Forex Terms (A – M) Terminology and Glossary

forex terms 1

ALL or NONE: A limit price order that instructs the broker/dealer to fill the whole order at the stated price or not at all.

ARBITRAGE: Taking advantage of certain prices in different markets by the purchase or sale of any instrument and at the same time taking an equal and opposite position in a related market to profit from any small price differential.

ASK: The price at which a broker or a dealer is willing to sell.

AUTOMATIC EXECUTION: Any order that is automatically executed by a computer without any human intervention.

BASIS POINT: One hundredth of a percent.

BID: Rrice at which a broker/dealer is willing to buy.

BROKER: An individual or a firm that matches buyers and sellers for a fee or a commission.

Example of an online forex trading broker:

COST OF CARRY (also “Interest” or “Premium”): The cost, often quoted in terms of dollars or pips per day of holding an open position.

COUNTERPARTY: Any one of the participants in a transaction.

ENTRY ORDER: The order which enters a position at a specified level.

FOREX: Foreign Currency Exchange

FOREX TRADER: A Person or a firm who buys and sells currency to make a profit.

LEVERAGE: The amount of “credit” you can get from your investment, i.e. 100:1 leverage is a 1% margin requirement.

LIMIT ENTRY ORDER: Is an order that buys below the market or sells above the market at a specified level.

LIMIT ORDER: Is an order that takes profits at a specified point.

LONG POSITION: Is a position that profits from an increase in price.

LOT: Is the standard size of a transaction; one standard lot is equal to 100,000 units of the base currency, or 10,000 units if it is in a mini account.

MANUAL EXECUTION: Is anu order that is entred/executed by a person.

MARGIN: Is a deposit that opens a position i.e. a 1% margin gives you the right to open a $100,000 position with a $1,000 deposit.

MARGIN CALL: A requirement by the broker to deposit more funds in order to maintain an open position. Sometimes a “margin call” means that the position which does not have sufficient funds on deposit will simply be closed out by the broker. This procedure allows the client to avoid further losses or a debit account balance.

MARKET MAKER: Is a dealer who is making a market in currency pairs and provides liquidity displaying a two way price quote.

MARKET ORDER: Is an order at the current market price.

MINI ACCOUNT: Allows you to trade with small — mini — lot sizes.