Forex, like every other country, has its own language, or particular terminology. Before learning a language, you must first master the alphabet. Understanding the patterns and terminology used in the foreign exchange market is an important step toward smart and profitable trading. This article will look at numerous forex terms beginning with the letter P and ending with the letter T.
Popular forex terms: P-T glossary
- Parabolic Move. Parabolic move refers to a market moving rapidly in a short period of time, generally at an accelerating pace that mimics one-half of a parabola. This trend is more commonly employed in an upward progression.
- Pip (point in percentage). Pip is a minor measure of the movement in a currency pair in the foreign exchange market. It can be calculated using either the quote or the underlying currency. A pip is a specified unit that represents the lowest amount by which a currency quote can fluctuate. Its defined size serves to safeguard traders from massive losses.
- Price Transparency. Price transparency refers to the ease of access to information about a trading instrument’s bid and ask price, and trading volume.
- Pullback. This refers to the process through which a trending market retraces a portion of its earnings before continuing in the same direction. Often used during an uptrend pause.
- Payout. Payout refers to the anticipated cash return following a successful trade.
- Position. The overall net exposure in a particular currency. A position might be flat or square, in other words, have no exposure, long, which means more currency is purchased than sold, or short, which means that more currency is sold than bought.
- Position Size. The size (e.g., number of shares) or monetary value of a particular investment.
- Profit. The price difference between the cost and sale price, the latter being higher.
- Quantitative Easing. When a central bank injects money into an economy in hopes of encouraging growth. In this instance, the central bank will often acquire government or corporate securities in order to enhance market liquidity.
- Quarterly CFDs. Quarterly CFDs are a form of futures with three-month expiration periods (once per quarter).
- Quote. The most recent price at which a share or commodity was exchanged, that is, the most recent price at which a buyer and seller agreed to complete a transaction for the item in issue. Also known as the Quoted Price.
- Quote Currency. The quote currency is the second currency in a currency pair and is used to determine the value of the first currency in a currency pair, the base currency.
- Rally. When a price recovers after a significant period of fall, this is referred to as a rally.
- Rate. The rate is the relative cost of exchanging one currency for another.
- Risk. The exposure to unpredictable, unexpected, and unwelcome developments is called risk.
- Risk Management. A method for identifying, measuring, reducing, and reporting/monitoring risk in order to minimise losses.
- Range. The difference between the highest and lowest futures prices reported during a trading session.
- Resistance. The price level that a currency finds difficult to exceed. In such cases, a currency will repeatedly hit a price ceiling, only to see a drop begin when it cannot break above it.
- Retail Investor. An individual investor who trades with personal funds rather than on behalf of a company.
- Real Money. Large traders such as pension funds, asset managers, insurance firms, and so on. They are seen as signs of considerable long-term market interest, as opposed to shorter-term, intraday speculators.
- Slippage. Slippage is the difference between the requested and obtained price, which is usually caused by fluctuations in the market.
- Sloppy. Sloppy refers to irregular trading conditions that lack any clear pattern and/or follow-through.
- Spread. The spread is the number of pips between the ask and bid prices. The spread substitutes transaction fees by representing the brokerage service expenses.
- Suspended Trading. This is a brief pause in the trading of a product.
- Security. Any type of tradable financial instrument.
- Spot Market. A physical market where foreign currency and commodities are purchased and sold for cash at the current market price settled “on the spot,” and delivered instantly.
- Stock. A share of ownership in a firm that is accessible to trade on the financial markets.
- Short Position. The excess of sales over purchases, or the excess of foreign currency liabilities over financial products.
- Settlement. The procedure for entering a trade into the books and records of the transaction’s counterparts. Currency trade settlement may or may not include the physical exchange of one currency for another.
- T/P. T/P is an abbreviation for ‘Take Profit,’ and it is a form of limit order that allows the trader to set the profit to a certain amount when the price hits a given level and the position is closed.
- Thin Market. A thin market is an illiquid, low-volume market with volatile trading circumstances.
- Tick. Tick is a unit of measurement for the smallest upward or downward change in a security’s price.
- Technical analysis. Investors use technical analysis to estimate future price fluctuations in the currency market. This is accomplished by going through current and historical market data using trading indicators, charts, and other relevant tools.
- Trailing stop. As the market price goes in a positive direction, a trailing stop allows the trade to continue to gain value, but it immediately stops the trade if the market price suddenly changes in an unfavourable direction by a defined distance. Placing variable orders may or may not limit your losses.
- Transaction cost. The price paid to purchase or sell a financial product.
- Turnover. The total monetary worth or volume of all transactions completed in a specific time period.
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