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Forex Glossary

Forex Definitions: The Industry’s Most Important Terms Explained

The forex industry is made up of so many definitions that it's easy to forget a few along the way. Do you know your Loonie from your Loti? Can you tell your Shooting Star from your Evening Star? Take the time to get to grips with forex jargon because understanding forex vocabulary is an important step in a trader’s journey.

Since no forex education can be complete without a glossary of basic forex terms, we've compiled one which explains key words and phrases in the simplest way possible. This way, you'll never be lost or confused with forex terminology!

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Before the continuation patterns of flags and pennants are formed, a steep and rapid price movement -a pole, is always present. After a pause in the market that takes the form of a flag or a pennant, a breakout occurs out of the pattern in the same direction as the pole. The measuring implication is equal to the length of the pole, hence half-mast.

The Halifax House Price Index measures the change in the house prices throughout the UK. It is released monthly as an annualized change. The change is calculated as an average for the latest three months compared with the same period, a year earlier.

It is released by the Halifax Bank of Scotland.

A Japanese candlestick pattern signaling a bullish reversal. The presence of a hammer at the end of a downtrend or decline, alerts for a possible bullish reversal. Traders enter the market with short positions, pushing prices even lower in the direction of the prevailing trend, to form the lower shadow. Eventually, the downward move is proven short-lived, as bulls take over the control and manage to close the session at the upper area of the candle. This forms the real body, whose length is 2-3 times shorter than the lower shadow.

The presence of a Hanging Man at the end of an uptrend or upward move, alerts for a possible bearish reversal. Traders enter the market with short positions, pushing prices lower against the direction of the prevailing trend, to form a long lower shadow. Eventually, the bulls take over the control and manage to pull the session higher at the upper area of the candle. This forms a small real body, whose length is 2-3 times shorter than the lower shadow.

A Japanese candlestick pattern signaling a bearish reversal. A small candlestick body of either color follows a candlestick of a long white body. The color of the small candlestick is not important. The bullish move 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. The weakness of the market to push prices higher and the presence of the pattern at the end of an upward move, signals possible bearish implications.

A Japanese candlestick pattern signaling a bullish reversal. A small candlestick body of either color follows a candlestick of a long black body. The color of the small candlestick is not important. 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. The weakness of the market to push prices lower and the presence of the pattern at the end of a decline, signals possible bullish implications.

A Japanese candlestick pattern signaling a bearish reversal. Just like Harami, a small candlestick body- (Doji in this case) follows a candlestick of a long white body. 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.

A Japanese candlestick pattern signaling a bullish reversal. Just like Harami, a small candlestick body- (Doji in this case) follows a candlestick of a long black body. The bearish decline 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 bearish market to push prices lower and the presence of the pattern at the end of a decline, signals possible bullish implications.

In Time Cycles, the principle of Harmonicity states that two neighboring cycles are related by a small whole number- usually the number 2. For example, if a 20-day cycle exists then the shorter cycle will be a 10-day cycle where the longer one will be a 40-day cycle.

It refers to the tone of language that policy makers use when referring to inflation. For example, a hawkish statement implies that drastic measures may be taken to raise interest rates.

A Technical Analysis price pattern signaling a bearish reversal. It consists of three tops and two bottoms. The highest top is known as the Head where the top to the left is known as the Left Shoulder and the top to the right is known as the Right Shoulder. The line connecting the two bottoms is known as the neckline. A prerequisite of any reversal is the existence of a trend, an uptrend in this case. In the course of an uptrend, as defined by consecutive higher tops and higher bottoms, the presence of a lower top warns for a potential reversal. A decisive break of the neckline signals the end of the prevailing uptrend and the beginning of a downtrend. If volume is available, then heavy volume should accompany the breakout below the neckline.

Investors use hedging to protect themselves by reducing the risk that may be caused by adverse market movements. Hedging means making two opposing investments, minimizing the losses which could be incurred by price fluctuations.

Investment funds that invest in a wide range of assets to reduce risk.

It is a price charting technique that filters out noise.

It uses modified open, high, low and close prices:

  • haClose = (Open + High + Low + Close) / 4
  • haOpen = (Previous haOpen + Previous haClose) /2
  • haHigh = Max(High, haOpen, haClose)
  • haLow = Min(Low, haOpen, haClose)

Heiken Ashi makes trend identification, retracements and reversals easier:

  • Uptrend is identified as a series of white bodies.
  • Strong Uptrend is defined as a series of long white bodies with and no lower shadows.
  • Downtrend is identified as a series of black bodies.
  • Strong Downtrend is defined as a series of long black bodies and no upper shadows.
  • Weak trends are defined by the presence of smaller bodies.
  • Retracement is defined by the presence of smaller bodies and the presence of upper and/or lower shadows.
  • Reversal is defined by the presence of a Doji or color change.

Automated trading, placing a big number of trades on high volumes and speed.

The highest price that a financial instrument is traded during a specific timeframe.

Historical Data is used in charts, backtesting and Expert Advisors’ Optimization. They are stored in the History Center of the client terminal. Historical Data may be modified in the following ways:

  • Import
  • Export
  • Add
  • Delete
  • Change

Hong Kong Dollar. The currency of Hong Kong. It is subdivided into 100 cents.

Lempira. The currency of Honduras. It is subdivided into 100 centavos.

A Japanese candlestick pattern signaling a bullish reversal.

It forms at the bottom of a downtrend or near a support area.

It consists of two black candlesticks.

The decline continues to record lower prices as reflected by the presence of a long black candle. Next session is characterized by a smaller black body that is completely engulfed by the previous long black body, signaling weakness, setting the stage for a bullish reversal.

A method used in Point and Figure charts to calculate price targets. It applies to both 1-box and 3-box reversal charts. In horizontal count, the width of the congestion pattern determines the price target.

The annualized number (monthly x 12) of residential “housing units” on which construction has begun in the previous month. Released monthly by the Census Bureau.

Kuna. The currency of Croatia. It is subdivided into 100 lipa.

Hang Seng Index. A stock market index composed of 50 stocks of the largest companies in the Hong Kong Stock Market. It is used to gauge stock market performance.

Gourde. The currency of Haiti. It is subdivided into 100 centimes.

Forint. The currency of Hungary. It is subdivided into 100 filler.

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