Forex Glossary
forex glossary
Provides easy access to the popular Meta Trader 5 trading platform; Market Order Execution; with more than 60 currency pairs to trade on.
Size Of The Market
The Forex market vastly overshadows the stock market, as forex trading measure up to 5 trillion USD a day.
FX Trading Time
FX brokers give access to all three major FX markets (New York, London and Tokyo) where almost all currency pairs are traded. Therefore, currencies can be traded 24 hours during the weekdays.
Stability
Unless a major event such as ‘Brexit’ comes around, prices of a currency moves very slowly. Due to this reason currencies are in fact quoted with 4 decimal points (barring Japanese Yen). A currency may move about 0.0010 – 0.0030 in value on a normal day.
In addition, the size of the Forex trading market means that, even very large transactions have minimal impact on price, making Forex markets less receptive to market manipulation by a single party.
Leverage
Due to the stability of a currency, Forex trade almost always uses the power of leverage. Leverage means that a smaller amount of money is set forth to trade a large sum of money. As an example, a leverage of 1:100 means that the Forex trader can use 100 USD in their trading account and buy 10,000 USD worth of Euros. As one Euro changes by 0.0001 USD in value, the trading position changes by 1 USD. As you can see, a very small change in a currency’s value fluctuation can result in a large gain/loss for the trader. Additionally, this means that a retail trader can start trading FX with a relatively small sum.
Commissions and Fees
FX commissions come through the bid and offer spread (discussed later) which results in a varying commission fee rather than the flat commissions.
Currency Pairs
In every transaction, there’s something the buyer gives to the seller and vice versa. In FX, the buyer gives money to the buyer and the seller gives money of a different currency to the buyer. Therefore, every FX transaction happens as a currency pair.
Currencies are denominated using the ISO 4217 currency code. They’re always in three characters. The following table shows the currencies traded on FX markets in 2016 against their respective market share.
– USD 88%
– EUR 31%
– JPY 22%
– GBP 13%
– AUD 7%
– CAD 5%
– CHF 5%
– CNY 4%
– Other 35%
As currencies are traded in pairs, the total market share adds up to 200%. Due to the massive US economy and most commodities (such as oil) being traded in USD, the FX market for USD is far greater than the other currencies as well.
Symbols and Standard Presentation
The FX currency pair is always quoted in the following manner
– USD/CAD 1.30425
The left-side currency, which is USD in this example, is called the base currency. The right-side currency is called the quote currency. The base currency is spent to buy the quote currency. The number represents how much of the quote currency is gained by spending a unit of the base currency. In this example, by spending one US dollar you can buy 1.3042 Canadian dollars. The 0.0001th decimal is referred to as a pip. A pip is the smallest tradable unit in the FX market. Therefore, the fifth decimal point is only for informational purposes and is called a pipette. Some brokers won’t quote the pipette.
The exception to the above is when a currency pair involves Yen. Then the pip becomes the second decimal point as one Yen is comparatively much less valuable to other major currencies. Therefore, the USD JPY pair take the following form.
– USD/JPY 111.604
Due to the dual nature of the currency pair, if a FX trader wants to buy the base pair using the quote currency, they can sell the currency pair instead of buying it. For example, you may buy 1 US dollar using 111.60 Yen according to the example above.
Bid Price and Offer Price
Even though most people are used to seeing only one price for currency pairs, there can always be a discrepancy between what the seller is willing to sell for and what the buyer is willing to pay for it.
Let’s take the example,
– GBP/USD 1.3074 Offer Price
– GBP/USD 1.3070 Bid Price
Here, the offer price indicates that a buyer is willing to spend 1 GBP to buy 1.3074 US dollars. The seller is only willing to part with 1.3070 US dollars in exchange for one GBP. The bid price is usually lower than the offer price. The difference between the two prices is called the spread. This spread can differ based on the broker used by the FX trader as the broker usually adds to the spread to make a profit.
ECN Brokers
The Electronic Communications Network (ECN) is used by the major banks and other institutions who provide price feeds to the ECN pool. The broker has access to this ECN pool thus can offer the best bid and offer prices to the trader. This can result in a very low bid offer spread which sometimes can close on to zero (i.e. bid and offer price are the same). The brokers usually take a fixed commission off each trade. Therefore, high value traders can save money by using ECN brokers.
