120 Forex Terms Every Trader Should Know (in a Fun and Easy Way)
- Hammet Forex
- Oct 8, 2024
- 7 min read
Updated: Oct 19, 2024
1. Ask Price
The price you pay to buy a currency. Think of it as what the seller "asks" you to pay.
2. Bid Price
The price at which you can sell a currency. It's what buyers are willing to "bid."
3. Spread
The difference between the ask and bid price. It’s how brokers make money.
4. Pip
A tiny measure of price change, usually the fourth decimal place in currency pairs.
5. Lot
A unit of measurement for currency trades. One standard lot = 100,000 units of currency.
6. Leverage
Borrowing money to trade more than you could with your own cash. High-risk, high-reward.
7. Margin
The money you need to keep in your account to maintain a leveraged trade.
8. Broker
A company that connects you to the forex market.
9. Currency Pair
Two currencies traded against each other, like EUR/USD (euro vs. US dollar).
10. Major Pair
The most popular currency pairs, like EUR/USD, GBP/USD, USD/JPY.
11. Minor Pair
Less popular pairs, like EUR/GBP or AUD/JPY.
12. Exotic Pair
A major currency paired with an emerging-market currency (e.g., USD/ZAR).
13. Base Currency
The first currency in a pair. In EUR/USD, EUR is the base currency.
14. Quote Currency
The second currency in a pair. In EUR/USD, USD is the quote currency.
15. Bullish
Expecting a currency’s price to rise. You’re in the “bull” camp.
16. Bearish
Expecting a currency’s price to drop. You’re feeling like a “bear.”
17. Long Position
Buying a currency pair, hoping it will go up in value.
18. Short Position
Selling a currency pair, expecting it to go down in value.
19. Stop-Loss Order
An order to automatically sell your position if it reaches a certain price to limit losses.
20. Take-Profit Order
An order that automatically closes your trade once you hit your profit target.
21. Limit Order
An order to buy or sell at a specific price, or better.
22. Market Order
An order to buy or sell at the current market price.
23. Volatility
How much the price moves up and down. More volatility = more action!
24. Liquidity
How easily you can buy or sell without moving the market price.
25. Risk Management
The art of keeping your account alive. It’s about limiting losses and preserving capital.
26. Equity
The value of your account, including open trades.
27. Balance
Your account value without considering open trades.
28. Margin Call
The broker's warning that you’re running low on margin and need more funds.
29. Hedging
Opening opposite positions to reduce risk.
30. Swap
Interest earned or paid on trades held overnight, based on interest rate differentials.
31. Fundamental Analysis
Analyzing the economy, politics, and news to predict currency movements.
32. Technical Analysis
Studying charts and using indicators to forecast price direction.
33. Moving Average
A tool that smooths out price data to show trends over time.
34. Fibonacci Retracement
A tool that helps find potential support and resistance levels using Fibonacci ratios.
35. Support Level
A price level where a currency tends to stop falling and bounce back up.
36. Resistance Level
A price level where a currency tends to stop rising and reverse downward.
37. Trend
The general direction of the market—up (bullish), down (bearish), or sideways.
38. Range
When the price moves between two levels, like a bouncing ball in a box.
39. Breakout
When the price breaks through a support or resistance level.
40. Candlestick Chart
A type of price chart that shows the high, low, open, and close for each period.
41. Bull Market
A market where prices are rising.
42. Bear Market
A market where prices are falling.
43. Lot Size
The number of units in a lot. It can be standard (100,000), mini (10,000), or micro (1,000).
44. Scalping
A trading strategy where you make tiny profits on small price movements.
45. Day Trading
Opening and closing trades within the same day.
46. Swing Trading
Holding trades for several days or weeks to profit from price swings.
47. Position Trading
Holding trades for months or years based on long-term trends.
48. Overtrading
Trading too much or too frequently—often a bad idea!
49. Slippage
When your trade gets executed at a different price than expected.
50. Rollover
When a position is extended to the next trading day.
51. Currency Peg
When a country fixes its currency’s value to another currency.
52. Cross Currency
A pair that doesn’t include USD, like EUR/GBP.
53. Economic Calendar
A tool that shows upcoming news events and economic data releases.
54. GDP (Gross Domestic Product)
A measure of a country’s economic activity and strength.
55. Inflation
When prices rise, reducing the purchasing power of money.
56. Central Bank
A country’s main monetary authority that controls interest rates and money supply.
57. Interest Rate
The cost of borrowing money, set by central banks.
58. Quantitative Easing (QE)
When central banks pump money into the economy to stimulate growth.
59. Non-Farm Payroll (NFP)
A key US jobs report that impacts the forex market.
60. CPI (Consumer Price Index)
An inflation indicator that measures changes in the price of goods and services.
