Affiliate

A website connected with another in order to make a commission for referred clients. Apart from webmasters, individuals such as bloggers can also become affiliated with a website.

Ask price

The ask price is the market price for traders to buy currencies, shown on the right-hand side of a quote (e.g. EUR/USD 1.1965 / 68 indicates that 1 Euro can be bought for 1.1968 USD). It is also called offer price.

Automated trader

A trading system using mathematical models (algorythms) for taking decisions and carrying out financial market transactions. Trades via an automated trader are API-based (Automated Programming Interface).

Bar chart/graph

A chart with rectangular bars, used for studying the price of currency pairs.

Base currency

In foreign exchange trading, currencies are quoted in terms of a currency pairs. The first currency in the pair is the base currency, which is the currency against which exchange rates are generally quoted in a given country. For instance, USD/JPY, the US Dollar is the base currency; EUR/USD, the EURO is the base currency.

Bid price

The price at which you can sell the base currency. You decide the currency you sell in: if for instance the value of EUR is decreasing, you can choose to sell it for USD.

Broker

A person/company that provides FOREX trading services. You open and fund an account and start to trade. Each broker has its own prices, spreads, minimum requirements (amount of money to start trading). Brokers generally offer a demo account and also have some training programs.

Buy limit order

An order to execute a transaction at a specified price or lower.

Candlestick chart

A chart type displaying the daily trading price range (open, high, low and close).

Contract for Difference/CFD

An agreement to exchange the difference in value of shares between the time of opening and closing the contract.

Close a position

The process of selling or buying a foreign exchange position that results in the liquidation of the position.

Commodity

An item that is considered to be of value and with roughly the same market value across the market and without qualitative differentiation. Traded commodities range from agricultural, livestock and energy to precious metals and industrial metals. The current relationship between the supply and the demand for a particular commodity directly affects commodity trading.

Cross rate

The exchange rate between two currencies. It is the price of one currency in terms of another in the market of a third country. The cross rate is said to be non-standard in the country where the currency pair is quoted. For instance, in the US, a GBP/Japanese Yen quote would be considered a cross rate, whereas in the UK or Japan this would be one of the primary currency pairs traded.

Currency pair

Forex trading is done in currency pairs: one currency is bought, the other is sold. Together they make up the exchange rate. If you buy in Euros with Dollars and the Euro increases in value as compared to the Dollar, you can sell the position and make a profit.

Day order

A buy or sell order that expires automatically at the end of the trading day on which it was made.

Day trading

A type of trading that refers to the fact that trade positions are opened and closed during the same day.

Equity

The secure amount that clients have in their accounts, taking into consideration the open positions, balance and profit/loss.

Exchange rate

The exchange rate shows how much a currency is worth in terms of another currency. For instance, in the pair EUR/USD, the exchange rate is 1.30. This means €1 (base currency) is worth $1.30. So you can buy $1 .30 with €1, or sell €1 for $1.30.

Execution

The process of completing an order or deal.

Floating profit/loss

it refers to the profit or loss that may only be realized in case the open contracts are settled.

Forex /FX

Short forms for foreign exchange.

Initial margin

The deposit that clients need to make before they are allocated a trading limit.

Intraday

Orders that are supposed to be performed within one day.

Leverage

Leverage is what allow small investors to trade big lots. Forex brokers have leverage of 100:1 or 200:1. This means you can use $100 to trade $10,000 (100×100) or $20,000 (100×200). The leverage depends of the broker.

Liquidity

Refers to the relationship between transaction size and price movements. If large transactions can occur with only minimal price changes, a market can be called ‘liquid’.

Liquidation

Refers to the closing of an existing position through the execution of an offsetting transaction.

Locked margin

The amount of margin for 2 trades opened by one symbol and to different sides, e.g. EURUSD buys 1 lot and EURUSD sells 1 lot. The full margin for these trades should be 1324.4+1324.4=2648,8.

Long position

When a currency pair is bought, the primary currency in the pair is 'long', and the secondary currency is 'short'.

Long-term position

Positions supposed to last for several months or even years.

Lot

Foreign exchange is traded in lots. A standard lot means $100,000 of any currency you fund your account with. Trading with only $1 is not possible).

Margin

The minimum deposit needed to maintain an open position (e.g. with an open position of $250,000 and a leverage of 50, the required margin is $5000).

Margin call

A demand for adding funds to cover positions. UWC preserves the right to close clients’ positions without previous notification if the equity for the required margin is below 20%. If several positions are opened, UWC may close one or several of them, starting with the one that generates the biggest loss.

The trade account condition is controlled by a server that closes all positions automatically if the margin level reaches 10% or less for LITEForex accounts. This is called stop-out, and it is in accordance with the current market price. For MINIForex and REALForex accounts the values are 100% and 50%.

Mid-term position

A position the goal of which should be reached within 1-3 weeks.

Open position

A long/short position, subject to market fluctuations (i.e. profit or loss).

Over-the-counter trading

Also known as OTC or off-exchange trading. It refers to trading financial instruments (stocks, bonds, commodities) between two parties directly.

Pending order

A pending order means that the client instructs the dealer to buy or sell once the price reaches the order level.

Pip

A pip stands for percentage in points. This is the last decimal point and minimum increment visible on a quote (e.g. 1.1230). 0 is the last decimal point, and if the price increases to 1.1235, this means 5 more pips. Checking the pips regularly shows you if you are earning or losing money.

Quote

A quote is an indicative market price used as information only.

Roll-over

Roll-over refers to the extension of the settlement value date on an open position to the next trade date.

Spread

Spread is the difference between the ask price and the bid price, the two prices on a currency pair in FOREX trading. When making a trade, you pay the bid price on the currency pair, and you close the trade at the ask price.

Stop-loss order

Stop-loss is an order placed with a broker to sell shares when they reached a particular price as per the investor’s risk-taking capacity. The aim of a stop-loss order is to minimize the loss, that is, after the price reaches the set value, client’s position is automatically closed with a fixed loss.

SWAP

SWAP is a transaction that involves the exchange of two currencies and moves the maturity of an open position to a future date.

Take-profit order

It is basically the same as a stop-loss order, but works in a reverse way. After the price reaches the set value, client’s position is automatically closed with a fixed profit. For instance, if you open a long position, you open a buy position up at ask price and close it at bid price. Here you can set stop-loss over the ask price and take profit under the bid price.

Trading platform

This is software provided to clients by a broker company to make trading possible through their own system and to manage accounts securely.

Trailing stop

Trailing stop is a stop-loss order which automatically adjusts to how the market rate moves in the direction of your open position. It helps you capture profits: if the prices suddenly drop, the automatic stop-loss order gives you protection.

Wire transfer

Wire transfer is an electronic payment service for transferring funds between two accounts by electronic means.