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Forex Terms > Forex: Terminology > Flashcards

Forex: Terminology Flashcards

1
Q

Define Forex

A
  • Foreign exchange market
  • Largest market in the world
  • A global market that allows you to trade one currency with another currency
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2
Q

Currency Pair

A

Quoting one currency against another

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3
Q

Base Currency

A

The first currency listed

Ex. The EUR in EUR/USD

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4
Q

Quote Currency

A

The second currency listed

Ex. The USD in EUR/USD

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5
Q

Exchange Rate

A

The ratio of one currency valued against another currency

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6
Q

What is the most traded currency pair?

A

USD

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7
Q

What makes something a a major currency pair?

A

USD (most traded) is involved in each one

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8
Q

Major Currencies

A
  1. USD (U.S. Dollar)
  2. EUR (Euro)
  3. JPY (Japanese Yen)
  4. GBP (Great British Pound)
  5. AUD (Australian Dollar)
  6. CAD (Canadian Dollar)
  7. CHF (Swiss Franc)
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9
Q

Major Currency Pairs

A
  1. GBP/USD 2. USD/CAD
  2. AUD/USD
  3. USD/CHF
  4. USD/JPY
  5. EUR/USD 7. NZD/USD
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10
Q

What is a cross pair?

A 
Any pair that does not include the U.S. Dollar
Ex. CAD/JPY
AUD/JPY
GBP/NZD
CHF/JPY
EUR/GBP
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11
Q

Why is the U.S. economy the largest economy in the world?

A

It’s half of every major currency pair, making up 84% of all transactions

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12
Q

Commodities

A

A currency pair that involves raw products like oil, gold, silver, or coffee

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13
Q

Exotics

A

A currency pair that consists of one major currency and one currency from an emerging market (EM)

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14
Q

Indicies

A
  • Short for a stock index
  • A measurement of the price performance of a group of shares from an exchange. … Indices are a highly liquid market to trade, and with more trading hours than most other markets, you can receive longer exposure to potential opportunities
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15
Q

Commodity: XAU/USD

A

Gold

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16
Q

Commodity: XAG/USD

A

Silver

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17
Q

Commodity: XPT/USD

A

Platinum

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18
Q

Commodity: USOIL

A

Oil (very volatile)

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19
Q

Exotic: USD/ZAR

A

USD/ South African

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20
Q

Exotic: USD/CNH

A

USD/ Chinese Yuan

21
Q

Exotic: USD/DKK

A

USD/ Danish Krone

22
Q

Exotic: USD/MXN

23
Q

Indices: New York Session

A
  1. US30- DOW Jones
  2. SPX500- S&P 500
  3. NAS100- NASDAQ
24
Q

Indices: London Session

A
  1. Ger30
  2. UK100
  3. FRA40
  4. ESP35
25
Q

Indices: Tokyo Session

26
Q

Indices: Cryptos

A
  1. Bitcoin- BITUSD
  2. ETHEREUM- ETHUSD
  3. RIPPLE- XRPUSD
27
Q

What are the 4 main trading sessions?

A

New York, London, Sydney, and Tokyo

28
Q

What time is the forex market open?

A

23 hours a day, 5 days a week

closed for 1 hour

29
Q

London Session Time

A

3AM EST to 12pm EST (MOST LIQUID, MOST MOVEMENT)

30
Q

New York Session Time

A

8AM EST to 5PM EST

31
Q

Sydney Session Time

A

6PM TO 2AM EST

32
Q

Tokyo Session Time

A

7PM TO 3AM EST

33
Q

When is the best time to trade?

A

When NY and London overlap occurs between 8:00 AM ET and 12:00 PM ET.

34
Q

When are the biggest movements in the 4 major currency pairs (EUR/USD, GBP/USD, USD/JPY, and USD/CHF) seen?

A

On Tuesdays, Wednesday, and Fridays before 12pm EST

35
Q

Technical Analysis

A
  • Price action (charts)

- looks at historical price movements to determine the current trading conditions and potential price movements

36
Q

Fundamental Analysis

A

Looks at economic, Political, Social News (basically anything besides charts) that affect the fluctuation of a price/asset

37
Q

What is the whole purpose of trading?

A

To make predictions based on previous movements and speculation

38
Q

What is a buy?

A
  • You are speculating that the quotation price is going to increase from where the current price is
  • Buy = price goes high
39
Q

What is a sell?

A
  • You are speculating that the quotation price is going to decrease from where the current price is
  • Sell = price goes to hell
40
Q

Example: What does buying GBP/USD mean?

A

Buying means the BASE is increasing. You believe the GBP is a stronger currency. Because of this, you are buying the GBP in expectation for the dollar to decrease in price.

41
Q

Example: What does selling GBP/USD mean?

A

Selling means the BASE is decreasing. If you believe the GBP (base currency) will weaken against the US dollar, you would execute a SELL GBP/USD order.

42
Q

If the USD was the BASE currency, as the dollar increases, what happens to the U.S. dollar indexes?

A

The U.S. dollar increases as well

  1. DXY Increase
  2. USD/XXX ex USD/JPY, USD/CHF increase
  3. US Indexes ex NAS100, US300, SPX500
43
Q

If the USD was the QUOTE currency, as the dollar decreases, what happens to the U.S. dollar indexes?

A

The U.S. dollar decreases

44
Q

Negative Correlation Example

A

When these Increase:
XXX/AUD
XXX/GBP
XXX/USD

These will Decrease:
AUD/XXX
GBP/XXX
USD/XXX

45
Q

Negative correlation with the dollar

A
  1. DXY Increase

2. AUD/USD, EUR/USD, GBP/USD Decrease

46
Q

Bid Price

A
  • The best available price at which you (the trader) can sell to the market
  • This number will be the lower number
47
Q

Ask Price

A
  • The best available price at which you can buy from the market
  • This number will be the higher number
48
Q

Spread

A

The difference between the bid and the ask price

Forex Terms (3 decks)

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