Financial Dictionary

A

• Algorithmic Trading: The use of computer algorithms and systems to trade on the market according to pre-set strategies that do not require direct human intervention.
• Appreciation: An increase in the value of a currency relative to another.
• Arbitrage: Exploiting price differences between markets to make a profit
• Ascending Triangle: A bullish chart pattern with a flat top and rising bottom.
• Ask Price: The price at which a seller is willing to sell a currency.

B

• Bear Market: A market condition where prices are falling.
• Bid Price: The price a buyer is willing to pay for a currency.
• Bollinger Bands: A tool used in technical analysis to measure volatility.
• Breakeven: The point at which gains equal losses.
• Breakout: When the price moves above a resistance level.
• Bull Market: A market condition where prices are rising.
• Bump and Run: A chart pattern indicating a rapid advance followed by a reversal.

C

• Carry Trade: Borrowing money in a low-interest rate currency to invest in a higher-interest rate currency.
• Central Bank Intervention: Actions taken by a central bank to influence currency value.
• Commodity Pairs: Currency pairs linked to countries heavily reliant on commodity exports.
• Consolidation: A period when prices move within a narrow range.
• Consumer Price Index (CPI): Measures changes in the cost of living.
• Continuation Patterns: Chart patterns suggesting a trend will continue.
• Contract for Difference (CFD): Derivative enabling traders to speculate on price movements.
• Correlation: Relationship between currency pairs.
• Cross Currency Pair: Currency pair not involving the US dollar.
• Cup and Handle: A bullish continuation pattern.

D

• Day Trading: Opening and closing positions within the same trading day.
• Depreciation: Decrease in the value of a currency.
• Descending Triangle: A bearish chart pattern.
• Direct Quote: Quoting a currency in terms of another.
• Diversification: Spreading risk by investing in different assets.
• Double Bottom: A bullish reversal pattern.
• Double Top: A bearish reversal pattern.
• Dovish: Favoring lower interest rates.
• Drawdown: Reduction in account balance from its peak.

E

• Easing Cycle: Central bank reducing interest rates.
• Economic Calendar: Schedule of economic events.
• Economic Indicator: Data reflecting economic performance.
• Elliott Wave: Theory predicting market cycles.
• Exchange Rate: Price of one currency in terms of another.
• Exotic Currency Pair: Pair including major and less common currencies.
• Expert Advisors (EAs): Automated trading software.
• Exponential Moving Average (EMA): Moving average giving more weight to recent prices.

F

• Fibonacci Expansion: Tool predicting price targets.
• Fibonacci Extension: Predicting price levels in a trend.
• Fibonacci Projection: Using retracement levels to project future prices.
• Fibonacci Retracement: Identifying potential support and resistance levels.
• Flag: A continuation pattern.
• Forward Contract: Agreement to buy or sell an asset in the future.
• Fundamental Analysis: Analyzing economic and political factors.

G

• Gaps: Price differences between trading sessions.
• Gross Domestic Product (GDP): Total value of goods and services produced.

H

• Hawkish: Favoring higher interest rates
• Head and Shoulders: Reversal pattern.
• Hedge: Reducing risk by taking opposite positions.
• High-Frequency Trading (HFT): Rapid trading using algorithms.

I

• Ichimoku Cloud: Technical indicator showing trend direction.
• Indirect Quote: Quoting currency as domestic currency per foreign unit.
• Interest Rate Differential (IRD): Difference in interest rates.

K

• KYC (Know Your Customer): Verification process.

L

• Leverage: Amplifying trading position.
• Liquidity: Ease of converting assets into cash.
• Long Position: Buying a currency pair to profit from its rise.
• Loose Monetary Policy: Lowering interest rates to boost economic activity.
• Lot: Standardized unit of trading.

M

• Margin: Collateral needed for trading positions.
• Margin Call: Demand for additional funds.
• Moving Average (MA): Smoothed price trend indicator.
• Moving Average Convergence Divergence (MACD): Momentum indicator.

O

• Options Contract: Derivative giving the right but not obligation to buy or sell.
• Order Flow: Process of executing buy and sell orders.
• Overbought: Price considered too high relative to fundamentals.
• Oversold: Price considered too low relative to fundamentals.

N

• Non-farm Payrolls (NFP): Employment report in the US.

Q

• Quantitative Easing (QE): Central bank buying assets to increase money supply.

P

• Partial Profits: Closing part of a position to lock in gains.
• Pennant: Continuation pattern.
• Pip: Smallest price move in forex trading.
• Pipette: Fractional pip for precise pricing.
• Pivot Point: Indicator showing potential support and resistance.
• Position Trading: Long-term trading strategy.
• Price Action: Movement of a security's price.
• Price Channel: Range where price fluctuates.

R

• Range Trading: Profiting from price fluctuations.
• Relative Strength Index (RSI): Momentum indicator.
• Resistance Level: Price point limiting upward movement.
• Reversal: Change in price trend.
• Risk Management: Managing trading risk.
• Risk-on/Risk-off: Market sentiment.
• Rollover Rate (Swap): Interest earned or paid for holding positions overnight.
• ROI (Return on Investment): Profitability measure.

S

• Safe Haven: Assets considered low risk.
• Sell Limit: Order to sell above current price.
• Sell Stop: Order to sell below current price.
• Short Position: Betting on a currency's decline.
• Slippage: Difference between expected and actual trade execution.
• Spot Market: Immediate transaction of assets.
• Spread: Difference between bid and ask prices.
• Stochastic Oscillator: Momentum indicator.
• Stop-Loss Order: Order to limit potential loss.
• Support and Resistance: Price levels indicating trends.
• Swap: Overnight interest rate differential.
• Swing Trading: Short to medium-term trading strategy.
• Symmetrical Triangle: Chart pattern.

T

• Take-Profit Order: Order to close position at a specified price.
• Technical Analysis: Analyzing price charts and patterns.
• Tight Monetary Policy: Raising interest rates.
• Tightening Cycle: Central bank raising interest rates.
• Trading Platform: Software for executing trades.
• Trend: General direction of market movement.
• Triple Bottom: Bullish reversal pattern.
• Triple Top: Bearish reversal pattern.

V

• Volatility: Rate of price change.
• Volatility Index (VIX): Measure of market volatility.

W

• Wedge: Converging trend lines.