Glossary of Trading Terms & Definitions Financial Terms Explained

Glossary of Trading Terms & Definitions Financial Terms Explained

Examples of cross pairs include EUR/GBP, EUR/CHF and AUD/NZD. When we buy the EUR/USD pair, we’re actually buying the euro and selling the US dollar. Similarly, when we sell the EUR/USD pair, we’re actually selling the euro and buying the US dollar. If you trade on a 1% margin, for instance, for every USD 100 that you trade, you need to put down a deposit of USD 1. And so, in order to buy 1 standard lot (i.e. 100,000 of USD/CHF), you need to maintain only 1% of the traded amount in your account i.e. But how can you buy 100,000 USD/JPY with only USD 1,000?

How many markets are there in forex?

The 4 Major Forex Markets

Within the global market, the four major forex exchange markets are in London, New York, Sydney, and Tokyo. 3 Forex traders often commit their hours to memory, paying particular attention to the hours when two exchanges overlap.

Rollovers/Swaps– Forex trading can generate interest as well as gains from profitable trades. Each currency within a pair has its own interest rate, and if the interest rate goes up while in a position, a trader will earn interest or “rollover,” known as positive roll. Conversely, if an interest rate goes down while in a trade, the trader will have to pay rollover, known as negative roll. Leverage -Leverage is the ability to control a larger amount of money with a small investment.

Namibia Dollar

During the conference the FOMC Statement is read and the Fed’s Chair answers press questions regarding the monetary policy. Minutes of the most recent meeting giving insights of the future of the US interest rate. EMA takes into account all available prices in its calculation and assigns more weight to the most recent prices.

Base – The first currency in a currency pair, also referred to as the nominator . For example, when trading the USD/CAD pair, the USD is the Base. Japanese economy watchers survey Measures the mood of businesses that directly service consumers such as waiters, drivers and beauticians. Readings above 50 generally signal improvements in sentiment. Japanese machine tool orders Measures the total value of new orders placed with machine tool manufacturers.

When there is a high demand for an asset, there is high liquidity, as it will be easier to find a buyer for that asset. An investor is any person who devotes capital to an investment in the hope that they will see a return from it. However, in the investment community, investors tend to have a different attitude to investing than traders. It is also referred to as a helicopter drop, in reference to a helicopter scattering supplies from the sky. A gearing ratio is a measure used by investors to establish a company’s financial leverage.

Which country currency is lowest?

Yet again, the Iranian rial remains the lowest currency in the world in 2022, with a value of over 42 thousand IRR to $1 USD. The rial has remained the weakest currency as a result of sanctions that prevent Iran from exporting petroleum into the global market, partially due to political instability in the region.

Equity options are a form of derivative used exclusively to trade shares as the underlying asset. CPI stands for consumer price index, an average of several consumer goods and services that are used to give an indication of inflation. Contracts for difference, or CFDs, https://forexbroker-listing.com/ are a type of financial derivative used in CFD trading. A commodity is a basic physical asset, often used as a raw material in the production of goods or services. When a market, instrument or sector is on an upward trend, it is generally referred to as a bull market.

Forex

All your profits and losses will be converted into that particular currency. Also known as the offer price, the ask price is the price visible on the right-hand side of a quote. This is the price at which you can buy the base currency. When a market is making a clear, sustained move upwards or downwards, it is called a trend. Identifying the beginning and end of trends is a key part of market analysis. Trends can apply to individual assets, sectors, or even interest rates and bond yields.

forex vocabulary

You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money. Yield is the income earned from an investment, most often in the form of interest or dividend payments. Yield is one of the ways in which investments can earn a trader money, with the other being the eventual closing of a position for profit. A trailing stop is a type of stop-loss that automatically follows positive market movements of an asset you are trading.

Double Exponential Moving Average

QE – the process of injecting money into the market to help the wider economy avoid recession. Central banks like the Federal Reserve use QE in order to reduce interest rates and provide customers with easier access to loans. Federal Reserve – The official centralised bank for the regulation of economic activity in the USA. The Federal Reserve aims to control inflation by influencing interest rates. When inflation is too high, the Federal Reserve typically raises interest rates to slow the economy and bring inflation down. Quote – The second currency in a currency pair, also referred to as the denominator , therefore, when trading USD/CAD the CAD is considered the Quote.

forex vocabulary

It can sometimes also be referred to as a fixed exchange rate, or pegging. Being bearish in trading means you believe that a market, asset or financial instrument is going to experience a downward trajectory. Being bearish is the opposite of being bullish, which means that you think the market is heading upwards. Bears are bond trading strategies traders who believe that a market, asset or financial instrument is heading in a downward trajectory. In that regard, they hold an opposite view to bulls, who believe that a market is going upwards. Alpha is the measurement of an investment portfolio’s performance against a certain benchmark –usually a stock market index.

Long Position

It is used to identify extreme price movements i.e. overbought and oversold levels. Readings from 0 to -20 imply overbought levels whereas readings between 80 and 100 imply oversold levels. To calculate %R, take the difference between the Highest High of the last n periods and the current closing price – this is the dividend. Furthermore, take the difference between the Highest High of the last n periods and the Lowest Low of the last n periods – this is the divisor. Parabolic Stop and Reverse is a technical indicator developed by Welles Wilder. It is based on the premise that a strong trend will continue to increase in strength and hence it will follow a parabolic arc.

It has possible bearish implications when at the top of an uptrend or near a resistance area. Gann considered the 45 degrees line the most important line, where the market has some form of balance. Prices above the 45 degrees line indicate an uptrend, where below – a downtrend. During an uptrend, prices will find resistance at the lines above the 45 degrees line. Consequently, prices are expected to find support at the lines below the 45 degrees line. 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.

What is the strongest currency?

The highest currency in the world is none other than Kuwaiti Dinar or KWD. The currency code for Dinars is KWD.

The breakout of the pennant should be accompanied by heavy volume where available. The measuring implication is equal to the length of the pole. The pennant pattern causes a brief pause in the market that lasts less than 3 weeks. The initial price at the beginning of a trading period (i.e. timeframe).

Capital Expenditure

Some of these trades occur because financial institutions, companies, or individuals have a business need to exchange one currency for another. For example, an American company may trade U.S. dollars for Japanese yen in order to pay for merchandise that has been ordered from Japan and is payable in yen. The Forex market is open around the clock and offers traders to profit not only on rising prices, but also on falling ones. However, there is another reason why a large number of traders feel attracted to the Forex market – leverage.

European Central Bank

A technical analysis oscillator developed to remove trend from price action, by using a centered moving average. High prices above the zero line, correspond to cycle crests, where lows below the zero line correspond to cycle troughs. The first candle is a long black body trading in the direction of the decline, showing off the bears’ strength. The second candle is black, and of a regular size gapping below-reaffirming the downward move. The third and fourth candles are black bodies of regular size, closing lower than the previous close.

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