Forex Trading

Forex Traders Glossary

Divergence between the oscillator and price gives early signals of a reversal. A crossing of the oscillator below the 100-line triggers a sell signal. An order for a trade to be executed instantly at the best available price. The Moving Average Convergence/Divergence is a momentum oscillator developed by Gerald Appel. It is the difference between a 12 period and a 26 period Exponential Moving Average plotted usually as a histogram above or below the zero line. A 9 period Simple Moving Average of MACD is known as the Signal Line.

What is forex simple words?

The term 'Forex' stands for Foreign Exchange. Forex trading in simple terms is the trading in currencies from different countries against each other; for example the US Dollar against the Euro.

An alpha of greater than zero means a trade outperformed the benchmark. Alpha is also a measure of risk and makes clear the extent to which a trader has beaten or fallen behind the market over a period of time. Aggregate demand refers to the total demand for goods and services in a given economy, sector, or market. It consists of all consumer goods, government spending, capital goods like factories and equipment, exports, and imports. Aggregate demand clarifies the link between current price levels and a country’s GDP (see ‘gross domestic product’).

The price of a grey market is a prediction of what the company’s total market capitalisation will be at the end of its first trading day. A financial instrument is a monetary contract between two parties, which can be traded and settled. The contract represents an asset to one party and a financial liability to the other party . When traders talk about the ECB, they are referring to the European Central Bank, the central bank for the eurozone. Earnings per share is an important metric in a company’s earnings figures. It is calculated by dividing the total amount of profit generated in a period, by the number of shares that the company has listed on the stock market.

It consists of two converging trendlines that intersect at a point called the apex. Wedges usually slant in the opposite direction from the prevailing trend. Hence, a falling wedge appears during an uptrend whereas a rising wedge appears during a downtrend.

Monthly report of current month’s employment numbers compared to the previous month. An increase of employed people is good for the currency where a decrease is negative. Technical Analysis theory developed by Ralph Nelson Elliott.

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The hypothesis suggests that the future price of each stock is independent of its own historical movement and the price of other securities. Quantitative easing is an economic chf jpy technical analysis monetary policy intended to lower interest rates and increase money supply. It saw an increase in profile and use after the 2008 financial crash and subsequent recession.

Further fall of the prices may find support at the lower 45 degrees lines. To draw a Gann Grid, attach the tool at an initial point on the chart. Gross domestic product is the total value of goods and services a country produces in a one year period. GDP is calculated annually but it can also be calculated quarterly. A GDP Economic report that shows the annualized change in total value of goods and services produced in a country and is an indicator of a country’s economic health. The ECB was established in 1998, located in Frankfurt , to manage the euro, keep prices stable and conduct EU economic & monetary policy.

Once your order is filled, you will receive a confirmation from your broker. Unlike other forex brokers, XM operates with a strict No Rejections and No Re-quotes policy. The profits that you make by trading will be added to your account balance – or, if there are losses, they will be deducted.

forex vocabulary

Unused area on the price chart between two candlesticks. It may occur at Monday’s open or during high impact or unexpected news. To draw an ascending Gann Line, attach the tool at a major bottom and drag the mouse to a higher bottom. Below the descending 45 degrees line, indicate a downtrend. To draw a Gann Fan, attach the tool at a major bottom/top and drag the mouse to the necessary length.

It examines the weighted average of prices in a ‘basket’ that includes transportation, food, and medical care. A basis point is the unit of measurement used to capture the percentage change in the value of financial instruments or the rate change in an index. A basis point equals one-hundredth of one per cent (0.01%). In this example, a profit of $25 can be made quite quickly considering the trader only needs $500 or $250 of trading capital . The flip side is that the trader could lose the capital just as quickly.

Kagi Charts

The index is a composite of four indicators, including seasonally adjusted business activity, employment, supplier deliveries and new orders received. A price charting method that originated in Japan in the 18th century. Merchants devised a system to predict future prices based on traders’ emotions. It makes use of all available prices; open, high, low and close. It consists of a rectangle which is white if the close is higher than the open, or black if the open is higher than the close price.

Dealing spread The difference between the buying and selling price of a contract. Delivery A trade where both sides make and take actual delivery of the product traded. Delta The ratio between the change in price of a product and the change in price of its underlying market.

