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Risk warning: Trading is risky. Your capital is at risk. Exinity Limited is regulated by FSC (Mauritius).

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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See BDT.

An order placed to close a position so as to lock profits once it hits a specific price.

An order placed to close a position once it hits a specific price.

See WST.

The study of market action mainly through price charts for the purpose of identifying future price trends in early stages.

Technical analysis applies to all:

  1. Timeframes
  2. Financial Instruments

Technical Analysis has received some criticism throughout the years:

  1. It is based on self-fulfilling prophecy.
  2. Prices move at random hence markets are not predictable.

Technical Analysis is based on 3 premises:

  1. Market action discounts everything.
  2. Markets move in trends.
  3. History repeats itself.

See Indicator.

See KZT.

One of the lines of Ichimoku Kinko Hyo. It is a 9-period moving average of the mid-prices; (Highest High + Lowest Low)/2 for the last 9 periods. It provides signals when combined with Kijun-sen.

A trendline that joins only two tops or bottoms.

Baht. The currency of Thailand. It is subdivided into 100 satang.

A Japanese candlestick pattern signaling a bearish reversal. It forms at the end of a rally or near a resistance area. At the top of the uptrend the presence of three consecutive long black candlesticks signifies the end of the upward move and the beginning of a new move in the opposite direction. Each Marubozu opens above the previous close and concludes below it. The lower shadows are very small if present - thus demonstrating the strength of the decline.

A Japanese candlestick pattern signaling a bearish reversal. It forms at the end of an uptrend or near a resistance area. 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 two candles form a Harami pattern. The bullish rally 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 move higher and the presence of the pattern at the end of a rally, signals possible bearish implications. The long black body that follows, extending below the second candle’s close, confirms the bearish reversal.

A Japanese candlestick pattern signaling a bullish reversal. It forms at the end of a downtrend or near a support area. 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 two candles form a Harami pattern. 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 move lower and the presence of the pattern at the end of a decline, signals possible bullish implications. The long white body that follows, extending above the second candle, confirms the bullish reversal.

A Japanese candlestick pattern signaling a bearish continuation. During a downtrend, three consecutive long black candlesticks (i.e. Three Black Crows) signify the strength of the downside momentum. The fourth candlestick, a long white body, opens below the third candle’s open and closes above the first candle’s close in the opposite direction.

A Japanese candlestick pattern signaling a bullish continuation. During an uptrend, three consecutive long white candlesticks (i.e. Three White Soldiers) signify the strength of the upside momentum. The fourth candlestick, a long black body, opens above the third candle’s close and closes below the first candle’s open in the opposite direction.

A Japanese candlestick pattern signaling a bearish reversal. It forms at the end of an uptrend or near a resistance area. Just like an Engulfing Pattern, a long black candlestick is formed at the end of an uptrend preceded by a small white candlestick. The body of the small white candlestick is completely engulfed by the body of the long black candlestick. The bullish pressure of the prevailing upward move, is overcome by the sellers entering the market aggressively at the top of the rise-forming a long black candlestick with bearish implications. The presence of the long black candle at the third session which closes lower than the prior close, confirms the bearish reversal.

A Japanese candlestick pattern signaling a bullish reversal. It forms at the end of a downtrend or near a support area. Just like an Engulfing Pattern, a long white candlestick is formed at the end of a downtrend preceded by a small black candlestick. The body of the small black candlestick is completely engulfed by the body of the long white candlestick. The bearish pressure of the prevailing downward move, is overcome by the buyers entering the market aggressively at the end of the decline-forming a long white candlestick with bullish implications. Additionally, the presence of the long white candle at the third session which closes higher than the second candle, confirms the bullish reversal.

A Japanese candlestick pattern signaling a bullish reversal. It forms at the end of a downtrend or near a support area. While the market is in a downtrend, a long black body with a long lower shadow forms in the same direction. The second candle is a small black candle with a relatively long lower shadow as well but above the previous one. The third candle in the pattern is again a small black candlestick with very small or non-existent shadows. The body of the last candlestick is contained within the range of the previous candle.

