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!
See On Balance Volume.
It is a Volume Indicator developed by Joseph Granville. Each day’s volume is assigned a plus or a minus sign, depending on whether the current day’s closing price is higher or lower than the previous day’s closing price. The result is added to a running cumulative total.
If Closing Price current > Closing Price previous then add Volume
If Closing Price current < Closing Price previous then subtract Volume
If Closing Price current = Closing Price previous then no change
The On Balance Volume should be in the same direction as the prevailing trend. Divergence is a signal that the prevailing trend is weakening and an impending reversal may be imminent.
In the course of a downtrend, a small white candle opens below the low of the prior long black body and closes at the aforesaid low.
In the course of an uptrend, a small black candle opens above the high of the prior long white body and closes at the aforesaid high.
Organization of Petroleum Exporting Countries. OPEC’s mission is to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry. The twelve-member states are: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.
The total number of outstanding (long or short) contracts at the end of the trading day. Open Interest applies to futures and options markets.
Buyer Sell Comment Open Interest
New Long New Short New Position ↑
New Long Old Short Not new Position − −
Old Long New Short Not new Position − −
Old Long Old Short Old Position ↓
A financial derivative where the buyer has the right to buy/sell an asset by the expiration date. More specifically, Call Options are contracts that give the owner the right (not the obligation) to buy an asset in the future (before or at the expiration date) at an agreed price. Investors buy Call Options when they believe that the value of the underlying asset will increase above the strike price. Similarly, Put Options are contracts that give the owner the right (not the obligation) to sell an asset in the future (before or at the expiration date) at an agreed price. Investors buy Put Options when they believe that the value of the underlying asset will decrease below the strike price.
Here are some examples of different types of Options:
See Over the Counter.
The traditional way of trading forex was ‘over the counter’, meaning traders made forex transactions over the telephone or on electronic devices.