In addition, as ECN brokers are only the middlemen between the liquidity providers and the traders, ECN brokers don’t profit from a trader’s loss. Thus, incentive to manipulate prices are far less. Still, trades through ECN brokers may get the price requoted (original price at the time the trade was input by the trader can change) as the volume provided by the counter party at a specific price may not be enough to fill the trade.
STP Brokers
STP Brokers are similar to ECN brokers in the sense that they connect traders to liquidity providers as well. The main difference lies in the fact that STP brokers have connections to liquidity providers individually. They also usually profit through an added bid ask spread rather than a commission.
Although, the above categorizations are generally accurate, in the real world there can be specific characteristics, fee structures and trust factors relevant to different brokers. Therefore, one must be careful and perform research on individual brokers before selecting one.
Charts
After selecting a trading platform and a broker, the next step is to learn how to trade. The most basic tool for this purpose is the line chart. It’s simply the price of the currency pair graphed against the time. Although simple to read, the line chart loses lot of information related to quick market movements which can be very important to short term traders. The main reason is that, a line chart connects the closing price of every time period, thus the price movement within that time period is lost. Candle stick charts on the other hand presents most of the relevant data in an elegant manner.
Reading the Candlestick Chart
Although looks complicated at first, candle stick charts are very simple to read.
Candlesticks represent four main price points within a particular time period. This period can usually be set to 1 minute, 5 minutes, 30 minutes 1 hour, daily, weekly, monthly etc. The main four price points are as given in the diagram. The main body of the candle will be colored in green (or be empty) if the closing price is higher than the opening price of that time period (i.e. the price has increased). If the body is colored red (or filled in black) the price has decreased within the period.
Ability to read candle stick charts is the first step before using various tools of analysis to become a successful trader.
Types of Orders
Typical Forex brokers will offer the following types of orders to ensure that the trader can execute their strategy without constant monitoring of the Forex market.
Market Order
This is a manual order where the trader asks the broker to fill a buy or sell position at the price currently available in the market. This is used if the trader wants to enter a position as quickly as possible.
Limit Order
Limit order is when the trader asks the broker to buy below the market price or sell above the market price. For example, if USD/CAD is at 1.3012 currently and the trader believes that the price will move to 1.3030 before coming down, the trader can set a sell limit at 1.3030. When the price goes to or above 1.3030 the broker will automatically sell the position for the best available price.
Stop Loss Order
A sell stop order can be set so that the sell will only execute if the price is above or equal a certain price. This can be used in conjunction with a limit order so that the sell is executed automatically but not below a certain price. In the earlier example, if the trader also sets a stop loss at 1.3028, then the broker will trigger the selling at 1.3030 but will not sell if the price falls below 1.3028. The same type of order can be used for buying which is called a buy stop.
Other Types
There are many other types of orders at a FX trader’s arsenal such as stop entry, trailing stop, good till cancelled, good for the day etc. It’s good practice to ensure that the trader doesn’t constantly have to monitor the market prices and setup these automated orders to execute their trading strategy and limit losses.
Analysis
There are three main categories of analysis FX traders can use to predict market behavior.
TECHNICAL ANALYSIS
Technical analysis is the use of a collection of methods that look for patterns in the chart that may predict future behavior. Technical analysis assumes that all the information related to a currency pair available is already priced in. Therefore, the theory is that if a particular pattern is repeated in the past, recognizing that pattern can help the trader predict the immediate future.
Pros and Cons
The biggest advantage of using technical analysis for Forex trading, is that the trader doesn’t need to conduct research on economic climate and predict future policy decisions. As the FX market is fluctuating according to patterns, it becomes far easier to automate the trading strategy. Finally, as more and more FX traders start to trade according to technical analysis theories, the higher probability exists that it becomes a self-fulfilling prophecy.
On the flip side, if the trader ignores the economic and policy climate affecting the FX market, it can be very easy to enter losing positions (especially on the long term) even when the signs of trouble are clear.
Tools and Techniques
Even a beginner trader can start using these tools without understanding the technical calculations as the popular platforms will have ready- made tools which can be inserted into the chart. The following looks at some of the basic tools of technical analysis.
Support & Resistance
One of the most fundamental patterns seen in price movements in Forex markets is the chart moving up and down in cycles. The turning points of these cycle patterns make up the support and resistance levels of a chart.
