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API Trading
Trades are executed via an automated programming interface (API), allowing orders to be sent directly to the order engine.
Automated Forex Trading
A trading system that is automatically executed by computer software without human intervention.
Base Currency
First currency in a currency pair (e.g. for GBP/USD, the British Pound is the base currency).
Bear Market
When market prices tend to go lower, the market is said to be a "bear market". Someone who expects prices to trend lower is "bearish."
Bid
The side of the price quoted where the party quoting the price is interested in buying the base currency of the currency pair.
Broker
See Forex Broker.
Broker Program
Introducing Brokers refer clients to forex trading platforms providers, while also expanding the number of products they offer their existing and potential client base. See Introducing Broker.
Bull Market
When prices are rising, the market is said to be a "bull market"; individuals who anticipate higher prices are considered "bulls." Situations arising which are expected to bring higher prices are called "bullish.".
Cable
The market term used to describe the GBP/USD exchange rate.
Charting
When traders analyse the markets, they employ graphs and charts to plot the price movements, volume, open interest, or other statistical indicators of price movement.
Counter Currency
See Quote Currency.
Cross Rate
The exchange rate between any two currencies, excluding the U.S. Dollar.
Currency Pair
The two currencies that form a foreign exchange rate (e.g. GBP/USD).
Currency Rate
See Exchange Rate.
Currency Spreads
See Spread
Day Trading
A type of trading where trade positions are opened and closed during the same day.
Entry Order
An order that is placed away from the current market to initiate a position.
Exchange Rate
The price at which one currency may be converted into another.
FIFO
See First In First Out
First In, First Out (FIFO)
When FIFO logic is adhered to in Forex Trading, offsetting trades in the same currency pair will automatically close the first opened position. For example, if you buy 10 lots and then buy 20 lots of the same currency pair, the first sell in that currency pair will offset the 10 lot position and generate realized PnL based on that position.
Foreign Exchange
A market for buying and selling currencies.
Forex
Acronym for foreign exchange.
Forex Broker
A regulated financial services professional who acts as an intermediary in the foreign exchange market, buying and selling currencies on behalf of investors and charging a commission for their services.
FX
Acronym for foreign exchange
Hedger
A trader who attempts to transfer the risk of price change by taking an opposite and equal position in the same or closely allied market.
Initial Margin
When a customer establishes a currency position, they are often required to make a minimum initial margin deposit to secure or collateralise the position.
Introducing Broker
See Broker Program.
Leverage
The use of a small initial investment to borrow funds to trade a large position.
Limit Order
An order to open a position or to close an existing positions. A buy limit will be below the current market and a sell limit will be above the current market.. When using a limit order to close an existing position you are establishing your target profit levels.
Liquid Market
A market which allows quick and efficient entry or exit at a price close to the last traded price. The ability to liquidate or establish a position quickly is due to a large number of traders willing to buy and sell.
Liquidity
The ability to quickly convert an investment portfolio to cash without suffering a noticeable loss in value.
Long
One who has purchased a currency pair. A trader with a long position is looking for the price of the base currency to go up.
Long Position
See Long
Management Fee
A fee charged by a financial advisor, which is a percentage of the total amount of funds under management by the manager. It is paid on a defined day in a month or quarter. The amount of assets for the purpose of the calculation of this fee equals the account equity.
Margin
The required funds that an investor is required to hold in a trading account to either open a position or keep an existing position open.
Mark-to-Market (MTM)
The value of open positions in your portfolio at current market rates.
Market Maker
Traders who make firm two-way prices for financial instruments.
Market Order
An order that is immediately executed at the current market price.
Market Rate
Current quote of a currency pair.
Market Risk
Exposure to potential loss from an adverse movement in market prices and rates.
Offer
The side of the price quoted where the party quoting the price is interested in selling the base currency of the currency pair.
Per Trade Commission
A flat fee charged by a financial advisor on a round turn basis when a trade is opened. This fee can be in an absolute amount or a mark-up applied to the currency spread.
Performance Fee
A fee charged by a financial advisor, which is a percentage of the return on the account and typically has a "high water mark" component in the calculation. The performance fee is paid each period, which is either a month or quarter based on the performance of the account in that period in relation to the previous period.
Pip
Percentage in Point. Price change of a currency pair typically measured to one basis point (i.e. 0.0001).
Quotation
Often referred to as a "quote." The bid or offer (ask) price.
Quote Currency
Second currency in a currency pair (e.g. for GBP/USD, the U.S. Dollar is the quote currency).
Rollover
Closing a position for one value date and simultaneously opening the same position for another value date. The rollover price reflects the difference between the interest rate for the two currencies involved in the trade.
Short
One who has sold a currency pair, A trader with a short position is looking for the price of the base currency to go down.
Short Position
See Short.
Spot
Today's market price of a currency pair for value in two business days (for most currency pairs).
Spot Currency Transaction
A transaction in the foreign exchange market for which delivery and settlement take place two business days (T+2) after the day of the trade (to allow the transfer of cashflows) for most currency pairs.
Spot FX
See Spot Currency Transaction.
Spread
The bid-offer spread, which is the difference between buy and sell quotes.
Stop Order
An order to open a position or to close an existing positions. A stop order to sell will be below the current market and a stop order to buy will be above the current market When using a stop order to close an existing position you are limiting the loss on that position.
Thin Market
A market with little trading and poor liquidity.
Trailing Stop
A stop-loss order that changes the order rate with movements in the market. The stop loss trail will specify a number of pips, once the market has moved the specific number of pips the level of the stop loss order will move the specified amount.
Volatile Market
A market with active price fluctuations is said to be volatile.
Volatility
A measure of the fluctuation in the market price of a currency pair. Mathematically, volatility is the annualised standard deviation of returns.
Yard
A billion units of a currency
ZAR
Currency symbol for the South African Rand.
