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!
A monthly survey showing orders for immediate or future delivery, placed with manufacturers. It provides an indication of future business trends. Released by the Census Bureau.
A reversal pattern. During the course of an uptrend as defined by successively higher tops and higher bottoms, the last top fails to exceed the previous top and prices fall below the last bottom. This is a failure swing to go short. On the other hand, in the course of a downtrend, as defined by successively lower tops and lower bottoms, the last bottom fails to move lower than the previous bottom and prices rise above the last top. This is a failure swing to go long.
The current price at which an asset could be sold on the open market.
A Japanese candlestick continuation pattern. During a downtrend, a long black body is followed by three small candlesticks, formed between the previous candle’s range - triggering a pause in the market. The resumption of the downtrend is signaled by the presence of the fifth candle which is a long black body.
See Federal Reserve.
Report submitted semiannually to Congress containing discussions of "the conduct of monetary policy and economic developments and prospects for the future”, along with testimony from the Federal Reserve Board Chair.
It is the central bank of the United States. It was established in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. The Federal Reserves’ responsibilities:
See Federal Reserve.
The Fed’s publication about current economic conditions and prospects across the 12 Federal Reserve Districts: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
Released eight times per year by the Federal Reserve.
See FOMC Statement.
It is a technical analysis tool that is drawn between two major points - top and bottom. The arcs are drawn centered on the second point intersecting the line connecting the two major points at 38.2%, 50% and 61.8%. The theory holds that prices are expected to find support and resistance at the arcs.
A technical Analysis tool used to draw a channel with diagonal Fibonacci retracements. In an uptrend, draw the channel (or return) line by connecting at least two tops. Consequently, draw the basic up trendline through the widest swing (bottom), parallel to the channel line. In a downtrend, draw the channel line by connecting at least two bottoms. Consequently, draw the basic down trendline trough the widest swing (top), parallel to the channel line. Fibonacci retracements equal to 61.8%, 100%, 161.8% and 261.8% of the channel width, are drawn as potential retracement levels. During an uptrend, prices will find support at the diagonal Fibonacci retracements, once they break out below the channel. On the other hand, in the course of a downtrend, prices will find resistance at the diagonal Fibonacci levels, once they break out above the channel.
It is a technical analysis tool that is drawn between three points on the price chart. The first point signifies the beginning of wave 1, the second point the end of wave 1 and the third wave the end of wave 2. The tool, displays three lines at 61.8%, 100% and 161.8% the length of wave 1(i.e. the distance between the first and the second point). These lengths (i.e. expansions) are drawn starting from the end of wave 2 (i.e. third point). The theory holds that at these levels, (i.e. expansions) significant changes may be expected, for example, the end wave 3.
It is a technical analysis tool that is drawn between two major points - top and bottom. In an uptrend, it is drawn from bottom to top, displaying three lines at 38.2%, 50% and 61.8% (i.e. the vertical distance from top to bottom). The lines serve as potential support levels. In a downtrend it is drawn from top to bottom, displaying three lines at 0.382, 0.50 and 0.618 (i.e. the vertical distance from bottom to top). The lines serve as potential resistance levels.
They are attributed to Leonardo Fibonacci, an Italian Mathematician. Each number in the sequence is composed by the sum of the two previous numbers. The sequence is: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233 etc.
It is a technical analysis tool attached from bottom to top in a rising market and from top to bottom in a declining market. The horizontal lines show the Fibonacci Retracement levels (ratios): 0.236, 0.382 and 0.618. The levels serve as potential support and resistance. The ratios are derived by dividing any number in the sequence by:
It is a technical Analysis tool that is comprised of vertical lines spaced at Fibonacci intervals: 1, 2, 3, 5, 8, 13, 21, 34, 55, etc. The tool is placed on two points on the price chart to define the time interval unit. The theory holds that significant price changes are expected at the vertical lines, that is, time intervals.
The completion of an order.
When an investor has a very specific price they want to carry out a transaction at, they place a Fill or Kill order – this means that if the order is not filled at the desired price, it is terminated, or killed.
In the MT5 order window, a trader may set the order’s Fill Policy:
The price at which an order has been completed.
Applying Oscillator overbought and oversold levels in candlesticks analysis, premature patterns are ignored (i.e. filtered out) hence increasing the success probability of the candlestick patterns.
A monthly report that measures the average change in price of a basket of consumer goods and services in Eurozone, compared to the same period the previous year. A high reading implies inflation and is positive for the euro whereas a low reading is negative for the euro. Released by Eurostat.
