Forex University – Module 1 – Deep Dive (audio only)
Glossary of Key Terms
- Ask PriceThe price at which a broker is willing to sell the base currency in a currency pair. Also known as the offer price. (Offer Price): The price at which a brokerA financial services firm that provides traders with access to the Forex market. is willing to sell the base currencyThe first currency listed in a currency pair (e.g., in EUR/USD, EUR is the base currency). in a currency pairTwo currencies quoted together, showing the relative value of one against the other (e.g., EUR/USD).. It is the price at which a trader can buy the base currencyThe first currency listed in a currency pair (e.g., in EUR/USD, EUR is the base currency)..
- Base CurrencyThe first currency listed in a currency pair (e.g., in EUR/USD, EUR is the base currency).: The first currency listed in a currency pairTwo currencies quoted together, showing the relative value of one against the other (e.g., EUR/USD). (e.g., EUR in EUR/USD). It is the currency being bought or sold.
- Bid Price: The price at which a brokerA financial services firm that provides traders with access to the Forex market. is willing to buy the base currencyThe first currency listed in a currency pair (e.g., in EUR/USD, EUR is the base currency). in a currency pairTwo currencies quoted together, showing the relative value of one against the other (e.g., EUR/USD).. It is the price at which a trader can sell the base currencyThe first currency listed in a currency pair (e.g., in EUR/USD, EUR is the base currency)..
- Cross Currency PairA currency pair that does not include the U.S. Dollar (USD). (Cross): A currency pairTwo currencies quoted together, showing the relative value of one against the other (e.g., EUR/USD). that does not include the U.S. Dollar (USD) (e.g., EUR/GBP, AUD/JPY).
- Equity: The total value of a trading account, calculated as the balance plus any unrealized profits or losses from open positions.
- Forex (Foreign Exchange): The global marketplace where currencies are traded.
- Free MarginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value.: The amount of funds in a trading account that are available to open new trades or to absorb potential losses in existing trades. Calculated as Equity minus Used MarginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value..
- Fundamental AnalysisA method of evaluating currencies by analyzing economic, social, and political factors that may influence their supply and demand.: A method of evaluating currencies by examining economic factors, such as GDP growth, inflation, and interest rates, that can influence their value.
- LeverageThe ability to control a large amount of money in the Forex market with a smaller amount of capital. Expressed as a ratio (e.g., 50:1).: The ability to control a larger amount of money in trading than one's account balance would normally allow, often expressed as a ratio (e.g., 1:50). It is essentially borrowing capital from a brokerA financial services firm that provides traders with access to the Forex market..
- Liquidity: The ease with which an asset can be bought or sold in the market without causing a significant change in its price. A highly liquid market has a large volume of trading activity.
- LotA standardized unit of currency used in Forex trading (standard lot = 100,000 units, mini lot = 10,000 units, micro lot = 1,000 units, nano lot = 100 units).: A standardized unit of volume in Forex trading. Common sizes include Standard LotA standardized unit of currency used in Forex trading (standard lot = 100,000 units, mini lot = 10,000 units, micro lot = 1,000 units, nano lot = 100 units). (100,000 units), Mini LotA standardized unit of currency used in Forex trading (standard lot = 100,000 units, mini lot = 10,000 units, micro lot = 1,000 units, nano lot = 100 units). (10,000 units), Micro LotA standardized unit of currency used in Forex trading (standard lot = 100,000 units, mini lot = 10,000 units, micro lot = 1,000 units, nano lot = 100 units). (1,000 units), and Nano LotA standardized unit of currency used in Forex trading (standard lot = 100,000 units, mini lot = 10,000 units, micro lot = 1,000 units, nano lot = 100 units). (100 units).
- Major Currency Pairs (Majors): The most frequently traded and liquid currency pairs, typically involving the U.S. Dollar paired with another major currency (EUR/USD, USD/JPY, GBP/USD, USD/CHF, USD/CAD, AUD/USD, NZD/USD).
- MarginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value.: The amount of capital required to open and maintain a leveraged trading position. It is not a fee but a portion of the account balance set aside as collateral.
- Margin CallA notification from a broker that a trader’s account equity has fallen below the required margin level, often requiring the trader to deposit more funds or close positions.: A notification from a brokerA financial services firm that provides traders with access to the Forex market. that the equity in a trading account has fallen below the required marginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value. level, often requiring the trader to deposit additional funds or close positions.
- MarginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value. Level: The ratio of equity to used marginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value., expressed as a percentage. It indicates the health of a trader's account and proximity to a margin callA notification from a broker that a trader’s account equity has fallen below the required margin level, often requiring the trader to deposit more funds or close positions. or stop-out. Calculated as (Equity / Used MarginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value.) * 100%.
- Pip (Percentage in Point)The smallest unit of price movement in a currency pair. For most pairs, it is 0.0001; for JPY pairs, it is 0.01.: The smallest unit of price movement in most currency pairs. For most pairs, it is 0.0001 of the quote currency; for JPY pairs, it is 0.01.
- Pipette (Fractional Pip)One-tenth of a pip, representing an additional decimal place in a price quote.: One-tenth of a pip, representing an extra decimal place in a currency quote used by some brokers for increased precision.
- SpreadThe difference between the ask price and the bid price of a currency pair, representing the transaction cost for the trader.: The difference between the ask priceThe price at which a broker is willing to sell the base currency in a currency pair. Also known as the offer price. and the bid price of a currency pairTwo currencies quoted together, showing the relative value of one against the other (e.g., EUR/USD)., representing the transaction cost for the trader.
- Stop Loss Order: An order placed with a brokerA financial services firm that provides traders with access to the Forex market. to automatically close a trade if the price reaches a specified unfavorable level, used to limit potential losses.
- Stop Out: A situation where a brokerA financial services firm that provides traders with access to the Forex market. automatically closes one or more of a trader's open positions because the marginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value. level has fallen below a critical threshold, preventing further losses.
- SupportA price level where buying interest is strong enough to prevent the price from falling further.: A price level at which buying interest is strong enough to prevent the price from falling further.
- Take Profit Order: An order placed with a brokerA financial services firm that provides traders with access to the Forex market. to automatically close a trade when the price reaches a specified profitable level, used to secure gains.
- Technical AnalysisA method of forecasting future price movements based on the study of historical price data, charts, and indicators.: A method of analyzing financial markets by studying past price action and trading volume to identify patterns and potential future price movements, often using charts and indicators.
- TrendThe general direction in which a market is moving (uptrend, downtrend, sideways trend).: The general direction in which a market is moving over a period of time (uptrend, downtrend, or sideways).
- Used MarginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value.: The total amount of marginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value. that is currently being used to maintain open trading positions. It is the sum of the required marginThe amount of money required in a trading account to open and maintain a leveraged position. It is a percentage of the total trade value. for all open trades.