Forex, Stocks & Financial Glossary
Forex is Foreign Exchange or
International Currency Trading
The following 3 pages are more than a Forex
Glossary. Use them as a lexicon or dictionary to find abbreviations, acronyms, definitions, technical words,
phrases, terms, jargon, lingo
and slang used in stock
broking and foreign currency trading,
banks, fund managers, dealers, brokers, analysts, commentators, gurus,
experts and financial market traders. There's also some background history
Do you know what CHF, GBP, JPY and XAU stand for? Or why names like
cable, kiwi, loonie and pip are used? What is 'spread'
and what are 'candlesticks' for? Define an ETF. What is 'currency' or
'binary options'? See below for
explanations and origins of these terms.
is the paper money (notes, bills or coins) issued by the
government or central bank of a particular country. It is the legal
medium of exchange and trade for that country. Many world currencies can
be exchanged between foreign countries for trade or other purposes.
Foreign currency exchange is what Forex is all about. See more
currency-related terms in the alphabetical dictionary
below. You will also find on the side panels books, free
courses and other offers we recommend.
You can also visit
Stock Trading and
pages to get some idea of how the money markets and online trading work.
As with many other trades,
professions and interest groups, a sub-language, slang or jargon evolves
Terminology, definitions, abbreviations, acronyms,
technical words and expressions are usually made up
or taken from similarly related disciplines. The word 'forex' is itself an example,
being a contraction of 'foreign exchange'.
Forex brokers, dealers, commentators and
traders use many of the same
words and phrases that have become the jargon of the 'money business' –
finance, currency and stock market trading. Additionally there are
currencies and currency pairs. The origins of some
of these terms are sometimes uncertain. We include some possible
derivations because we at Retire-Asia are active forex enthusiasts too. Some of these
interesting or amusing and we add them as we find them. Bookmark (Ctrl+D) this page for future reference if you like it!
you're reading this page on your mobile phone, you can trade forex
too! Go to
2 and see Mobile Forex Trading or visit the
FXCC site for a free account.
A strengthening of a currency's price in response to market demand.
The sale or purchase of a financial instrument, at the same time
taking of an equal and opposite position in a related market to take
advantage of small price differentials between those markets.
Term used by dealers used when the forward premium/discount is near
parity e.g. "three-three around" means 3 pips either side of the current
An investment diversification practice for risk management
purposes which divides funds among different markets in relation to an
The price at which a bank, dealer or trader is willing to sell the first-named
of a currency pair. e.g. for the GBP/USD this is selling
GBP by buying USD. See Offer Price or Bid.
A semi or fully automated forex trading software program that requires
little user intervention after setting up trades. Also called an
Autopilot, Robot or EA.
Learn more about forex robots.
'Behind-the-scenes' administration of a brokerage or trading floor
involved in the settlement of financial transactions.
Balance of Trade
This is the value of a country's exports minus its imports and one
of the many factors affecting market prices when reports are released.
Bar, Line Chart
Many types of chart are used in Technical Analysis
show current prices and the historical price movement of a currency pair,
from seconds, minutes or hours right up to weeks, months and years. Bar and
line charts basically show by divisions of time, the high and low prices of
a currency pair, as well as the opening and closing prices. There are more
complex charts including Candlestick. Various lines can be added to
charts to show a variety of other indicators like strength, volume, trend
The first-named of a tradable currency pair or the currency in
which an investor or issuer maintains its book of accounts. In the forex
markets, the US Dollar is normally considered the 'base' currency for
quotes i.e. quotes are expressed as a unit of 1 USD per the other
currency in the pair. Main exceptions to this rule are the
British Pound, the Euro and the Australian Dollar. For example the
GBP is the
base currency of the GBP/USD
pair. The second name
in the pair may be referred to as
the terms, quote, pip or counter currency and is valued (rated) against
If the GBP/USD rate is 1.9650, 1 pound is worth 1.9650 dollars.
Outside forex trading, exchange rates may be quoted differently. In our example
above, the dollar/pound rate could also be shown as
0.5089 (1/1.9650); $1.00 = £0.51 (51p) or £1.00 = $1.96. The actual value is the
same in all cases. See also Lot Size below.