A Japanese candlestick pattern signaling a bullish reversal. It forms at the end of a downtrend or near a support area. At the end of the downtrend or decline, the presence of three consecutive long white candlesticks signify the end of the downward move and the beginning of a new move in the opposite direction. Each Marubozu opens below the previous close and concludes above it. The upper shadows are very small if present - thus demonstrating the strength of the ascent.

During trading hours Bid/Ask prices change as new incoming prices are received. A tick represents any single incoming price quote.

There are 4 major categories:

  • Long term
  • Seasonal
  • Primary or Intermediate
  • Trading

It is applied to the breaking of trendlines, support and resistance. Sometimes a close is needed above or below the line or 2 closes or 2 days or a Friday close to name just few popular filters.

It is based on the study of the past. To forecast the future, one needs to study previous data.

To determine specific entry/exit points in the market.

Somoni. The currency of Tajikistan. It is subdivided into 100 diram.

Turkmenistan New Manat. The currency of Turkmenistan. It is subdivided into 100 tennesi.

Tunisian Dinar. The currency of Tunisia. It is subdivided into 1000 milim.

Pa’anga. The currency of Tonga. It is subdivided into 100 seniti.

During the course of an uptrend, the recording of a higher high followed by a lower close (lower than the previous close) suggests a reversal. The wide range of the day (bar or candlestick) and the accompanied heavy volume define the strength of the reversal. Also, known as buying climax.

A Japanese candlestick pattern signaling a bullish reversal. It forms at the end of a downtrend or near a support area. In the course of a decline a long black candle reaffirms the negative sentiment in the market. The following three candles are of small real bodies, displaying indecision. The last candlestick is a long white body, signaling a reversal.

In the course of a rally a long white candle reaffirms the positive sentiment in the market. The following three candles are of small real bodies, displaying indecision. The last candlestick is a long black body, signaling a reversal.

The difference between a country’s exports and imports. More exports than imports result in a trade surplus. If there are more imports than exports, it results in a trade deficit.

In Time Cycles, a trading cycle is 4 weeks long. It consists of the alpha (2 weeks) and beta (2 weeks) cycles.

Some of the most popular orders are:

  • Instant Execution
  • Market Order
  • Buy Stop
  • Sell Stop
  • Buy Limit
  • Sell Limit
  • Buy Stop Limit
  • Sell Stop Limit

See Trading System.

Trading software (i.e. MT4, MT5) is provided by the broker for traders to place, manage and close positions electronically. The platform provides account management, live market prices, news feeds and charting tools.

It is characterized by equal tops and bottoms. It is also known as sideways or trendless market. It is a state of the market where supply and demand are in equilibrium.

The trading hours of the foreign exchange market are divided into 4 broad categories:

  • European (8:00am – 5:00pm)
  • American (1:00pm – 10:00pm)
  • Australian (10:00pm – 7:00am)
  • Tokyo (1:00am – 9:00pm)

See Trading System.

There are many different styles of trading to suit a trader’s profile, knowledge and time:

  • Day Trading
  • Buy-and-Hold
  • Scalping
  • Mechanical Trading
  • Automated Trading
  • Discretionary Trading
  • Copy Trading
  • Position Trading
  • Trend Following
  • Range-bound Trading
  • Break-out Trading
  • News Trading

A detailed plan on how to trade the financial markets. It is a step-by-step set of instructions on when to enter the market, when to exit with minimal loss once the market goes against you and when to book profits.

A stop loss order that is applied on profitable positions to lock in profits. It follows the market price at a distance equal to a predetermined number of points. It is set on the Client Terminal as opposed to the Stop Loss order that is set on the Server.

The direction of successive tops and bottoms:

  • Uptrend – Successive higher tops and higher bottoms
  • Downtrend - Successive lower tops and lower bottoms
  • Trendless (Range, Sideways) – Equal tops and equal bottoms

Trends fall under three categories:

  • Major
  • Intermediate
  • Near term trends

Trend has three directions:

  • Up
  • Down
  • Sideways

Trading in the direction of the established trend.

