Learn The Lingo - Forex Trading Jargon Broken Down 

There’s a wide range of Forex terminology. At first, you may feel baffled by the jargon. But, with a little education, you will see it is simpler than you first thought.

We have put together the following A – Z list to help you to learn the most used words in Forex jargon.

So, here goes.

Ask (offer)

This is the price the market is prepared to sell a product. In Forex trading the Ask represents the price a trader can buy the base currency. The base is the first currency of a pair. For example, in the quote EURUSD 1.2168/70 the base currency is EURO, and the Ask price is 1.2170. So, you are buying one EURO for 1.2170 U.S. dollars.

Average True Range (ATR)

Average True Range (ATR) is a technical indicator. It measures the average of true ranges over a specified period. It also measures volatility, taking into account gaps in price movement.

Aussie

This is the nickname for the currency pair AUD/USD (Australian Dollar/U.S. Dollar pair). Also known as “Oz” or “Ozzie”

Base Currency

In Forex, the base currency represents the first currency shown in a pair. For example, for the currency pair EUR/USD, the EURO is the base currency and the U.S. Dollar is the quote currency. It represents how much of the quote currency is needed to get one unit of the base currency.

Bar Chart

Bar charts display vertical bars on the charts showing multiple price bars. Each bar shows price movement over a specified timeframe. For example, a completed bar on a 5-minute chart will show the price a bar traded at during the last 5 minutes. A daily bar chart shows a price bar for each day. Some traders use bar charts for technical analysis.

Bears/Bearish

Bears are traders looking to gain from negative price action for a currency. A bearish market is indicative of a declining price. If the market is bearish on USD/CHF it means the U.S. Dollar is weakening against the Swiss Dollar.

Bid

A Bid is a price at which the market is prepared to buy a product. Prices are quoted two-way as Bid/Ask.

Bollinger Bands

Bollinger Bands are a form of technical analysis traders use to plot trend lines. On the charts, Bollinger bands display as three lines following price movement. When price touches the top line, it suggests the price is overbought. This indicates a potential sell area. When price touches the lower line it is oversold, indicating a potential buy area.

Broker

A broker is a financial services company that provides a platform for traders to buy and sell foreign currencies. 

Bulls/Bullish

Bulls are traders looking to gain from rising price direction. A bullish market is indicative of an improving/rising market. For example, if EUR/USD is bullish, it means the EURO is strengthening against the U.S. Dollar.

Buy

A buy is when you place a trade expecting price to rise.

Chart

A Forex chart shows the historical behaviour of a currency pair across various timeframes. Traders look at past price movements to assess the probability of future price action. 

Consolidation

This is when price action stays in a range. It seems to move sideways on the chart. This can happen after an extended price move in a trend.

Currency Strength Meter

You can add a currency strength meter to a trading platform. It's an indicator showing the strength of a currency across timeframes. It can be a useful addition to technical analysis.

Divergence

Divergence is when price action makes a new high or a new low, but shows the opposite on a momentum indicator.

Downtrend

A downtrend is when price action forms lower lows and higher lows on the chart.

Equity

Equity is the money in your trading account plus or minus the difference from open positions. For example, if your trading balance was £500.00 and you had an open position in £10.00 profit, your equity is £510.00.

Fibonacci

Adding a Fibonacci indicator on your chart can help you to measure retracement levels. It shows a series of horizontal lines for potential support and resistance zones.

Fill

Your order is filled when it has been accepted by the broker after execution.

Forex

Abbreviation for Foreign Exchange.

Free margin

This is the amount of margin you have in your trading account. It will vary when you have open trades in the market.

Fundamental Analysis

This is when a trader analyses economic, social, and political forces. If a country's economic outlook is good, the probability is for the currency to strengthen. If the outlook is not so good, the currency may weaken.

Gap/Gapping

A gap is when the currency price will skip several levels without any trades occurring. Gapping often occurs during session crossovers. This increases the spread between the Bid and Ask price so it is not a good time to place a trade.

Going Long

When a trader buys expecting the price to rise.

Going short

When a trader places a sell trade expecting the price to fall.

Greenback

This is the nickname for the U.S. Dollar.

Guaranteed Order

This is an order type that guarantees to fill your order at the price asked. It protects a trader against market gapping.

Hedge/Hedging

Hedging is when a trader takes a position or a combination of positions in the market. The reason for hedging is to reduce the risk of a primary position.

Heiken Ashi Candles

Heiken Ashi candles look like Japanese candles. But they chart price by using average ranges to calculate the points of the candle. This smooths out the chart and so provides a clearer view of the current market trend.

