The Forex market has a number of unique Acronyms and Jargon that you will not find in the Stock Market. Below are the Key terms that are essential to understand when trading forex.

ADX

The strength of a trend on any forex pair is indicated as the “Average Directional Index” and indicates the which direction the pair is trending towards.

Ask

Sometimes shown as the “Offer” which indicates the price other trade makers are offering their currency and the price you will need to pay for it.

Bank Rate

In South Africa you will know it as the “repo rate” which represents the percentage interest at which that country’s Central Bank lend money to their commercial banks.

Bid

The bid price is the price that other trade makers are prepared to pay for a currency and the price you would sell for.

Broker

A broker sits between traders and the institutions much like an insurance broker and trades on your behalf.

Cable

The most traded pair of currencies is the GBP/USD pair which forex traders have given the name “cable”.

Carry Trade

Every so often the Central Banks review their bank rate and a carry trade is a position that is left open overnight specifically to take advantage of the difference in the interest rate and hopefully make a profit.

CCI

The “commodity channel index” is used by brokers to find overbought or oversold positions in the market and is a technical indicator.

CFD

A “contract for difference” allows traders to buy or sell without actually paying for the trades and is the instrument where gearing is taken advantage of , most used by speculators.

CPI

The consumer price index is announced from time to time and is a statistical measure of inflation. The price of a pre determined basket of goods is measured and the percentage increase or decrease is show as the consumer price index.

EA

Trading currencies with an “Expert Adviser” allows traders to manage their positions automatically. It is a software program that traders use to automate buy/sell positions.

ECB

The “European Central Bank” that regulates the financial system of the European Union.

Fed

The Federal Reserve is the regulator of the Unites States of America’s financial systems.

Flat

When all positions are closed, this state is referred to as “flat”

Fundamental Analysis

An analysis of the forex markets based on no analytical tools but on the basis of news reports and economic indicators from the various central banks.

Gap

In the Forex markets, the “gap” occurs on weekends and is the difference between the closing price on Friday and the opening price on Monday.

GDP

An annualsied calculation of the total market value of goods and services produced in a country in any given year.

GTC

Sometimes referred to as an open order, a “Good till cancelled’ order would have a fixed price and remains open until executed or cancelled.

Hedging

A defensive position used to lower risk where a position is taken in the opposite direction

Jobber

These are traders who trade small positions in the very short term and rarely leave any positions overnight, sometimes known as day traders.

Leading Indicators

These indicators are used to forecast the trends in the economy going forward.

Limit Order

An order given to a broker to buy at a fixed price or a lesser price or to sell at a fixed price or a higher price.

Long

If you have taken a long position your primary currency in the pair is in the buying direction.

Lot

Normally indicated in units of 100 a lot refers to an exact amount of money or units.

Margin

The amount of cash needed in your account with the broker in order to execute any trades you wish to make and is intended as security for any potential losses.

Margin Account

The account that you hold with a broker firm that you need to deposit your margin into.

Margin Call

A margin call is made by a broker to a client to top up the funds in their margin account.

Market Order

A market order is an order to execute a buy or sell position at the prevailing market price.

Market Price

This is the current price at any given time indicated as the bid or offer price.

Momentum

This jargon indicates that a currency is moving in a particular direction, either up or down.

MA

Is the moving average which is a measure of the average price over time.

Offer

The offer price indicates what brokers are offering their currency to you at and the price you will buy at.

Order

An order is given to a broker to sell or buy at a particular price or within a price range.

PAMM

A Percentage Allocation Management Module is a system operated by the broker that allows an investor to invest with traders and allows traders to manage investors funds using the broker’s trading platform.

Pivot Point

The point at which a currency is likely to meet resistance to an upward or downward trend.

Pip

A PIP is the last digit or point in a rate eg ZAR/USD 5.4321, 1 would indicate the PIP.

Principal Value

The initial investment made.

Resistance

Resistance levels indicate levels of aggressive selling that could lead to a price increase.

Scalping

Scalping is charecterised by numerous small open positions for very short periods of time that are for short term trading profits.

Settled Position

A position is settled or closed when the transactions have all been executed.

Slippage

The difference between an order price and the execution price usually charecteristic of low liquidity.

Spread

A spread is the difference between ask and bid prices for a currency pair.

Standard Lot

Standard lots are in multiples of 100,000 units of the base currency which you are buying or selling in the pair.

Stop-Limit Order

An order given that indicates a lot can be purchased at a fixed price or lower price or a lot to be sold at a fixed price or higher.

Stop-Loss Order

Is an order placed to sell the moment the market has reached a certain price on the downside and is intended to limit losses should the market move in the direction not anticipated.

STP

The vast majority of all orders are processed as “straight through processing” which is an automated settlement process.

Support

Support levels indicate the price point at which there is likely to be aggressive buying indicating that the price may come down.

Swap

Swap is the overnight settlement of your positions where the rate difference between the 2 currencies in your pairs is settled, either on the upside or the downside.

Unrealized Profit/Loss

This is the profit or loss on all your open positions sometimes referred to as a floating profit/loss.

Useable Margin

The amount available in your margin account with which you are able to trade.