A very important concept in Technical Analysis. It is a straight line connecting successively higher bottoms during an uptrend or successively lower tops during a downtrend. Trendlines are used to open long positions during an uptrend and short positions during a downtrend. On the other hand, violation of the trendline is an early warning for a reversal.

A Japanese candlestick pattern signaling a bearish reversal. It forms at the end of an uptrend or near a resistance area. During a prolonged rally, a formation of three consecutive Doji candlesticks, signals that the uptrend may be coming to an end. Second Doji gaps above the first and the third candles.

A Japanese candlestick pattern signaling a bullish reversal. It forms at the end of a downtrend or near a support area. During a prolonged decline, a formation of three consecutive Doji candles, signals that the downward move may be coming to an end. Second Doji gaps below the first and the third candlesticks.

A continuation pattern comprised of two converging sides with at least 4 reversal points (2 tops and 2 bottoms). The opening (height) of the triangle is called the base whereas the intersection of the two sides is called the apex. Three popular types of triangles are:

  • Symmetrical (coil) – Two converging sides. Upper trendline is descending whereas the lower trendline is ascending
  • Ascending – The upper side is flat whereas the lower side is ascending
  • Descending – The lower side is flat whereas the upper side is descending

Volume is usually heavier on the breakout side hence giving hints to which side to expect the breakout. Two measuring techniques are available for triangle breakouts:

  • Height projection – Project the height at the breakout point to estimate the minimum target
  • Parallel line – Draw a parallel line from the top of the base to the triangle side. The minimum target is estimated at the parallel line with an approximate time forecast the intersection of the 2 triangle sides (apex).

During the course of a downtrend the presence of three bottoms at about the same level and the breaking of the corresponding two tops, signal a reversal. Heavy volume (if available) confirms the reversal.

A trading method with 3 moving averages: a short-term, medium-term and long-term. A buy signal is triggered in a downtrend when the short moving average crosses above both the medium and the long moving average and in turn, the medium moving average crosses above the long moving average. A sell signal is triggered in an uptrend when the short moving average crosses above both the medium and long moving average and in turn, the medium moving average crosses above the long moving average. Popular triple crossover systems are 4-9-18 and 5-10-20.

During the course of an uptrend the presence of three tops at about the same level and the breaking of the corresponding two bottoms, signal a reversal. Heavy volume (if available) confirms the reversal.

The area below the market price where buying interest overcomes selling pressure. Also, known as bottom or support.

Turkish Lira. The currency of Turkey. It is subdivided into 100 kuruş.

Trinidad and Tobago Dollar. The currency of Trinidad and Tobago. It is subdivided into 100 cents.

See MNT.

New Taiwan Dollar. The currency of Taiwan (Province of China). It is subdivided into 100 cents.

A Japanese candlestick pattern signaling a bearish reversal. It forms at the end of a rally or near a resistance area. As the market continues to trade in the direction of the established uptrend, registering higher highs the next session is bearish, pushing prices lower. The matching highs indicate that a possible top may be in place and a reversal may be imminent.

A Japanese candlestick pattern signaling a bullish reversal. It forms at the end of a decline or near a support area. The market trades in the direction of the established decline forming a long black candle, registering lower lows. The next session registers a matching low and eventually forms a bullish candlestick hence, pushing prices higher. The matching lows indicate a possible reversal may be imminent.

A Japanese candlestick pattern signaling a bearish reversal. It forms at the end of an uptrend or near a resistance area. In the course of an uptrend, the presence of a long white candlestick reaffirms the bullish sentiment. The second candle is a relatively small candle that gaps higher than the previous high but closes lower than its own open price forming a black candle. The third candle is a long black body that opens within the body of the small black candlestick, fills the gap and closes in the body of the long white candlestick, hence signaling a potential bearish reversal.

The average of the high, low and closing price of a trading period:

(High+Low+Close)/3

Tanzanian Shilling. The currency of Tanzania. It is subdivided into 100 senti.

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