Ask Price
The ask price is the lowest price at which a seller is willing to sell an asset. In forex, you buy at the ask price. The difference between the ask and bid price is the spread.
Buying Rate
It is known as the rate at which the investor can buy the instrument to be invested. The buying rate is always higher than the selling rate when quoted by the broker.
Broker
In the foreign exchange market, it is the person or institution that brings the buyer and seller together and earns commission income between these two parties. The broker does not take on market risk.
Bear Market
A bear market is a general decline in the market over a period of time. It includes a transition from high investor optimism to general investor fear and pessimism. A bear market is typically defined as a 20% or more decline from recent highs.
Bull Market
A bull market is a period in which prices of financial instruments are rising or are expected to rise. It is associated with high investor confidence and expectations of continued strong results.
Bid Price
The bid price is the highest price a buyer is willing to pay for an asset. In forex, you sell at the bid price. The bid is always lower than the ask price.
Compound Interest
Compound interest is the addition of interest to the principal sum of a loan or deposit. It is the result of reinvesting interest so that interest in the next period is then earned on the principal sum plus previously accumulated interest.
CFD (Contract for Difference)
A CFD is a financial agreement between a trader and a broker to exchange the difference in value of an asset between when the contract is opened and when it is closed. CFDs allow traders to speculate on price movements without owning the underlying asset.
Leverage
Leverage is a system that enables traders to take positions in financial markets with less capital but greater volume. For example, if the highest leverage ratio used is 1:200, a transaction of $200,000 can be made with capital of just $1,000. Revenue and loss are calculated over the full transaction volume.
Lot
A lot is the standardized unit of measurement in forex trading. A standard lot equals 100,000 units of the base currency. Mini lots (10,000 units) and micro lots (1,000 units) are also commonly used.
Liquidity
Liquidity refers to how easily an asset can be bought or sold without affecting its price. The forex market is the most liquid financial market in the world, with over $6 trillion traded daily.
Margin
The deposit required to open or maintain a position. Margin can be either 'free' or 'used'. Used margin is the amount being used to hold an open position, whereas free margin is the amount available to open new positions.
Open Position
It means that the trader has any role within the foreign exchange market. For example, if the investor is buying or selling in GBPUSD parity, this individual has an open position.
Pip
A pip (percentage in point) is the smallest price movement in a currency pair. For most pairs, this is 0.0001. Pips are used to express profits and losses, as well as spread values.
Spread
The spread is the difference between the buy (ask) and sell (bid) price of a currency pair. It represents the broker's fee and is measured in pips. Tight spreads mean lower trading costs.
Stop Loss
A stop loss is a risk management order that automatically closes a trade when a specified price level is reached, limiting potential losses. Setting stop losses is a fundamental part of any trading strategy.
Swap (Rollover)
A swap or rollover is the interest paid or earned for holding a position overnight. If you hold a position past the end of the trading day, you either pay or receive swap based on the interest rate differential between the two currencies in the pair.
Slippage
Slippage occurs when an order is executed at a different price than the one requested. It typically happens during periods of high volatility or low liquidity when the market moves rapidly.
Take Profit
A take profit is an order placed to automatically close a trade when it reaches a certain profit level. It allows traders to lock in gains without needing to monitor the market continuously.
Volatility
Volatility measures how much the price of an asset fluctuates over a given period. High volatility can create both greater profit opportunities and greater risk of loss.