|
Pip
|
Pip, or percentage-in-points, is the smallest movement in a currency's price. For
example, when the EUR moves up from 1.4416 to 1.4417, it has moved by 1 pip (1.4417 minus 1.4416)
|
|
Bulls/Bullish
|
Buyers / Buyers in control
|
|
Bears/Bearish
|
Sellers / Sellers in control
|
|
Long
|
Going Long is the terminology for buying a base currency (and selling the relative
quote currency)
|
|
Short
|
Going Short is the terminology for selling a base currency (and buying the relative
quote currency)
|
|
Base Currency
|
Base Currency is the first of a currency pair that is being traded. Eg., for the
currency pair, USD/CAD, USD is the base currency.
|
|
Quote Currency
|
Quote, or counter currency, is the second of a currency pair that is being traded.
Eg., for the currency pair, USD/CAD, CAD is the quote currency.
|
|
Bid
|
Bid price is the price at which you will sell the base currency (and the broker will
buy at).
|
|
Ask
|
Ask price, or offer price, is the price at which you will buy the base currency (and
the broker will sell at).
|
|
Spread
|
The difference between the Ask and Bid price is the Spread. It's what the broker
earn as commission from your trade. You pay the spread when you enter a position to buy, When you enter
a trade to sell, you pay the spread when you exit your position.
|
|
Rollover
|
Rollover is the interest you pay or earn for positions still open at the end of the
brokers's cut-off time (usually 5pm). Shariah-compliant platforms do not have rollover charges.
|
|
Lot
|
1 lot represents 100,000 units of the base currency, and 0.1 (mini) lot represents
10,000 units.
|
|
Market order
|
Buying or selling at the current market price.
|
|
Buy limit
|
You want to go Long, but want a better price than the current price, so you set a
Buy Limit order. When the price falls and reach your target price, the order is executed. To place a
Buy Limit order, the current price level must be higher than of the price the placed order. Orders of
this type are usually placed in anticipation of the price, having fallen to a certain level, will
increase. Sell limit is the opposite.
|
|
Buy stop
|
You want to go Long, but when only the market reaches at a certain price higher than
the current, so you set a Buy Stop order. Orders of this type are usually placed in anticipation of the
price, having reached a certain level, will keep on increasing. Sell Stop is the opposite.
|
|
Stop loss
|
A Stop loss is used to quit the open position if the price goes the opposite
direction.
|
|
Trailing stop loss
|
The Trailing Stop is used to lock in profits. For example, if you bought GBP/USD at
1.7480 and the price has risen to 1.7520, giving you a profit of 40 pips, you may want to lock in a
certain amount of that profit in case the price falls back down. You would simply place a stop order to
sell at, say, 1.7510. This assures that if the price does drop, your position will be closed
automatically with a profit of 30 pips. If the price keeps increasing and the position becomes even
more profitable, the trader may move his or her trailing stop up yet again, thereby "locking in" more
profits.
|
|
Target profit
|
The profit you wish to take on an open position.
|
|
Leverage
|
Leverage allows you to increase your buying power with
less capital. By using a margin, or borrowed funds, you can gain higher returns to your investment, or
to control a much larger investment. This is what allow small investors to trade big lots. Depending on
the broker, you can trade with leverage of 100:1 or 200:1. This means you can use $100 to trade $10,000
(100x100) or $20,000 (100x200). Without proper risk management, this high degree of leverage
can lead to large losses as well as gains.
|
|
Margin
|
The minimum required balance to place a trade. When you open a forex trading
account, the money you deposit acts as collateral for your trades. This deposit, called margin, is
typically 1% of the value of the position.
|
|
Slippage
|
Slippage occurs when you do not receive the price you expect.
|
|
Scalp
|
Taking in in small profits by by quick buying and selling.
|
|
Intraday
|
Trading in and out of the market within the same day.
|
|
Swing
|
Keeping an open position or positions in the market between two days and three
weeks.
|
|
Long term trading
|
Keeping an open position or positions in the market for more than a month.
|
|
Daily chart
|
Shows the intraday movement of a currency pair.
|
|
Margin call
|
Margin call is the close of all or some positions by your broker when the margin
requirement is breached.
|
|
Consolidation
|
No trend, the prices are ranging.
|
|
Retracement
|
The price reverses from the current trend before continuing again.
|
|
Volatility
|
The extent of price fluctuation.
|
|
Volume
|
Total number of shares traded for a given timeframe.
|
|
