I just updated this definition list, I might add more words on the way, but those are the definitions I believe you'll need the most. I'll keep you updated in the Blog Section. -SenseiFx.

​

​

​

 

A
Aggregate Demand - The sum of government spending, personal consumption expenditures, and business expenditures.
 

Appreciation - A currency is said to ‘appreciate‘ when it strengthens in price in response to market demand.
 

Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.
 

Around - Dealer jargon used in quoting when the forward premium/discount is near parity. For example, “two-two around” would translate into 2 points to either side of the present spot.

​

​

​

​

 

B
Back Office - The departments and processes related to the settlement of financial transactions.

 

Balance of Trade - The value of a country’s exports minus its imports.

 

Bar Charts - Standard bar charts are commonly used to convey price activity into an easily readable chart. Usually four elements make up a bar chart, the Open, High, Low, and Close for the trading session/time period.

 

Base Currency - In general terms, the base currency is the currency in which an investor or issuer maintains its book of accounts.

 

Bear Market - A market distinguished by declining prices.

 

Bid Rate - The rate at which a trader is willing to buy a currency.

​

Book - In a professional trading environment, a ‘book’ is the summary of a trader’s or desk’s total positions.

 

Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.

 

Bull Market - A market distinguished by rising prices.

 

Bundesbank - Germany’s Central Bank.

 

Buying/Selling - In the forex market currencies are always priced in pairs; therefore all trades buys and sells occur at that one price.

 

Break Of Structure (BOS) (CONTINUATION)

A BOS is when the price breaks above or below, and continues in the direction of the trend. (CONTINUATION).

Break Of Structure Down
When the price breaks and closes BELOW the wick of the previous LOW in a DOWNTREND.

Break Of Structure Up
When the price breaks and closes ABOVE the wick of the previous HIGH in an UPTREND.
Buy Side Liquidity (Smart Money SELLS)

 

Where an Order Block forms where Smart Money SELLS into retailers (dumb money) BUYING orders – Pushing the price DOWN.

​

​

​

​

C
Cable - Trader jargon referring to the Sterling/US Dollar exchange rate.

 

Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price.

 

Central Bank - A government or quasi-governmental organization that manages a country’s monetary policy.

 

Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements.

 

Choice Market- A market with no spread. All trades buys and sells occur at that one price.

 

Clearing - The process of settling a trade.

 

Contagion - The tendency of an economic crisis to spread from one market to another.

 

Collateral - Something given to secure a loan or as a guarantee of performance.

 

Commission – A transaction fee charged by a broker.

 

Confirmation - A document exchanged by counterparts to a transaction that states the terms of said transaction.

 

Contract - The standard unit of trading.

 

Counterparty - One of the participants in a financial transaction.

 

Country Risk – Risk associated with a cross-border transaction, including but not limited to legal and political conditions such as war etc.

 

Cross Rates - The exchange rate between two currencies expressed as the ratio of two foreign exchange rates that are both expressed in terms of a third currency.

 

Currency - Any form of money issued by a government or central bank and used as legal tender and a basis for trade.

 

Currency Risk - the probability of an adverse change in exchange rates.

 

Change of Character (CHoCH) (REVERSAL)
Refers to a much larger shift in the underlying market trend, dynamic or sentiment.
This is where the price moves to the point where there is a change in the overall trend. (REVERSAL)

Change of Character Down
When the price breaks and closes below the previous uptrend.

Change of Character Up
When the price breaks and closes above the previous downtrend.
 

​

 

​

 

D
Day Trading - Refers to positions which are opened and closed on the same trading day.

 

Daily bias
Tells us which direction, trend and environment the market is in and what we are looking to trade.

Daily bias Bearish
When the market environment is DOWN and the trend is DOWN – we look for shorts (sells) in the market.

Daily bias Bullish
When the market environment is UP and the trend is UP – we look for long positions (buys) in the market.

Discount market <50%
The market is at a discount when the price trades BELOW the equilibrium level. We say the price is at a discount (low price).

Dealer - An individual who acts as a principal or counterpart to a transaction.

 

Deficit - A negative balance of trade or payments.

 

Delivery - An FX trade where both sides make and take actual delivery of the currencies traded.

 

Depreciation - A fall in the value of a currency due to market forces.

 

Derivative – A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument.

 

Devaluation - The deliberate downward adjustment of a currency’s price, normally by official announcement.

 

​

​

 

 

E
Economic Indicator - Economic indicators such as GDP, foreign investment, and the trade balance reflect the general health of an economy, and are therefore responsible for the underlying shifts in supply and demand for that currency.

 

End Of Day Order (EOD) - An order to buy or sell at a specified price. This order remains open until the end of the trading day.

 

EURO – since 2002 the Euro has been the currency of the European Monetary Union (EMU).

 

European Central Bank (ECB) - the Central Bank for the new European Monetary Union.

