Pip
The smallest unit of measurement in a currency pair, representing the change in value between two currencies.
Bid/Ask
The bid price is the price at which traders are willing to sell a currency pair, while the asking price is the price at which traders are willing to buy it.
Spread
The difference between the bid and ask price. It represents the transaction cost for entering or exiting a trade.
Margin
The amount of funds required by a trader to open and maintain a position. It acts as collateral for leveraging larger trading positions.
Leverage
The use of borrowed capital to increase the potential return to a investment. Forex trading typically offers high leverage ratios.
Stop-Loss Order
A predetermined order placed by a trader to automatically close a position at a specific price level to limit potential losses.
Take-Profit Order
An order placed by a trader to automatically close a position at a specific price level to secure profits.
Long Position
Buying a currency pair with the expectation that its value will rise over time.
Short Position
Selling a currency pair with the expectation that its value will decline over time. Traders profit from the decline in value.
Carry Trade
A strategy where traders take advantage of the interest rate differential between two currencies to generate profit by holding a higher-yielding currency while borrowing a lower-yielding currency.
Bull Market
A financial market characterized by a sustained upward trend in prices, typically accompanied by investor optimism, confidence, and increasing buying activity.
Bear Market
A financial market characterized by a sustained downward trend in prices, typically accompanied by investor pessimism, negative sentiment, and increasing selling pressure.
Resistance
A price level or zone where an asset's upward movement is expected to face selling pressure, potentially causing a reversal or slowdown in price appreciation.
Support
A price level or zone where an asset's downward movement is expected to encounter buying interest, potentially leading to a rebound or halt in price decline.
Volatility
The measure of price fluctuations or variability of an asset. Higher volatility indicates larger price swings, while lower volatility suggests more stable price movements.
Liquidity
The ease with which an asset can be bought or sold in the market without causing significant price movement. High liquidity implies ample trading activity and tight bid-ask spreads.
Candlestick Chart
A type of chart used to represent the price movements of an asset. Each "candlestick" visually displays the opening, closing, high, and low prices over a given period, often depicted in different colours to indicate bullish or bearish price action.
Moving Average
A commonly used technical indicator that calculates the average price of an asset over a specific period. It helps smooth out price fluctuations and identifies trends.
Breakout
The price movement of an asset when it surpasses a significant level of resistance or support. Breakouts are often seen as potential signals of a new trend or price acceleration.