Annualized change of the Gross Domestic Product (GDP), the economic output of a country.
It reveals whether an economy is expanding or contracting.
An economic indicator gauging economic health, based on year-to-date private and public investments Released monthly (except February) by the National Burau of Statistics (China).
Fiji Dollar. The currency of Fiji. It is subdivided into 100 cents.
Falkland Islands Pound. The currency of the Falkland Islands(Malvinas). It is subdivided into 100 pence.
Continuation price pattern composed of a parallelogram with slanting sides against the trend and preceded by an almost straight-line move called a flagpole. The flagpole and the breakout of the parallelogram are accompanied by heavy volume.
The flag pattern causes a brief pause in the market that lasts less than 3 weeks.
Precedes the parallelogram part of the flag pattern. It’s an almost straight-line move (accompanied by heavy volume) called a flagpole. Projecting the flagpole at the breakout point, a price target may be calculated.
An a-b-c correction against the prevailing trend. It follows a 3-3-5 wave pattern.
When an exchange rate is not fixed, but adjusts depending on the supply and demand for a particular currency relative to other currencies.
It is responsible for conducting the nations (USA) monetary policy.
The FOMC (Federal Open Market Committee) Chair presents the current economic/monetary projections and provides additional context for the FOMC's policy decisions during a press briefing. It’s scheduled four times per year.
An FOMC tool to control inflation and short-term interest rates. Scheduled eight times per year. It is the interest rate at which banks and other depository institutions lend money to each other. Released by the Federal Reserve.
Minutes of the most recent meeting giving insights of the future of the US interest rate. Released eight times per year by the Federal Reserve.
Scheduled four times per year. During the conference the FOMC Statement is read and the Fed’s Chair answers press questions regarding the monetary policy. High market volatility is usually expected.
After each regular meeting, the FOMC issues a statement that summarizes the Committee's economic outlook and the policy decision at that meeting.
It’s a technical oscillator that measures the momentum of rallies and declines. It was developed by Alexander Elder. It makes use of the:
A positive difference shows that the bulls are in control. A negative difference shows that the bears are in control.
Force Index = Volume Today x (Close Today – Close Yesterday)
When enabled, all indicators and objects will be in the background whereas the price chart will be in the foreground.
Foreign exchange, or Forex for short, is the “place” where currencies are traded. In the forex market, currencies are traded in pairs. When a trader buys a currency, he or she is selling another currency at the same time. 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.
A digital chart that plots the price movements of currency pairs, to help investors make informed trading decisions.
A trading strategy based on the notion that if you buy and sell (or sell and buy) a currency within a very short time frame, you are more likely to make a profit than you would with large price movements.
A system which gives out signals to traders to help them decide whether a specific time is suitable to buy or sell a currency pair.
A specific group of currencies which form a weighted average that can act as a measure to value an obligation.
The current exchange rate that a currency pair can be bought or sold at.
This refers to automated trading software which is designed to help determine whether to buy or sell a currency pair, at a given time.
Trend-following indicator developed by John Ehlers. It’s based on the Exponential Moving Average formula. The smoothing factor calculations are based on the current fractal dimension of the price series. Reactions to price changes are faster, while during consolidation periods it remains flat.
Developed by Bill Williams. Up fractals are used to identify tops, where down fractals are used to identify bottoms. Up fractals are comprised of 5 bars (minimum) where the highest high is preceded by two lower highs and is followed by two lower highs. Down fractals are comprised of 5 bars (minimum) where the lowest low is preceded by two higher lows and is followed by two higher lows.
A Japanese candlestick pattern signaling a bullish reversal. At the end of a downtrend, volatility tightens as the market is forming a prolonged bottoming pattern. Short bodies substitute the long black bodies and lower lows form the first part of this rounding bottom or frypan, that mark the lowest level of the bottom. The second part of the bottoming pattern is characterized by higher lows but the range of the bodies remain short- in sync with the low volatility. Finally, a break- out above the pattern with a gap, is necessary to complete the pattern.
A reversal pattern, similar to double top and double bottom, found in point & figure charts. It is characterized by a move in the congestion area of the pattern and a following move in the opposite direction.
The impact economic, political and environmental events have on prices in financial markets (interest rate announcements, unemployment rate, elections, etc.)
See Futures Contract.
An agreement between two parties - a buyer and a seller- where the seller agrees to sell an asset to the buyer at a predetermined price, date, quantity and quality.