In very basic terms, the support line is the temporary limit where the price can’t break through to reverse the overall trend. In the example above, the blue boxes are supporting the overall downward trend and not letting the price reverse into an upward trend.
The resistance is the opposite of support. In the example, they’re shown in orange. If the overall trend was going up, the support for an upward trend would be the bottom troughs and the resistance would be the ceilings.
A very basic trading strategy when the price is trending down is to buy the currency at resistance and sell at support levels, (if the price is on uptrend, buy at support and sell at resistance). Although this can work in theory, in the real world its almost impossible to accurately predict the price trend and the support/resistance levels without using other tools.
Moving Averages
One of the basic tools to identify whether the overall price is trending up or down, is to use a moving average (MA). This indicator takes the last X number of closing prices and averages the price for the current periods moving average. The larger the X, the stronger the MA trend.
The diagram indicates the 30-point MA in Orange, 10-point MA in black and 5-point MA in blue. As evident, the blue line follows the oscillations of the market far closer than the orange line. Therefore, the orange line shows a much stronger trend line. Nevertheless, as a large spike in the past can affect a MA line unnecessarily, traders tend to use exponential moving averages (EMA) that give more weight to more recent price points.
In the above example, the blue line represents the 30 EMA vs. the orange 30 MA line. The 30 EMA is more sensitive to recent price changes while still considering 30 past closing prices. Therefore, it’s more accurate to use EMA trend lines to discern the overall price movements.
Oscillators
Assuming the trader has identified the overall trend, how can he still be confident that the trend won’t reverse as soon as he commits to a trade? This is where oscillators come in.
Some of the most common oscillators are Stochastic Oscillator & Relative strength index (RSI). Without going into the technical details of how they work, lets look at how to interpret the signals.
The stochastic oscillator and RSI look similar when plotted in the charting software.
Here, the bottom chart is the RSI and the next one is the stochastic oscillator. The blue line on the candlestick chart is the 30 EMA. The most important factor to identify here is that both the oscillators break out of their darkened zones before the actual trend reversal takes place. Therefore, by studying the breakout of the oscillators, the trader can be confident that a trend reversal is about to take place.
Other Tools and Notes
There are many more tools such as Fibonacci’s retracement, Bollinger bands and MACD which can indicate possible future trends, support and resistance levels. The most important thing to realize is that none of these tools can predict the FX market 100% accurately. Still, a trader can improve his or her odds by adding the use of these tools to their arsenal. As a beginner, when the options seem overwhelming, start with the basics. This goes for tweaking the parameters of the tools mentioned earlier as well. By using the default settings of the tools above, (as most other traders will also use the same parameters) the market can behave in a self-fulfilling manner.
Fundamental Analysis
Fundamental analysis is when the FX trader considers underlying economic or policy reasons for a currency’s price fluctuations. The main idea behind the analysis is if the currency’s underlying economy is predicted to do better compared to other countries, the price of that currency will go up and vice versa.
Pros and Cons
The main advantage of fundamental analysis is that the predicted price fluctuations are based on real world value. Therefore, identifying large enough influencing factors can accurately predict future price trends. Nevertheless, especially on the short term, prices can be driven much more by seemingly random trader behaviors.
Tools and Techniques
Unlike technical analysis, fundamental analysis deals less with charts and much more with research and economic indicators. The following are some of the economic indicators and how they will affect the related currencies.
GDP and Retail Sales
Gross domestic product (GDP) can be characterized as a country’s economic output. The most important factor traders look at is the GDP annualized growth rate. As a country’s GDP reporting date draws closer, traders will have varying ideas on the predicted outcome and the consensus will be priced in. As soon as the report releases, if the report indicates that the growth rate is better than expected, the currency will appreciate and vice versa.
The retail sales numbers indicate the appetite for consumer spending. If the consumer spending is on the downturn, it can mean an upcoming recessionary cycle (as GDP is largely affected by retail sales). When trading with USD currency pairs, the retail sales numbers report of the USA (released monthly) can be used as a short-term indicator compared to the GDP report (released quarterly)
CPI & Interest Rates
The consumer price index (CPI) measures the inflation of an economy (i.e. how fast the prices of goods are rising). If the rate is higher, the monetary authority will raise interest rates to bring consumer spending down. That means that more investors will be willing to buy bonds of that currency thus increasing its demand. Therefore, the price of the currency will increase. In case if inflation is lower than expectations, this can drive the price for the currency down. On the other hand, if traders’ sense runaway inflation (such as in the case of Venezuela) the demand for the currency can drop very fast.