During an uptrend, volume should increase as buying pressures increases. If volume doesn’t follow through then it hints for a reversal. In a downtrend, volume should be heavier as selling pressure increases.

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At the end of a decline, a long black candlestick and a smaller black candle that follows, share the same closing price. Even though the second candle opens higher than the previous close, it doesn’t manage to follow through and eventually it closes at the same price as the previous session. Since the market failed to record a new low, a support may have been formed and a possible reversal may be in place.

Currency trading is the exchange of one type of currency for another. The forex market has no physical location or central exchange as it is a global, decentralized market and trades 24 hours a day, 5 days a week. The moving average convergence/divergence is a technical analysis indicator that aims to identify changes in a share price’s momentum. The MACD collects data from different moving averages to help traders identify possible opportunities around support and resistance levels. A Japanese candlestick pattern signaling a bullish reversal. It forms at the end of a downtrend or near a support area.

The bullish move is running out of steam as shown by the presence of the Doji, which signals uncertainty as it is contained by the previous long body. The weakness of the bullish market to push prices higher and the presence of the pattern at the end of an upward move, signals possible bearish implications. The bearish decline is running out of steam as shown by the presence of the small candle which signals uncertainty, as it is contained by the previous long body.

Who controls the forex market?

7.1 The Foreign Exchange Market

It is decentralized in a sense that no one single authority, such as an international agency or government, controls it. The major players in the market are governments (usually through their central banks) and commercial banks.

Intrinsic value is a way of describing the perceived or true value of an asset. This is not always identical to the current market price because assets can be over- or undervalued. Intrinsic value is a common part of fundamental analysis, which investors use to assess stocks, as well being used in options pricing.

They are grouped based on whether they are governed by the same regulations and/or have similar characteristics. Major asset classes include commodities, futures, financial derivatives like CFDs, stocks, bonds, and increasingly— cryptocurrencies. A measurement that shows how an investment portfolio is performing against a defined benchmark like a stock market index.

Interest definition

Forex traders often talk about one currency ‘strengthening’ in relation to another, meaning that it would cost more to buy, or that it can buy more of another currency when sold. Crystallisation is the term used when a trader or business closes a position and then reopens an identical position immediately. A covered call is when a trader sells call options in an asset that they currently have a long position on. Capital expenditure, or CAPEX, is the term used for the money spent by businesses on physical assets. It’s an important part of understanding a company’s accounts. A call option is a contract the gives the buyer the right but not the obligation to buy a specific an asset at a specific price, on a specific date of expiry.

Each band is plotted two standard deviations away from the SMA of the market, and they are capable of highlighting areas of support and resistance. Arbitrage in trading is the practice of simultaneously buying and selling an asset to take advantage of a difference in price. The asset will usually be sold in a different market, different form or with a different financial product, depending on how the discrepancy in the price occurs.

Usually, a stock index is made up of a set number of the top shares from a given exchange. Share buyback, or share repurchase, is when a company buys back its own shares from investors. It can be seen as an alternative, tax-efficient way to return money to shareholders. Once shares are repurchased they are considered cancelled, but they can be kept for redistribution in the future. The SEC stands for the US Securities and Exchange Commission. It is a government agency set up to regulate markets and protect investors in the United States, as well as overseeing any mergers and acquisitions.

Even though the second candle opens lower than the previous close, it doesn’t manage to move lower and eventually it closes at the same price as the previous session. Since the market failed to record a new high, a resistance may have been formed and a possible reversal may be in place. This key technical analysis tool is used to identify possible areas of support and resistance.

Blue chip stocks definition

Wholesale prices Measures the changes in prices paid by retailers for finished goods. Inflationary pressures typically show earlier than the headline retail. Working order Where a limit order has been requested but not yet filled. Round trip A trade that has been opened and subsequently closed by an equal and opposite deal. At best An instruction given to a dealer to buy or sell at the best rate that can be obtained at a specific time. At or better An instruction given to a dealer to buy or sell at a specific price or better.


Large inflows of funds into countries with high interest rates that drive up their exchange rate. The pennant is identified by two converging trendlines and is more horizontal. An important requirement is that volume should dry up noticeably while each of the patterns is forming (cf. Flag). Any opinions, news, research, analysis, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. A key inflation indicator, CPI, is the average price of an indicative group of everyday goods and services.