Trading Basics
Trading Orders
Market Order — A market order is an order to buy or sell at the current ask or bid price quoted on the market. The trader can choose to buy at a certain price either for placing a new order in the market or to liquidate an existing sell position. The trader can choose to sell at a certain price either for placing a new position in the market or to liquidate an existing buy position.
Stop — Loss Order — A Stop Loss order is designed to limit an investor loss on if the market moves against their position. The trader setsВ the number of pips that he is willing to lose on a specific trade and if the market reaches that point, the position gets executed.
Limit Order — A Limit order is used to lock in the trader's profit if the market moves in the direction of his trade. The trader can sets in advance the price at which he wants to close his position.
Trading Glossary
Appreciation: A currency appreciates when it strengthens in price.
Ask Rate: Also known as the offer, this is the rate at which non-market makers can buy a particular currency.
Asset Allocation: Investment practice that divides funds among different markets to achieve diversification for risk management purposes.
Balance of Trade: The value of a country's exports minus its imports.
Bear Market: A market that is characterized by declining prices.
Bid Rate: The rate at which traders can currently sell a particular currency.
Bid/Offer (Ask) Spread: The difference between the bid and the ask (offer) price.
Bull Market: A market that is characterized by rising prices.
Cable: Slang for the GBPUSD dollars exchange rate.
Central Bank: A government or quasi-governmental organization that manages a country's monetary policy. An example is the Federal Reserve, which is the US Central Bank.
Cross Rate: An exchange rate between two currencies that does not involve the US dollar, such as EURJPY.
Currency: Any form of money issued by a government or central bank and used as legal tender.
Currency Risk: The probability of an adverse change in exchange rates.
Deficit: A negative balance of trade or payments.
Economic Indicator: A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), CPI (inflation) and retail sales.
European Central Bank (ECB): The Central Bank of the European Monetary Union.
Federal Reserve (Fed): The Central Bank of the United States.
Foreign Exchange/ Forex or FX market: A market where currencies are bought and sold against each other.
Fundamental analysis: Analysis of economic and political information with the objective of determining future movements in a financial market.
Hedge: A position or a combination of positions that reduces the risk of the trader's primary position.
Inflation: An economic condition whereby prices for consumer goods rise, eroding purchasing power.
Limit order: An order to buy at or below a specific price or to sell at or above a specific price.
Liquidity: The ability of a market to accept large transactions with minimal or no impact on price stability.
Long position: A market position where the client has bought a currency he did not previously have. Normally expressed in base currency terms, e.g. long Dollars (short Swiss Franc)...
Margin: The required equity that an investor must deposit to collateralize a position.
Margin call: A request from a broker or a dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer. Alternatively the client can choose to close one or more positions.
Offer: The price or rate that a trader is prepared to sell at.
Open position: A deal that has not been settled by physical payment or reversed by an equal and opposite deal for the same value.
Over the counter (OTC): Used to describe any transaction that is not conducted over a regulated exchange.
Pips: The term used in the currency market to characterize the smallest incremental move an exchange rate can make. The value of a pip depends on the currency pair. One pip/basis point equals for instance 0.0001 for EUR/USD, GBP/USD and USD/CHF, and 0.01 for USD/JPY.
Resistance level: A price level at which you would expect selling to take place.
Short Position: An investment position that benefits from a decline in market price.
Spot Price: or spot rate of a commodity, a security or a currency is the price that is quoted for immediate (spot) settlement (payment and delivery).
Spread: The difference between the bid and the offer (ask) price.
Stop order: (also stop loss order) is an order to buy (or sell) a security once the price of the security has climbed above (or dropped below) a specified stop price.
Stop loss: An order to close a position when a particular price is reached in order to minimize loss.
Support Level: A price level at which you would expect buying to take place.
Take profit: An order to close a position when a particular price is reached to ensure a profit. Technical Analysis: An effort to forecast future market activity by analyzing market data through the use of charts, price trends, and volume.