Employment Reports
Employment reports include measures of unemployment rates and wages. If the unemployment is low and wages are growing, the populace will spend more in the future thus increasing GDP and vice versa. Therefore, a positive employment report will strengthen the currency of the underlying economy.
Geopolitical Events
The above indicators were relating to periodical measures released by the governing bodies. There can still be major influencing events for FX markets in the form of specific geopolitical effects. For example, the Brexit, the US election, NAFTA deal, Trade wars etc. can all influence the Forex market. The main point to look out for here is to understand how an event will affect the underlying economy and trade accordingly. Even if the other traders don’t share your sentiment, if your prediction is correct, the markets will move in your favor in the long term.
Types of Traders
As a FX trader, there are several styles of forex trading that can be followed. They can be broadly categorized by the time frame the positions are held for.
Scalp Trading
Scalp trading is the most active form of trading as the positions are only held for literal seconds or minutes. The strategy is entirely built on technical analysis as fundamentals cannot affect such a small timeframe. It’s also important to select a FX broker with low commissions and fast execution times as there needs to be several hundred small trades to make a significant profit.
Day Trading
Like scalp trading, day traders will also use technical analysis unless a sudden geopolitical event comes to light. Day traders trade positions within the day and don’t typically hold positions overnight. They also require generally fast execution and low commissions to make profit.
Swing Trading
Swing trading is the next natural step of the trading styles. Here, the positions are held from several days to weeks. The analysis can be a mix of technical and fundamental analysis as both can affect the pricing in this time frame. As the positions are only entered and exited once in a while, this can be a practical trading style for FX traders looking to enter the Forex market part time.
Position Trading
This is the trading style with the longest timeframe. Typically, the positions are held across months or even years. FX position trading is mostly driven by fundamental analysis and closely resembles traditional stock trading. Here, the most important criteria for your broker needs to be their trustworthiness and the fact that they won’t shut down for a long time to come.
ACCOUNT BALANCE
The entire value of the customer account including the profit and loss, as well as the equity required to keep any open trading position.
ADR
An ADR stands for American Depositary Receipt, which is a negotiable documentation that denotes an underlying number of securities of a non-U.S. corporation that trades on a U.S. exchange platform.
ASK
The price of buying the base currency in a certain trading pair.
BASE CURRENCY
The currency appearing on the left in the currency pair, for example GBPUSD where the EUR is the base currency.
BID
The price of selling the base currency in a certain pair.
BITCOIN
The world’s first decentralized cryptocurrency using the blockchain technology.
BLOCKCHAIN
The record-keeping technology behind the Bitcoin, where it is the digital information stored in a public database.
CFD
Contract for Difference is a financial derivative contract that pays the differences in the settlement price between the open and closing trades.
Cryptocurrencies
Digital or virtual assets such as Bitcoin using encryption for security and relying mainly on decentralized distributed ledger.
CLOSE-OUT
An automatic closing to a trading position that occurs when an account equity drops lower than the margin close-out level.
CLOSED OUT
Closing of an open position.
CREDIT CARD PAYMENTS ONLINE
Clients may fund their account using a credit or debit card through a secure client portal.
DAY SPREADS
Spreads or difference between bid and ask prices applied between 07:00 & 21:00 CET
DEMO ACCOUNT
Allow clients trade forex on the MetaTrader platform to examine the system and practice trading with unreal money.
DIRECT MARKET ACCESS
A trading scheme providing you a direct access to trade a certain instrument on an exchange.
ECN ELECTRONIC COMMUNICATION NETWORK
A computer system that matches the buy and sell orders for financial instruments in the market.
ETHEREUM
A digital currency that depends on an open-source network that allows for SmartContracts and Distributed Applications.
EXPERT ADVISOR EA
An automatic trading system that works robotically on your MetaTrader.
EXPIRY DATE
The date at which a CFD contract will end and all open positions on that instrument will be automatically closed.
FINANCIAL CONDUCT AUTHORITY FCA
The regulatory body for financial services in the United Kingdom.
FINANCIAL OMBUDSMEN
The final authority responsible for settling any disputes with regulated companies in the financial markets.
FOREX
Stands for Foreign Exchange, which is the market that allows one currency to be exchanged for another.