Japanese Candlesticks

Japanese candlesticks are used for technical analysis. They show time-related, detailed, and accurate information about price movement. Their movement represents supply and demand in the market. Candles show an opening price and a closing price. BUY candles are usually green and SELL candles are usually red. A trader can assess candlestick activity from opening to closing. There are many different candle patterns you can learn to understand the probability of future price action.

Kiwi

This is the nickname for NZD/USD (New Zealand Dollar/U.S. Dollar).

Lagging and Leading Indicators

In simple terms, a lagging indicator lags behind price action. A leading indicator is ahead of price action.

Line Chart

A line chart is a basic chart showing historical price action. It shows as a continuous line on the chart moving according to price.

Liquidity

Liquidity is a measure of how much money is in the market. If you wished to place an order for a currency pair with low liquidity, your order may not be filled.

Limit order

A limit order is set to buy at a lower level than the current price. For instance, if EURUSD was at 1.2100 you could set a limit order to buy at say 1.2000. When the price hits that level it will execute your order.

Loonie

This is the nickname for the Canadian Dollar.

Lot

A lot is a unit measuring the amount of a transaction. You calculate your lot size based on the size of your trading balance.

Margin

Margin is a portion of your account balance with the broker that is set aside so you can trade. Your margin will depend on open trades and whether they are in profit or loss. So, your margin will fluctuate when trades are open.

Margin Call

If you get a margin call from your broker, it means there's not enough money in your account to cover open positions. You will need to close open positions or add new funds. At a certain point of low margin, your broker has the right to close your open trades.

Momentum

Momentum relates to the strength of the upward or downward trend of a currency.

Moving Averages 

Moving averages are a chart indicator used for smoothing out price action. A simple moving average (SMA) is slow to respond to price and is more suitable on longer timeframes. An exponential moving average (EMA) tracks price more closely. It is more suitable for shorter timeframes. You add a moving average to the chart and they show as coloured lines following price action. You can have several moving averages on a chart.

Option

A currency option is a contract giving a buyer the right to buy or sell at a specific exchange rate. The buyer is not obligated and it can be on or before a specified date

Overbought & Oversold

Overbought is where price may be trading above its intrinsic value. Oversold is where price may be trading below intrinsic value.

Parabolic

A parabolic move is when price action moves a lot in a short time. It can be either up or down.

Partial Fill

If liquidity is low for the pair you are looking to buy or sell, your order may only be partially filled by the broker.

Pips

A pip stands for “percentage in point” or “price interest point” A pip is a tiny measure of price change in a currency pair.

Pullback

When price action has moved away from a consolidation zone, it often pulls back to that zone. Then it may continue back the way it was going.

Put Option

A hedging contract giving the buyer the right to sell a specific currency at a specific price within a defined period.

Quote

A Forex quote is the price of one currency in terms of another currency.

Range

A range is when price action is consolidating after a big move. Price action appears to go sideways.

RSI

Relative strength indicator is a momentum indicator.

Scalping

Scalping is when a trader holds a trade for a short period and will do many quick trades during the trading day.

Slippage

This is when a stop loss closes a position at a different rate than it was set in the order. It can occur when volatility is high. For instance, it can happen following an important news event.

Spread

This is the difference between the Bid and the Ask price.

Stop Entry Order

This is an order placed above or below the market price. Your order triggers when the price reaches that point.

Stop Loss

You set a stop loss at a certain point in the market to limit your loss if price action starts to reverse against your order.

Stop Loss Hunting

High volume traders are said to manipulate market prices.  They do it to the level where other traders have their stop-loss orders triggered, so they can take profits from the losses.

Supply & Demand

Supply = selling and Demand = buying. An increase in selling causes prices to fall. Increased buying causes prices to rise. These zones are often relative to support and resistance areas on the chart.

Support & Resistance levels

Support is when prices hit a lower level and reverse from that level. Resistance is where price hits a higher level and reverses. These areas are easy to identify as regular turning points on the charts.

Technical Analysis

By studying historical price charts, a trader may predict future probability. A trader will chart patterns, support, and resistance areas, etc. to form an idea of future movement.

Tick

A tick is a small change in price. 

Trailing Stop

On the charting platform, once your trade is in profit, you can select how many pips you want to trail the order. For example, if you set a trailing stop of 10 pips, if the price came back 10 pips, your order would close.

Trendlines

When price moves in zig-zag lines on the chart, you can add a trendline to join up the points. From this line, you can see the highs and lows of price in the trend.

Renko

This is a type of chart that uses price movement instead of time intervals. Renko shows on the chart as a series of bricks. A new brick will only form if prices move out of the previous price movement.

Uptrend

When price action is moving up showing higher lows and higher highs on the chart.

Volatility

If liquidity is low, the market may be more volatile. This can cause prices to change quicker than when a market has good liquidity.

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