A Bear is an investor who believes that the prices in the market will
decline. A Bear Market is one where prices are falling (e.g. if the GBP/USD rate is
dropping). If the decline is expected to continue, the market would be
'bearish'. 'Bear' dates back London stock traders
of the 1700s. It may stem from the adage "Don't sell the bearskin before
you've caught the bear." This is roughly equivalent to "Don't count your
chickens before they're hatched." which is what stock market 'bears' do.
Anticipating declining market prices, they sell stock or currency they don't
own yet, gambling that the price will fall by the time they actually have to
buy it or deliver it, for a large profit.
or Bid Rate
The current price at which a broker/dealer is willing to buy the
first-named of a currency pair. e.g. buying GBP/USD means buying Pounds and
selling Dollars. See Ask Price.
Bid/Ask Spread (or Spread)
The difference in price in 'pips', between the Bid
and Ask or Offer price, the amount being used to measure market liquidity. See Pips.
This is how brokers make
money on every trade entered instead of charging commission.
The first (main) digits of an exchange rate. Because these rarely change in normal market fluctuations
they may be omitted verbally in dealer quotes when
market activity is high. e.g. if the USD/JPY rate was 107.40/107.45, it
might be quoted as simply '40/45'.
Also known as Fixed Return Options (FRO) or Digital Options
(they are made online)
binary options have only two possible outcomes: the forecast
is either correct or incorrect. The trader decides how much to invest in the
option; there is no fixed price, only a fixed return.
'The book' is the summary of a trader's or desk's total positions.
A market bottom is an area where prices in a decline encountered heavy
support, were unable to progress any lower, and either reversed (i.e. went
into a bull trend) or consolidated (traded sideways).
Bretton Woods Agreement
The United Nations Monetary and Financial Conference agreement signed in Bretton Woods, New Hampshire in 1944. It
established the International Monetary Fund and fixed
exchange rates for major currencies, providing for central bank intervention
in the currency markets, and also pegging the price of gold at US$35 per
ounce. In 1971, US President Nixon annulled the Bretton Woods Agreement,
allowing for floating exchange rates for major currencies and also
letting US citizens purchase gold once more.
An individual or company that acts as an intermediary, putting together
buyers and sellers for a fee or commission. A Broker is a 'middle man' (sometimes a bank) acting as a 'negotiator' for
both customer (the trader) and supplier (the main market players like
commercial or national banks and financial institutions. Bearing in mind
that forex lots are typically $100,000 small investors need brokers to manage their online trades and trading account.
Where trades are small or happen quickly, certain brokers handle the buying
and selling 'in house'. This is more likely to be the case with 'mini' or
'demo' accounts. Although price changes are claimed to be the same as 'the
market' it is possible that some brokers may delay or otherwise manipulate
prices using their proprietary software to end a trade when it may be more
advantageous to themselves than their customers. Choosing a reputable bank
or broker is an important aspect of successful forex trading.
XTrade is a reliable broker for all
of today's popular trading instruments.
Broker Affiliate, Partner or Introducer
A trader or other individual who is paid by a broker or dealer to refer new clients.
Commission can be earned from introducing new accounts or a percentage of
the profit from trades made through these new trading accounts or by
promoting trading courses and tools.
A Bull is someone who believes that market prices will rise. This
person would be considered Bullish. A Bull Market is a market where
prices are rising. If the advance is expected to
continue, the market would be described as 'bullish'. A bull is an
animal when provoked; it tosses its head upwards before it charges.
Similar in nature to a snarling lion. The forex market has also
been referred to as 'lion country'; one should never enter lion
country unarmed – even if only while bird watching!
- Germany's Central Bank.
A term used for the GBP/USD currency pair rate (British Pound vs. the US Dollar).
It refers to
the Atlantic Cable, a
steel cable laid under the Atlantic
Ocean in 1850, telegraphically linking the UK with the USA,
enabling messages with currency prices to be transmitted
between the London and New York
Exchanges. Fibre optic cables and satellites have now taken over for both
international communications. See more Currency Names and Pairs below.