FREE EQUITY
The unused amount of equity, taking into account all active trade positions, and thus disposable to withdraw.
HEDGING
The trading strategy of opening the opposite position in the same currency pair to protect against market volatility.
INSTANT ORDER
An order executed immediately on the current ask or bid prices.
INSTRUMENT
Any tradable asset that can be a currency pair, CFD or commodity.
LEVERAGE
The ratio of the trader’s equity compared to the size of the broker’s credit.
LIMIT ORDER
A type of pending order used to close an open trading position when the market is moving profitably.
LIQUIDITY PROVIDERS
Banks or other market institutions that act as an intermediate who make a market by supporting with pricing.
LITECOIN
A peer-to-peer digital currency which relies on fully decentralized open source global payment network.
LIVE ACCOUNT
An account giving live access to traders to execute deals in the market.
LOT SIZE
A measure of a quantity of a certain asset which is considered appropriate for buying and selling.
MARGIN CLOSE-OUT LEVEL
If the margin level reaches or fall below the closeout level, it will require your company to close any or all of your trading positions due to lack of free margin.
MARGIN REQUIREMENT
The amount of equity required to maintain an open position.
MARKET ORDER
It is an instruction from a trader to a broker to buy or sell a certain asset immediately at the current price.
MARKET WATCH WINDOW
The window on your MetaTrader platform that provides an overview of price data of the available financial instruments.
MAXIMUM DEVIATION
A slippage amount used with orders allowing execution within a set pip range.
METATRADER
An electronic trading platform that enables Forex and CFD trading, while confers powerful technical analysis and trading operations.
METATRADER 5 ACCOUNT
It allows access to FX trading by directly connecting with our liquidity providers’ quotes.
MICRO LOT
It is 1,000 units of the base currency in a forex pair which enables smaller trading positions.
MINI LOT
It is 10,000 units of the base currency in a currency pair.
MOBILE DEALING
Trading forex or CFDs via Smartphones, PDAs and other portable devices.
NO DEALING DESK
Provides immediate access to interbank rates without human dealers.
OPEN POSITION
An active trade in the market which has not yet been closed.
ORDER
Any instruction to buy or sell a certain financial instrument on a trading platform and it can includes several types.
PARTIAL CLOSURE
A feature allowing the trader to close only part of an open trading position.
PENDING ORDER
An order executed at a later time on a certain price detected by the trader.
PERSONAL AREA
Secure communications portal for VCG clients.
PIPS
Stands for point in percentage, which is the smallest measure of a change in a currency pair price.
PROFIT/LOSS
The outcome of a trading position which is either a profit or a loss.
REGULATION
The law issued by a regulator or a financial supervisor body governing the fairness of our business.
RIPPLE
It is an alternative cryptocurrency known for its digital payment network for financial transactions.
ROLLOVER
Also known as swaps, the daily interest earned for holding a trading position overnight.
SCALPING
The practice of moving in and out quickly from a trading position, aiming at making profit from small price movements.
SLIPPAGE
The difference between the expected execution price and the actual one that mainly occurs during high volatility in the market.
SPREAD
The difference in pips between the bid and ask price of a currency pair.
STOP-LIMIT Order
A conditional trade that combines the features of both stop orders and limit orders, mainly used by traders to lower risk.
STOP ORDER
A pending trading order used to close a financial position when the market moves against the open position.
SWAP
It is the percentage imposed on a daily basis on trading positions that remain open beyond midnight according to Central European time.
TAKE PROFIT
An order used to close an open position when a predetermined level is reached that guarantees a profit.
TRADE
It is a trade that is executed in the financial market.
TREATING CUSTOMERS FAIRLY TCF
It is a guarantee of transparent and fair dealing with clients in accordance with laws of the regulatory body.
UNDERLYING CONTRACT
It is the contract that determines the prices of the CFDs traded with the broker.
VARIABLE SPREADS
It is intended to determine prices according to the minimum target price difference (spreads), but with the possibility of change according to market conditions
Account Limit
It is the maximum amount of funds that are allowed to be present and dealt with in the account.
After Hours Trading
It is trading in financial markets after the end of the trading hours and the close of the market.
AML
They are the controls imposed by the regulatory body on the broker to regulate dealing with and receiving clients ’money, in order to combat and reduce money laundering crimes.
Arbitrage
Trading on the price difference between various financial markets.
