Forex Dictionary - Glossary of Forex Terms

With the Forex market growing daily, many new investors are getting in on the action. When traders first start trading Forex online, they will come in contact with terms that may be unfamiliar. This section offers the definitions for some popular terms that are used in the Forex market.

As a new trader, it is very important to understand the terms that are used when trading Forex. By having this understanding, new traders will be able to progress quickly and will have a complete grasp of what trade actions are taking place. They will also be able to communicate better with their brokers and other traders. The following list contains some of the most commonly used Forex trading terms and will provide knowledge to new and existing traders, helping them to become as successful as they possible can online.

Broker - a participating body that can serve as a middle man between traders and larger commercial institutions.

Bid/Ask Spread - the distance, which is usually represented in pips, that is between the Bid and the Ask price. Tighter spreads are better for the trader.

Leverage - the amount in which the notional amount trade exceeds a margin required to trade. If the notional amount is $100,000 and the required margin is $2000, the trader will be able to trade with 50 times leverage.

Margin - the amount of funds that are required to be in an account to open a position or maintain a position that has already been opened.

PIP - stands for percentage in point and is, the smallest increment of price in a currency. These can also be referred to as ticks.

Stop or Stop Loss - This is an order to but at the market only when the market increases to a specific price. It is also to sell when the market moves down to a certain price.

Technical Analysis - an analysis that is applied to the price action of the market. Used to help develop trading strategies and decisions.

Trading Platform - the software package that is used in which trades are conducted. This can vary per broker.

Win Ratio - the ratio of profitable trades in relation to trades that incurred a loss.

Trend - Refers to the action of a currency. If the price is rising, it is an uptrend and when going down, it is a downtrend.