Forex Glossary Terms You Need To Know

The world of Forex trading is a complicated and daunting one for any new trader. Even if you come into the market with a strategy, it can be overwhelming for a while. It doesn’t help that experienced traders often sound as though they are talking a whole other language.

There are lots of different terms that you will come across related to the prices, currencies, and different types of orders and trades. The more you understand, the easier it will be to make the right moves and avoid losses. So, here are some important Forex terms to get you started.

20 Forex Glossary Terms You Need To Know.

1) Asset.

This is an important one to start with. All traders and investors deal with assets to either buy or sell for profit. In financial trades, your assets are your chosen currency or currency pair.

2) Currency Pair.

On that note, it is helpful to pay attention to key currency pairs that trade together in the market. They are either minor, major, or exotic, with major pairs being the most commonly traded.

3) Quote Currency.

Sticking with currency terms, you may hear the second currency in the pair listed as the quote currency.

4) Soft or Hard Currency.

Currencies are classified based on their status. Some are reliable and stable, and won’t fall or rise too dramatically over time. These are the hard currencies. Others are much more unreliable and likely to decline quickly in times of trouble. These are the soft currencies.

5) Pip.

This term relates to the change in the price of an asset based on the exchange rate. Most have four decimal points, with the Pip referring to the smallest possible price change – either up or down. This is shorthand for percentage in point, but no one has the time to say that.

6) Bid.

Your bid is the price that traders set for their assets. They set this bid price at a determined value, and it is up to you to determine if it is a good investment.

7) Yield.

After dealing with a bid and making a trade, you will end up with your yield. This is the return that you have ended up with on your investments. You will typically see this as a percentage.

8) Day trade.

This is one is quite self-explanatory, but you will hear it a lot. Some forex trades open and close within 24 hours, so you have to be on the ball to keep up with them. Expect to hear a lot about these day trades.

9) Overnight position.

Not all trades are day trades, as some do carry on into the next trading day. Here, traders can deliberately keep their position open to carry it over – making it an overnight position.

10) Bear Market.

There are two terms to watch out for related to markets. Bears aren’t a good thing, with bear markets describing an asset in decline. Some traders may shorten this to bear or say the market is bearish. Don’t get caught out.

11) Bull Market.

The opposite of this is the bull market, where everything is heading in a positive upward direction. Again, watch out for people shortening it to bull or saying the market is bullish.

12) Volatility.

As the name suggests, this refers to the volatile nature of the industry. You will often hear markets described as volatile when assets rise and fall in value at sharp rates, and when experts struggle to predict movements.

13) Spike.

When the markets get volatile with these rises and falls, there are going to be some noticeable spikes. Spikes aren’t just a positive sign of a rapid increase in a short period. They can also mean sharp declines, so watch out.

14) Resistance.

Even with the potential for spikes in hard currencies, there are often price ceilings. A currency could get close to this figure over and over again, but never break through. This price level is often called resistance.

15) Slippage.

An added problem with a volatile market is that it can lead to some problems with bids and trades. Sometimes, traders will execute a trade that ends up costing more than expected. This slippage is more common during the most volatile periods.

16) Scalping.

This is something you might want to try in the future. It basically means working with lots of short-term trades for fast and frequent profits, rather than any long-term ventures.

17) Hedging.

An alternative option is to go for a hedging approach. This one is a lot more cautious and works through two investments that should balance each other out. It is a form of insurance to help reduce the risk of significant losses.

18) Speculators.

This refers to a specific type of trader that isn’t afraid to take a risk. They make speculative judgments about the potential gains of assets and hope they pay off. Successful traders can may big profits this way, but it is a gamble.

19) Stop-loss Order.

Traders can set up different types of orders to try and minimize loss and possible damage. A common one is a stop-loss order. This comes into play to either buy or sell at a set price. These orders can also cause those slippages for other traders.

20) Fill Or Kill.

This one sounds brutal, and it sort of is. Investors can place a set price on a transaction with no room for negotiation. The fill or kill order means that if they don’t see that order fulfilled at that price, they can “kill” it. The whole trade is terminated.

Keep Practicing To Become More Fluent.

As with all languages, the more you practice and use the terms in real-life settings, the easier it will be. Sooner or later, you will become familiar with these terms, and a whole lot more, and be able to use them to your advantage. Also, don’t be afraid to ask people about terms you aren’t sure of. There are friendly traders to point you in the right direction.