracements and consolidations are similar events and can sometimes be used interchangeably with pullbacks, although they typically refer to longer-termed drops in price.
Purchasing power Purchasing power has two main definitions: it is the total amount of a currency that can be exchanged for goods and services, and it is also the amount of credit available to a customer in a brokerage account, including cash and margin (borrowed funds). Both definitions refer to the “power to buy” and can be affected by factors like inflation or the value of a trader’s assets.
Purchasing Managers Index (PMI) The purchasing managers’ index (PMI) measures the economic wellbeing and direction of the manufacturing and services sectors. It looks at key indicators that show signs of retraction or growth in the economy such as inventory levels, production, and employment. As a result, the PMI provides insight and guidance to company decision-makers and investors. The PMI is calculated monthly by the Institute for Supply Management (ISM), which gives the industry a number between 1-100. An index score above 50 indicates an expansion in the sector, and a score below 50 represents a contraction. A score of 50 indicates no change.
Purchasing Managers Index services (France, Germany, Eurozone, UK) Measures the outlook of purchasing managers in the service sector. Such managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries and inventories. Readings above 50 generally indicate expansion, while readings below 50 suggest economic contraction.
Put option Put options are financial contracts that give the owner the right, but not the obligation, to sell an underlying asset at a specified price within a specific time. A buyer of a put can profit when the underlying asset falls in price.
Quadrant Lines Charting tool dividing price action into four zones. Used for spotting support, resistance, and breakout areas.
Quantitative easing Quantitative easing (QE) is a dovish monetary strategy imposed by a central bank to increase the money supply in an economy by purchasing long-term securities on the open market. The central bank’s objective is to stoke growth and investment when the interest rate is at or near zero. QE is an alternative monetary policy used when the usual open market operations are not functioning as they should be. There is sometimes a danger that it will cause inflation and fall short of its impact on growth.
Quarter-Over-Quarter (QoQ) Compares data between quarters. Key for forex traders analyzing economic growth trends.
Quarterly CFDS A type of future with expiry dates every three months (once per quarter).
Quiescent Market A quiet market with little volatility. Often precedes a breakout in forex trading.
Quietly Bearish Market sentiment leaning bearish without strong moves. Helps traders anticipate gradual declines.
Quote A quote is the final price an asset is traded for when a transaction is completed. Before a transaction is processed, the asset’s price is listed as a bid quote, which means the current price of the asset is subject to change before the transaction is finalized. In forex, the quote refers to the second currency in a bid/ask pair. It represents the cost of purchasing one unit of the base currency in the currency pair.
Quote Currency The second currency in a forex pair, showing how much is needed to buy one unit of the base currency. Traders use it to calculate exchange rates and trade sizes.

FOREX EDUCATION

Forex Trading Basics

▶Introduction to Forex
▶Understanding Currency Pairs (Part 1)
▶Understanding Currency Pairs (Part 2)
▶Liquidity and Market Dynamics
▶Economic Factors Affecting Currency Pairs
▶Pips, Spread and Volume
▶Leverage and Margin
▶Volatility & Slippage
▶Forex Trading Hours

Platform Navigation

▶Introduction to MetaTrader 4
▶Exploring the MT4 Interface
▶Placing Trades with Metatrader 4
▶Adding & Creating Custom Indicators
▶How to use the Mobile Trading App

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