61. ISM Manufacturing Index
An economic indicator that shows the health of the US manufacturing sector.
62. Unemployment Rate
The percentage of people who are jobless but actively seeking work.
63. Hawkish
When a central bank is likely to raise interest rates to fight inflation.
64. Dovish
When a central bank is likely to cut interest rates to encourage growth.
65. Safe Haven Currency
A currency that investors flock to during economic uncertainty (e.g., USD, CHF).
66. Risk-On
When traders are willing to take more risk, usually in higher-yielding currencies.
67. Risk-Off
When traders avoid risk, favoring safer assets like bonds or safe haven currencies.
68. Correlation
When two assets move in sync with or opposite to each other.
69. Diversification
Spreading your investments across different assets to reduce risk.
70. Commodity Currency
A currency from a country that relies heavily on commodity exports (e.g., AUD, CAD).
71. Forex Market Hours
The times when different forex markets are open—Sydney, Tokyo, London, New York.
72. Broker Spread
The difference between the buy and sell price, which brokers charge as their fee.
73. Quote
The price at which a currency pair is trading at any given time.
74. Tick
A single price movement, up or down.
75. Swing Low
A low point in a currency’s price movement.
76. Swing High
A high point in a currency’s price movement.
77. Bull Trap
When the price briefly rises before reversing downward, trapping bullish traders.
78. Bear Trap
When the price briefly drops before reversing upward, trapping bearish traders.
79. Stop Hunting
When big players push the price to trigger stop-loss orders and take advantage.
80. Currency Intervention
When a central bank buys or sells its currency to influence its value.
81. Arbitrage
Profiting from price differences in different markets.
82. Carry Trade
Borrowing in a low-interest currency and investing in a high-interest one.
83. Liquidity Provider
An institution that supplies liquidity to the market by being ready to buy or sell.
84. Tick Volume
The number of price changes that occur during a specific period.
85. Over-the-Counter (OTC)
A market where trades are made directly between two parties, without an exchange.
86. Bear Market Rally
A temporary price increase during a bear market.
87. Double Top
A bearish reversal pattern where the price hits the same high twice before falling.
88. Double Bottom
A bullish reversal pattern where the price hits the same low twice before rising.
89. Triple Top
Like a double top, but with three peaks—stronger bearish signal.
90. Triple Bottom
Like a double bottom, but with three dips—stronger bullish signal.
91. Broker Commission
A fee charged by a broker for executing trades.
92. Trading Platform
Software provided by brokers to execute trades and analyze the market (e.g., MetaTrader).
93. Market Sentiment
The overall attitude of traders toward a currency pair, either bullish or bearish.
94. Trendline
A straight line drawn on a chart to show the trend.
95. Moving Average Convergence Divergence (MACD)
An indicator that shows the relationship between two moving averages.
96. Relative Strength Index (RSI)
An indicator that shows whether a currency is overbought or oversold.
97. Bollinger Bands
A tool that shows volatility by placing bands above and below a moving average.
98. Candlestick Pattern
A series of candlesticks that signal potential price movement.
99. Doji
A candlestick pattern that signals indecision in the market.
100. Hammer
A bullish reversal pattern that looks like a hammer at the bottom of a downtrend.
101. Shooting Star
A bearish reversal pattern that looks like a star at the top of an uptrend.
102. Engulfing Pattern
A reversal pattern where a large candle completely engulfs the previous one.
103. Morning Star
A bullish reversal pattern that occurs at the bottom of a downtrend.
104. Evening Star
A bearish reversal pattern that occurs at the top of an uptrend.
105. Flag
A continuation pattern where the price consolidates after a strong move.
106. Pennant
Similar to a flag but with converging trendlines.
107. Divergence
When the price moves in the opposite direction of an indicator, signaling a reversal.
108. Fractal
A pattern that signals the reversal of a trend.
109. Stochastic Oscillator
An indicator that shows overbought or oversold conditions.
110. Ichimoku Cloud
An all-in-one indicator that shows support, resistance, and momentum.
111. VWAP (Volume Weighted Average Price)
An indicator that shows the average price based on volume.
112. Parabolic SAR
An indicator that helps identify trend reversals.
113. ATR (Average True Range)
An indicator that shows market volatility.
114. Pivot Point
A tool used to determine potential support and resistance levels.
115. Break-even
When a trade results in no profit or loss.
116. Equity Stop
Closing a trade when your account equity hits a certain level.
117. Profit Factor
The ratio of total profits to total losses.
118. Slippage Tolerance
The amount of slippage you're willing to accept on a trade.
119. Micro Account
A type of trading account that allows small trades (micro lots).
120. Demo Account
A risk-free practice account to learn trading before using real money.
Now you're armed with the knowledge to navigate the forex world with confidence. Enjoy the ride!
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