A more informative form of bar chart showing price movement using
blocks of different colours or shades called 'sticks' and extended lines above and below
them called 'candles'. The top of the candle shows the highest price for the
chart division and lower one the lowest price. The colour of the stick and
the lengths of both sticks and candles indicate the strength or size of the
price movement. In colour displays, red sticks indicate a lower closing than opening price, and
green indicates the price is rising. Learn more about
a 'crash course' in
- A government or quasi-government organisation that manages a
country's monetary policy. In the US it is the
Federal Reserve, the British equivalent is the Bank of England and the German is the
CFDs - see Contracts for Difference
- The process of settling a completed trade.
- an asset offered to secure a loan or as a guarantee of performance.
- a fee charged or received by a bank, dealer, broker or other party as
payment for a service. Can be a fixed amount or a percentage of the value of
The contagious spreading of an economic crisis from one market to
another. In Indonesia in 1997, high volatility of the Rupiah caused by
political instability began an economic meltdown and devaluation of emerging
currencies, affecting many other countries including Thailand. The
'infection' now known as the 'Asian Contagion' then spread to Latin America.
Contracts for Difference are contracts
between a "buyer" and a "seller", where the seller pays to the buyer the
difference between the current value of an asset (forex, shares,
commodities or indices) and its value at contract time. If the difference
is negative, the buyer pays the seller). CFDs are financial derivatives that
allow traders to take advantage of prices moving up or down (long or short
positions) on various instruments and are often used to speculate on
financial markets. Similar in some respects to Options but easier to learn
how to trade successfully.
A term used in technical analysis. When a market moves strongly in one
direction and then pulls back, it is referred to as a correction which commonly occurs in a bull (up) or bear (down) trend). It
is often sharper (occurs more quickly) than the preceding move.
Corrections are a component of an overriding trend up or down and
not considered as a reversal of the trend. A correction
usually strengthens the foundations of the trend to continue and sustain
further gains (or losses) in the short term such as the days or weeks ahead.
In technical analysis, it relates to a condition when the rates are moving
in a sideways motion usually encountered after a market top or bottom.
The second named currency in a pair; also called Terms Currency. The
first named is the
Base currency. In the GBP/USD pair, for example, the dollar is the
From a US perspective, this refers to
a pair of 'foreign' currencies e.g. GBP/JPY, EUR/GBP or 'minors' and 'exotics' (pairs less traded than
the 'majors'). However in the respective countries these pairs would be
considered as primary currency pairs.
- Any form of money in current use issued by a government or central bank as
legal tender and a basis for trade.
Currency Codes (ISO)
Currencies, precious metals and other 'trading instruments' all
have three-letter international identification known as an ISO code (International
Organization for Standardisation). Here
of both obsolete and current ISO codes for every country and currency instrument in the world.
Currency Names, Slang
Pound refer to
the GBP – Great Britain Pound. 'Pound Sterling' (sterling silver is almost pure)
dates back to 1158; from the Old
French esterlin (strong, firm, immovable).
Kiwi is the NZD (New Zealand Dollar) named after the national bird;
Aussie AUD (Australian Dollar);
Swissie for the CHF or Swiss Federation
franc (Confederation Helvetia Franc); Loonie (or
Little Dollar) for the Canadian Dollar (CAD), also a bird;
Euro was the logical if
uninspiring name given to the
new currency of the European Union (EUR), replacing centuries-old
names like the German Deutschemark, French and Belgian franc,
Italian lira, Dutch guilder or florin, Spanish
peseta, Portuguese escudo, Scandinavian krona, Irish
punt and others now of
interest only to currency note collectors and historians. The British pound and Swiss franc
manage to survive.
Currency Pairs and their
(see above for the origin) refers to the GBP/USD
currency pair. The slash can
also be omitted from pairs e.g. GBPUSD. Other
nicknames include 'Aussie Dollar' (AUD/USD) 'Dollar Canada' (USD/CAD),
(EUR/GBP) refers to the English Channel Tunnel linking England and France
by rail, 'Fiber' (optic cable) is the EUR/USD and the GBP/JPY
may be called the 'Geppy'. There are lesser-known nicknames too.
2: D to M
3: N to Z
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