 

Equilibrium
Equilibrium is a state of the market where the demand and supply are in balance with the price. We say the price of the market is at fair value.

​
 

 

 

F

Fair Value Gap (FVG)
A 3 candle structure with an up or down impulse candle that indicates and creates an imbalance or an inefficiency in the market.

Fair Value Gap Bearish
A 3 candle structure with a DOWN impulse candle that indicates and creates an imbalance or an inefficiency in the market.

Between candle 1 and 3, do NOT show common prices. The price needs to move back up to rebalance and fill the gap.

Fair Value Gap Bullish
A 3 candle structure with an UP impulse candle that indicates and creates an imbalance or an inefficiency in the market.

Between candle 1 and 3, do NOT show common prices. The price needs to come back down to rebalance and fill the gap.

​

 

Federal Deposit Insurance Corporation (FDIC) - The regulatory agency responsible for administering bank depository insurance in the US.

 

Federal Reserve System - The central bank of the United States, with responsibility for implementing the country's monetary policy and regulating member banks of the System.

 

Fixed Exchange Rate- Official rate set by monetary authorities for one or more currencies.

 

Floating Exchange Rates - Floating exchange rates refer to the value of a currency as decided by supply and demand.

 

Forward - The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date.

 

Forward Contract - A forward contract fixes the exchange rate for future delivery at a date to be agreed by both participants.

 

Forward Rates (Swaps) - A Forward Rate refers to a cash price of 2 currencies interest difference for a fixed term.

 

Forward Trading - Forward trading is making the opposite trade of a spot trade in a given period of time.

 

Forward points - The pips added to or subtracted from the current exchange rate to calculate a forward price.

 

Fundamental Analysis - focuses on the economic forces of supply and demand that causes price movement.

 

Futures Contract- An obligation to exchange a good or instrument at a set price on a future date.

 

 

 

 

G
Gearing - Also known as margin trading. A term used to in the relationship of actual equity versus controlling equity.

 

Group of Five (G5) - are five leading industrial nations, which meet from time-to-time to discuss common economic problems.

 

Group of Seven (7) are 7 leading non-communist industrial nations composed of G5 plus Canada and Italy.

 

Group of Ten (G10) is also known as The Paris Club which includes Belgium, Canada, France, Germany, Italy, Japan, the Netherlands,

Sweden, UK and US.

 

Goldilocks Economy was a term coined back in the mid-1902 to describe an economy that was not too hot and not too cold.

 

Good ‘til Cancelled (GTC) - An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.

 

​

​

 

 

H
Hedging - A hedging transaction is a purchase or sale of a financial product, having as its purpose the elimination of loss arising from price fluctuations.

 

​

​

​

​

I

Initial margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance.

 

Interbank Rates - The Foreign Exchange rates at which large international banks quote other large international banks.

​

 

 

 

L

Leading Indicators - Statistics that are considered to predict future economic activity.

 

LIBOR - The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

 

Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received.

 

Line Charts - The Line Chart connects single prices for a selected time period.

 

Liquidity - The ability of a market to accept large transaction with minimal to no impact on price stability.

 

Liquidation - The closing of an existing position through the execution of an offsetting transaction.

 

Long position - A position that appreciates in value if market prices increase.

​

Levels of liquidity
The area of prices where smart money players, identify and choose to BUY or SELL large quantities.

E.g. Supports, resistances, highs, lows, key levels, trend lines, volume, indicators, psychological levels.

Liquidity
The degree, rate and ability for an asset or security to be easily bought (flow in) or sold (flow out) in the market at a specific price.

Liquidity sweep (Liquidity grab)
Smart money buys or sells (and sweeps or grabs liquidity) from traders who enter, exit or get stopped.

 

 

 

 

M
Margin - The required equity that an investor must deposit to collateralize a position.

 

Margin call - A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the client.

 

Market Maker - A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

 

Market down structure
When the price makes lower lows and lower highs.

Market structure
Indicates what a market is doing, which direction it’s in and where it is more likely to go.
Market Structure Shift (MSS)

MSS shows you when the price is breaking a structure or changing the direction in the market.

Market up structure
When the price makes higher lows and higher highs.
 

​

Market Risk - Exposure to changes in market prices.

 

Mark-to-Market - Process of re-evaluating all open positions with the current market prices.

 

Maturity - The date for settlement or expiry of a financial instrument.

 

 

 

 

N
Narrow Market - occurs when there is light trading and greater fluctuations in prices relative to volume.

 

 

 

 

 

O
Offer - The rate at which a dealer is willing to sell a currency.

 

Offsetting transaction - A trade with which serves to cancel or offset some or all of the market risk of an open position.

 

One Cancels the Other Order (OCO) - A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.

 

Open order – An order that will be executed when a market moves to its designated price.

 

Open position - A deal not yet reversed or settled with a physical payment.

 

Order block
Large market orders (big block of orders) where smart money buys or sells from different levels of liquidity.