Ask Price
The lowest price a potential seller is willing to accept for a particular security.
Back Office
It is the software that allows the broker to monitor clients’ accounts, trades and financial positions to identify any problem that may arise to clients.
Base Currency
It is the currency whose symbol is written first in the currency pair, where trading orders such as buying and selling are also executed on the base currency.
Example:
EUR / USD = 1.10
The first symbol “Euro” refers to the single European currency, the Euro, and here it represents the base currency.
From this example, One euro is exchanged for a dollar and 10 cents. That is, we quote the euro using the dollar.
Base Rate It is the main interest rate in the country, which is determined by the monetary policy committee of the central bank of that country.
Basis Points
One basis point represents one in a hundred percent (0.01), meaning that 50 basis points represent half a percent (0.50). The basis points are used in determining the base interest rate by central banks around the world.
Bear Market
It is the financial market in which the selling forces are greater than the buying ones, which pushes prices to the downside.
Bid Ask Spread
The difference between the bid price and the ask price, which represents the profit that a financial broker may make.
Bid Price
The price at which a financial instrument can be sold when a price decline is anticipated.
Bull Market
It is the financial market in which the buying forces are greater than the selling ones, which pushes prices to the upside.
Buy
It is a trading order that the client takes when the price is expected to rise or upon closing a financial selling position, which is considered an opposite position to buying.
Cable
Cable is a term given universally to the currency of the United Kingdom, the British Pound or the GBP.
Cash Price
The price of the financial commodity in its main market, on which a number of other sub-markets may be based, and may give different prices for the same financial commodity.
Central Bank
It is the main bank in any country that undertakes the tasks of setting monetary policy and supervising the money supply in the financial markets, in addition to many other tasks.
CFD
It is a type of financial derivative that allows trading and speculation on the price of various financial instruments without actually owning this instrument, where a gain or a loss is achieved according to the price changes of this financial instrument.
Charting
It is the graph that defines the price movements of a particular financial instrument, where the history of these movements is studied in order to predict future movements.
Closing Only
It is a clarification that shows that specific financial positions can only be closed and not be opened or modified.
Closing Price
It is the last price recorded by the financial instrument in a specific period of time, that is, there may be a closing price for an hour, four hours, a day, or a week, and so on.
Corporate action
Decisions taken by decision makers in different companies when there is a change in the organizational or administrative structure of the company.
Cost of Carry
They are the costs that may accompany the execution of a specific deal or financial position that lasts for two consecutive days or more.
Counter currency
It is the currency with the second symbol in the currency pair, and it is the currency in which the base currency is priced using it, where a trading order applied to the counter currency is the opposite of the order applied to the base currency.
Cover
It is an adjustment made to the deal or financial position to reduce the size of the deal or close it.
Cross Rate
It usually refers to non-major currency pairs. For example, AUD/NZD.
Day trading
Trading throughout the day without leaving positions on to run overnight.
Delivery
It is a strategy of trading during one day hours without leaving financial positions open for the next day.
Deposit
It is a type of trading on specific commodities that are physically capable of being delivered upon the expiry of their trading contract.
Derivative
Different financial instruments trading market, but the pricing in the financial derivative markets is done through the actual trading markets for each financial instrument.
Dividend
A share of the company’s profits that is distributed to shareholders at the end of specific periods.
ECB
European Central Bank
Economic Indicator
An indicator that measures the performance of a particular sector of the economy issued by the responsible government agencies. It is mainly used to describe and measure the performance and state of the economy in a particular country.
Equity
In the forex market, the term Equity represents the client’s physical account on the trading platform, but in the equity markets the term Equity represents the stock of a company.
ETF
Exchange Traded Fund. It is a financial fund that can be traded on the stock exchange and may be found in the stock, commodity, bond and other markets.
Ex Dividend
Shares that are traded without their companies being obligated to distribute profits, rights or any other obligations.
Expiry
It is the expiry date of the trading contract.
Fair Value
It is the value at which a company’s share is priced in a way that achieves a balance between the financial and historical position of the company issuing the share and the expected return on this share for the next five years, for example.
Fast Market
A market that witnesses rapid fluctuation in price movements as a result of financial liquidity and high trading volumes, and it may cause the real price to differ from the price on the screen in the trading platform due to the speed of the movements.
Fed
It is the central bank of the United States of America and is responsible for setting monetary policy, interest rate and setting growth and inflation targets, as well as other central bank responsibilities.
