Forex Beginner Flashcards
Ask Rate
The rate at which a financial instrument if offered for sale (as in bid/ask spread).
Base Currency
The currency listed first in a currency pair. The US Dollar is normally considered the “base” currency for quotes, meaning that quotes are expressed as a unit of $1 USD vs the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro, the Australian Dollar and the New Zealand Dollar.
Bear Market
A market distinguished by declining prices and lower lows
Bretton Woods Agreement of 1944
An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies. Thus creating the Forex Market.
Bull Market
A market distinguished by rising prices and higher highs
Candlestick Chart
A chart that indicates the trading range for the period illustrated by candlesticks that reflect the opening and closing price as well as the high and low price.
Commission
A transaction fee charged by a broker on each trade.
Currency
Any form of money issued by a government or central bank and used as legal tender and a basis for trade.
Day Trading
Refers to positions which are opened and closed on the same trading day. Day traders can be short term or long term
Economic Indicator
Foundation of fundamental analysis. A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
EURO/EUR
The currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU). Aka “Fiber”
Foreign Exchange (Forex, FX)
The simultaneous buying of one currency and selling of another.
Fundamental analysis
Analysis of economic and political information with the objective of determining future movements in a financial market.
Limit order
A pending order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 102.00/05, then a limit order to buy USD would be at a price below 102. (i.e., 101.50)
Liquidity
The ability of a market to accept large transactions with minimal to no impact on price stability.
Long position
A position that appreciates in value if market prices increase. Buy position.
Margin call
A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.
Market order
A order that is instantly executed in the market based on the current ask or bid price
Offer
The rate at which a dealer is willing to sell a currency. Also known as bid price
Over the Counter (OTC)
Used to describe any transaction that is not conducted over an exchange.
Pipette
Smallest fractional value of calculating a pip. Typically, the fifth decimal place in most major currency pairs. Third decimal place in Yen pairs.
Pips
Percentage in Points. Increment for calculating rate fluctuations in the market. Typically, the fourth decimal place in most major currency pairs. Second decimal place in Yen pairs.
Position Trading
Refers to positions which are held long term usually weeks, months and sometimes years.
Quote Currency
An indicative market price for the “quoted” or counter currency.
Rate
The price of one currency in terms of another, typically used for dealing purposes.
Resistance
A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.
Risk
Exposure to uncertain change, most often used with a negative connotation of adverse change.
Scalp Trading
Refers to positions which are opened and closed very quickly within seconds or minutes.
Short Position
An investment position that benefits from a decline in market price. Sell position
Spread
The difference between the bid and ask prices.
Stop Loss Order
Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor’s position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.
Support Levels
A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.
Swing Trading
Refers to positions which are opened for several days at a time, usually 2 - 7 days.
Take Profit Order
A pending order to close an open position in profit at a specified price
Technical Analysis
An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.
Technical Indicators
Mathematical formulas designed to be added to the chart to assist with technical analysis of trends, momentum and volatility.