Order Block Bearish
A strong selling or a supply zone for smart money.

Order Block Bullish
A strong buying or a demand zone for smart money.

Order block events
Large market orders where smart money buys or sells from certain events i.e. High volume, supports, resistances, highs, lows, key levels, Break Of Structure, Change of Character, News or economic event.
 

​

Over the Counter (OTC) - Used to describe any transaction that is not conducted over an exchange.

 

Overnight - A trade that remains open until the next business day.

 

 

 

 

P
Pips - Digits added to or subtracted from the fourth decimal place, i.e. 0.0001.

 

Political Risk - Exposure to changes in governmental policy which will have an adverse effect on an investor’s position.

 

Position - The netted total holdings of a given currency.

 

Premium - In the currency markets, describes the amount by which the forward or futures price exceed the spot price.

 

Price Transparency - Describes quotes to which every market participant has equal access.

 

Point Of Interest (POI)
POI is an area or level in the market where there is expected to be a large amount of buying or selling activity i.e. Order blocks.

Premium market >50%
The market is at a premium when the price trades ABOVE the equilibrium level.
We say the price is at a premium (high price).

 

 

 

Q
Quote - An indicative market price, normally used for information purposes only.

 

 

 

 

R
Rate - The price of one currency in terms of another, typically used for dealing purposes.

 

Resistance - A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.

 

Revaluation - An increase in the exchange rate for a currency as a result of central bank intervention.

 

Risk Management - To hedge one’s risk they will employ financial analysis and trading techniques.

 

Roll-Over - Process whereby the settlement of a deal is rolled forward to another value date.

 

Rollover Rate - The daily rollover interest rate is the amount a trader either pays or earns, depending on the established margin and position in the market.

 

 

 

 

S
Settlement – The process by which a trade is entered into the books and records of the counterparts to a transaction.

 

Short Position - An investment position that benefits from a decline in market price.

 

Spot/Next - A currency deposit transaction or the simultaneous purchase and sale of currency, or vice versa by means of swap for spot value day against the next working day.

 

Spot Price – The current market price. Settlement of spot transactions usually occurs within two business days.

 

Spot Trade - When you trade foreign exchange you are always quoted a spot price 2 business days in advance.

 

Spread - The difference between the bid (buy) and offer (ask, sell) prices; in other words the spread is the commission that the brokerage house makes on each trade.

 

Sterling – slang for British Pound.

 

Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price.

 

Stochastics Oscillator - This technical analysis indicator is based on the premise that during an upward trading market, prices tend to close near their high, and during a downward trading market, prices tend to close near their low.

 

Support Levels - A term used in technical analysis indicating a specific price level at which a currency will have the inability to cross below.

 

Swap - A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.

​

Sell Side Liquidity (Smart Money BUYS)
Where an Order Block forms where the Smart Money BUYS into the retail (dumb money traders orders – Pushing the price UP.

Smart Money
These are the smart, informed, and savvy financial institutions that invest (buy and sell) their large capital into different financial markets.

Smart Money Concepts
SMC is a more sophisticated method of price action to spot, identify and locate where smart money is buying and selling their positions

Sweep Buy Side Liquidity (Smart Money SELLS)
Smart Money SELLS into positions (and sweeps liquidity) from retail traders who are short (get stopped) and for long traders who buy and enter their trades.

Sweep Sell Side Liquidity (Smart Money BUYS)
Smart Money BUYS into positions (and sweeps liquidity) from traders who are long (get stopped) and for short traders who enter their trades.

​

​

T
Technical Analysis - An effort to forecast prices by analyzing market action through chart study, volume, trends, moving averages, patterns, formations and many other technical indicators.

 

Tick - Minimum price move.

 

Ticker - Shows current and/or recent history of a currency either in the format of a graph or table.

 

Tomorrow Next (Tom/Next) - Simultaneous buying and selling of a currency for delivery the following day.

 

Trading - Buying or selling of goods and services among countries called commerce. Forex Trading is the trading of Foreign Currencies.

 

Transaction Date – The date on which a trade occurs.

 

 

 

 

U
Uptick – a new price quote at a price higher than the preceding quote.

 

Uptick Rule – In the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.

 

 

 

 

V
Value Date - The date on which counterparts to a financial transaction agree to settle their respective obligations.

 

Variation Margin - Funds a broker must request from the client to have the required margin deposited.

 

Volatility (Vol) - A measure of price fluctuations. The standard deviation of a price series is commonly used to measure price volatility.

 

Volume - represents the total amount of trading activity in a particular stock, commodity or index for that day.

 

 

 

 

W
Weak Dollar/ Strong Dollar - dollar is said to be weak (relative to a previous time period) against another currency when more dollars

are required to buy one unit of another currency.

 

Whipsaw – slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.

​

​

Y

Yield - Return on capital investment.

 

 

 

 

Z

Feel free to let me know if there's anything else I can assist you with! blackbeltfxtrade@gmail.com