Fill
It is the state of the financial position that has been closed.
Flat
It is the state of the trading account when there are no executed deals in the market or any pending trading orders.
FOMC
Federal Open Market Committee. It is formed by members of the US Federal Reserve Bank. Its mission is to discuss and decide the future of monetary policy and decide on interest rates.
Front Month
It is the future contract activated in this period and the focus is on it and it is the source of the prices of the financial commodities subject of the contract.
Futures
It is a financial derivative that provides a contract to sell or buy a specific financial instrument at a specific rate and for a specific period of time.
FX
Foreign exchange.
Gap
The price difference between the closing price and the opening price of a specific financial instrument.
Gearing
The position of the financial trade when a massive trading position is opened with a small cash deposit and this is done through leverage.
GFD
Good For the Day. Any trading order that remains active in the market until the end of the trading day. Whether it is a pending order or an open position, this position will be canceled or closed at the end of the day.
Grey Market
A market that can be traded on certain conditions even when the actual trading hours in the main market have expired.
GT
Good Till. Usually it indicates a command that is no longer valid.
GTC
Good Till Cancelled. describes the type of trading order that an investor may place to buy or sell a security that remains active until the order is executed or the investor cancels it.
Hedging
A strategy in investing and trading intended to distribute risk to more than one trading market, in order to reduce exposure to risks of financial market fluctuations.
High
The highest price recorded by a financial instrument at a specific time.
Historical Trading Range
A specific price range that has experienced intense price activity over the history of price movements.
Illiquid
A trade with a very small volume that is not sufficient to move the price.
Index
A basket of financial instruments in a single financial market, including a group of stocks or a group of currencies, and so on.
Indication Price
An approximate price of a commodity that is different from the actual price but is close to it.
Inflation
An economic condition that expresses a rise in the prices of goods and services in a particular economy for multiple reasons, and is mainly accompanied by a decline in the purchasing power of consumers.
Interbank Rates
Interest rates used between banks.
IPO
Initial Public Offering. It is the process by which a private company can be offered for public by selling its shares to the general public.
Junk Bond
Bonds that have a higher risk of default than most bonds issued by companies and governments. It is issued by companies that are struggling financially and have a high risk of defaulting or not paying interest or capital payments to investors.
KYC
Know Your Customers. It is a standard of commitment by the client and the broker as it includes knowing detailed information about the extent to which clients take risks, knowing the size of the investment and the financial position.
Last Trading Day
It is the day before a derivative expires. After this day, the contract expires, the derivative is no longer negotiable and the settlement process begins.
Leverage
It is the ratio between the trader’s funds to the amount required to open a trading deal. The brokerage firm provides leverage, which allows the trader to take larger deals than the money that the trader has.
Libor
London Interbank Offered Rate. It is the standard interest rate at which major global banks lend each other in the international interbank market for short-term loans. The rate is calculated and published daily at 11:00 am by the Intercontinental Exchange.
Limit Down
It is the maximum limit that a given market allows to decline in a specific period of time, and is determined by the regulators of that market.
Limit Order
It is a trading order to buy or sell that is specified by the client previously, and in the event that the price of the financial instrument reaches the price specified in the order, it shall be executed and if the market price does not reach the price specified before, the order remains pending without execution.
Limit Up
It is the maximum limit that a given market allows to rise in a specific period of time, and is determined by the regulators of that market.
Liquidity
Liquidity in the forex market is the ability of a currency pair to trade (buy/sell). High liquidity in forex refers to a currency pair that can be bought / sold in large volumes without significant differences in the exchange rate (price level).
Long Position
It is a financial position entailing the purchase of a financial instrument that is expected to rise, where the price increase will help the trader make profit.
Lot
It is the contract value used in the trading position, and the underlying contract is worth 100,000 of the currency.
Low
It is the lowest price recorded by a financial instrument at a specific time.
Manifest Error
An apparent error which is obvious and indisputable mistake such as providing wrong rates by a mediator.
Margin Call
An order that is activated when the client’s account falls below the margin guaranteeing the continuation of trading, which is determined by the broker.
Margin
The minimum required amount of funds needed to fund a client’s account to be able to execute a financial position.
Mark to Market
The process of adjusting a customer’s account to reflect its current market value.
Market Capitalisation
The value of the company that is traded in the stock market, calculated by multiplying the total number of shares by the current share price.
