Forex Glossary
Understand the
Language of Trading
Whether you’re a beginner or an experienced trader, mastering Forex terminology is essential to navigating the markets confidently. This glossary provides clear definitions of key terms you’ll encounter in the world of currency trading.
Forex Glossary
A
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Ask Price
The price at which a trader can buy a currency.
Arbitrage
Buying and selling the same asset in different markets to profit from price differences.
Appreciation
An increase in the value of a currency.
Account Balance
Total amount of money in a trader’s trading account.
Asset
Any resource with economic value, such as currency, stocks, or commodities.
Algorithmic Trading
Using computer programs to trade automatically
Asian Session
One of the major Forex trading sessions; starts around 11 PM GMT.
Averaging Down
Buying more of a losing position to lower the average entry price.
ATR (Average True Range)
A technical indicator used to measure volatility.
Ask-Bid Spread
The difference between the ask and bid price.
B
Balance
The total funds in a trading account excluding open positions, updated after closing trades or making deposits and withdrawals.
Base Currency
The first currency in a pair which represents the value being traded against the second currency.
Bear Market
A market condition where prices are consistently falling due to negative sentiment or economic factors.
Bull Market
A market condition where prices are rising steadily due to strong demand and positive economic outlook.
Bid Price
The price at which a trader can sell a currency pair, and it is always lower than the ask price.
Broker
A company that provides traders with access to Forex markets along with trading platforms and tools.
Breakout
A price movement beyond a defined support or resistance level which often signals a new trend.
Backtesting
The process of testing a trading strategy using historical data to evaluate its effectiveness before live trading.
Bollinger Bands
A technical indicator that measures market volatility using upper and lower bands around price.
Buy Limit
A pending order placed below the current price to buy when the market reaches a lower level.
Buy Stop
A pending order placed above the current price to buy when the market continues upward.
Bearish Trend
A sustained downward movement in the market indicating stronger selling pressure.
Candlestick
A chart type that displays open, high, low, and close prices to help analyze market behavior.
CFD (Contract for Difference)
A trading instrument that allows traders to speculate on price movements without owning the underlying asset.
Commission
A fee charged by a broker for executing trades, which may depend on trade size or account type.
Currency Pair
A quotation of two currencies traded against each other, where one is bought and the other is sold.
Central Bank
An institution responsible for managing a country’s currency and monetary policy which influences Forex markets.
Chart
A visual representation of price movements over time used for technical analysis.
Closing Price
The final price of a currency pair at the end of a trading session used for analysis and trend confirmation.
Correction
A temporary reversal in price movement within a larger trend which is considered a normal market behavior.
Cross Pair
A currency pair that does not include the US Dollar and often has different volatility characteristics.
Capital
The total amount of money available for trading including deposits and accumulated profits or losses.
Carry Trade
A strategy where traders profit from interest rate differences by buying high-yield currencies and selling low-yield ones.
Consolidation
A market condition where prices move within a narrow range before a potential breakout.
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