Market Order
An order to buy or sell at the price available in the market. It is executed instantly against the price offered by your broker.
Maximum trade size
The maximum trade size that can be opened at one time.
MIS
A report with information about the financial market related to the underlying financial commodity to be submitted to the client to help him take the appropriate decision for trading.
Net position
The total value of all open trades combined.
Normal market size
The average trading volume of a particular financial market.
Notional
the face value of the financial instrument.
OCO
One Cancels Other. A feature that includes placing two orders, and if one of them is fulfilled, the other order will be canceled.
Offer
The price offered by the broker at which you can buy the financial instrument at this price.
Open position
Trades opened in the market at the moment that have not yet been closed.
Order
An order that a client requests through a trading platform to buy or sell a specific financial instrument at a certain price.
OTC
Over The Counter. Financial markets that are traded through the means of communications and the Internet from anywhere in the world without having a specific location for trading.
Our quote
The price of various financial instruments that VCG provides to clients to enable them to buy and sell through these prices.
Over bought
When buying forces increase in a certain financial instrument, forcing it to rise to levels above its real value.
Over Sold
When the selling forces of a particular financial instrument increase to push it down to levels below its real value.
P&L
Profit and loss that the client records during his trading positions.
Pip
The least movement in the price of a financial instrument in the financial markets
Point
The smallest increase or decrease in the movement of a financial instrument.
Position
A trading transaction that a client performs through the trading platform.
Quote
The price of a financial instrument, whether it is rising or falling, and it includes the bid price and the ask price.
Realised P&L
Profits and losses that are recorded after the close of trading deals.
Resistance
A price level in a specific financial instrument at which the chances of selling increase.
Retail Investor
An investor who trades in the financial markets in an unprofessional manner.
Rights issue
When a company issues new shares to increase its capital.
Risk
The risk of being exposed to losing money or assets, and in the financial markets risk represents the amount of money that a client may lose due to trading or investment.
Rollover
A procedure in financial derivatives through which the financial position is transferred from the expiring contract to the next contract.
Running P&L
Profits and losses that are recorded when trading positions are open in the market, and are constantly changing with the price movement.
SEC
Securities and Exchange Commission (US regulatory authority).
Sell
The trading order that the client takes when he expects the price to drop in a specific financial market, or upon closing a financial position to buy, as it is considered an opposite position.
Settlement
Takes place when the market closes, during which the net profits and losses and the rest of the trading account details are determined.
Short position
A financial position that sells the financial instrument when its price is expected to decrease.
Slippage
Occurs when a client places a trading order at a certain price and it is executed at another price due to the strength of the market movement.
Spot
The actual price of a financial instrument that is updated as it happens in the currency rates in the forex markets.
Spread
The difference between the bid price and the ask price provided by a broker and represents the basic profit of the broker.
Stamp Duty
A tax fee imposed by a government on the buying or selling of shares of companies listed on its main exchange.
Stop Loss
An order that is used to close the open financial position when recording losses, and the position is closed when a specified level is reached by ensuring the reduction of losses.
Stop
An order to buy or sell at a price level lower or higher than the current market level. It results in the opening of a new financial position, and may be used to close an already open one.
Support Level
A price level in a particular financial instrument at which the chances of buying increase.
Takeover
The transfer of ownership of financial instrument from one person to another or from one group to another.
Technical Analysis
The process of studying and analyzing charts of financial instruments through studying their price history to predict price movement during the coming periods.
Terms of Business
The legal contract entered into between the client and VCG .
Tick
The smallest movement in the price of a financial good.
Trading range
The highest and lowest level recorded for a particular financial instrument over a certain period of time.
Trailing stop
An order to stop losses of the financial position, but it moves automatically with the price movement upon achieving a profit in the deal and the difference between it and the current price is determined by the client.
Underlying asset
The primary market on which a number of other sub-markets may depend, and it is the source of pricing financial instruments in the various sub-markets.
Up Bet
Buying a financial instrument when it is price is expected to increase, or when closing a financial position by selling that has been implemented before.
Volatility
The movement of a financial commodity in an unclear way between a high and a low without taking a specific direction to trade during a specific period of time.
Warrant
An option to buy a specific share contract at a certain period in the future.
Yard
Slang term meaning billion dollars
Yield
It is the rate of return on investment in a given market.
