Terms and Educational Resources for Forex Professionals, Traders, Investors and Beginners on ForexDictionary.com from ForexDictionary.com

Bar Chart

noreply@ForexDictionary.com — Sun, 19 Feb 2012 21:50:10 GMT

Term Definition: A bar chart is a graphical representation of a currency pairs price action that displays the open, high, low and close for a given period of time. Bar charts display price action during a time interval in the following way:

A horizontal line on the left of the bar represents the opening price
A horizontal line on the right of the bar represents the closing price
The top of the vertical bar represents the high
The bottom of the vertical bar represents the low

A bar chart is also called an OHLC chart, referring to the fact that it displays the opening, high, low and close.

Line Chart

noreply@ForexDictionary.com — Sun, 19 Feb 2012 21:46:45 GMT

Term Definition: A line chart is a basic type of forex chart that plots the closing price for each interval and connects all the data points with a line. Line charts can be set up to display the average price instead of the closing price, or multiple lines can be plotted to show the open, close and average. Line charts are most often used to evaluate long-term correlations between the price action of two currency pairs or a currency pair and some other variable like oil prices or gold prices.

Cross Currency Pair

noreply@ForexDictionary.com — Sun, 12 Feb 2012 21:55:52 GMT

Term Definition: Cross currency pairs are currency pairs that do not have the U.S. dollar as either the base or quote currency. Because of the central role the U.S. dollar played in the Bretton Woods agreement and the power of the U.S. economy, many traders understandably focus on currency pairs containing the dollar. That said, cross currency pairs are no longer considered obscure, with the EUR/JPY and EUR/GBP rounding out the most active pairs in the world.

Gold

noreply@ForexDictionary.com — Sun, 12 Feb 2012 21:51:31 GMT

Term Definition: Gold is a precious metal that plays an important role in world markets. Scientifically speaking, gold is an element just like any other, but its value to people goes far beyond that. Along with being useful in manufacturing and jewelry, gold is perceived as a hedge against inflation.

Oil

noreply@ForexDictionary.com — Sun, 12 Feb 2012 21:49:36 GMT

Term Definition: Oil is the common way of referring to petroleum, a mixture of hydrocarbons that humans burn for energy. Although it is naturally occurring, the scarcity of oil has made it a valuable commodity. Countries with large deposits of oil often reap economic benefits when the worldwide price of oil increases.

Oil is also referred to as crude oil or simply crude.

Sovereign Debt

noreply@ForexDictionary.com — Sun, 12 Feb 2012 21:46:18 GMT

Term Definition: Sovereign debt refers to government bonds that are issued in an international currency in order to raise funds from foreign investors. Sovereign debt and government debt are often confused because they are both intended to raise funds for a nation’s government to create infrastructure, fund programs and so on. The primary difference is that government bonds are marketed to citizens of the issuing nation in the currency of that nation, whereas sovereign debt is marketed to the international investing community in an international currency (the Euro, the U.S. dollar and so on).

Sovereign bonds are the main form sovereign debt takes.

Time Frame

noreply@ForexDictionary.com — Wed, 25 Jan 2012 22:48:53 GMT

Term Definition: Time frame refers to the period that a forex trader chooses to operate in. The time frames in forex can encompass seconds, minutes, hours, days or months. Currency traders may use multiple time frames to analyze and track a trade or they may just stick to one.

Time frame is also written as timeframe.

Online Forex Trading

noreply@ForexDictionary.com — Sun, 22 Jan 2012 18:36:30 GMT

Term Definition: Online forex trading refers to the buying and selling of currencies over an Internet connection. The majority of forex trading is now done online. That said, traders can still use phone systems out of preference or to trade if their connection fails.

Professional Forex Trader

noreply@ForexDictionary.com — Sun, 22 Jan 2012 18:34:48 GMT

Term Definition: A professional forex trader is an individual who earns the majority of their income from currency trading. Essentially, an individual currency trader who makes enough in profits to support himself (or herself) is considered a professional forex trader. A trader employed by an organization like a bank and trading on their behalf in return for a salary is also considered a professional forex trader even though the compensation is not directly related to profits and losses.

Headline News

noreply@ForexDictionary.com — Fri, 06 Jan 2012 12:49:51 GMT

Term Definition: Headline news is a slang term that refers to any news event that has an impact on the financial markets. Headline news could be an expected event like a scheduled economic release or an unexpected one like a natural disaster. Forex traders watch for headline news in order to trade the market reaction.

Hyperinflation

noreply@ForexDictionary.com — Fri, 06 Jan 2012 12:47:55 GMT

Term Definition: Hyperinflation refers to a period of rapid inflation in a nation’s currency. Hyperinflation can quickly erode the purchasing power of a nation’s currency, thereby forcing the citizens to look for alternative currencies. Hyperinflation can be extremely damaging to a nation’s economy and may result in a currency replacement.

Killer Trade

noreply@ForexDictionary.com — Fri, 06 Jan 2012 12:45:58 GMT

Term Definition: A killer trade is a slang term that describes a very profitable trade. There is no universal measure that says what a killer trade is in forex. A killer trade also depends on the timeframe the trader is working in. For short term traders, a killer trade may be anything over 20 pips. For long term traders, that line may be at 50 pips or more.

Mrs. Watanabes

noreply@ForexDictionary.com — Fri, 06 Jan 2012 12:43:58 GMT

Term Definition: Mrs. Watanabes is a slang term to refer to the large number of Japanese housewives who have taken up currency trading. Japanese households have some of the largest savings in the world, making the activity of these women a force on the global market. Japanese traders have long been a powerhouse in forex, but the Mrs. Watanabes are unique in that they tend to trade part-time while carrying out day-to-day domestic chores.

The Mrs. Watanabes are also referred to as the Japanese housewives.

Junk Currency

noreply@ForexDictionary.com — Fri, 06 Jan 2012 12:41:30 GMT

Term Definition: Junk currency is a slang term for the money of a nation that is seen to be inflating or otherwise destroying the purchasing power of that money. The term junk currency implies that the currency is losing value rapidly and will soon be worthless. Some people believe this term applies to all fiat currencies because of the fact that they are not backed by hard assets like gold.

Unsterilized Intervention

noreply@ForexDictionary.com — Fri, 06 Jan 2012 12:39:31 GMT

Term Definition: An unsterilized intervention refers to a situation where a nation’s central bank directly buys or sells its own currency. An unsterilized intervention is a clear attempt by a nation to influence the value of its currency. An unsterilized intervention is in contrast to a sterilized intervention, in which offsetting instruments are used to subtly influence currency rather than direct buying or selling.

An unsterilized intervention is also known as a naked intervention.

News Trader

noreply@ForexDictionary.com — Fri, 06 Jan 2012 12:35:24 GMT

Term Definition: A news trader is a currency trader who primarily trades around important events. News traders can pick and choose their preferred news, but some common examples include economic releases, political elections and so on. News traders may enter a position prior to the announcement or at anytime during the market reaction.

Noise Trader

noreply@ForexDictionary.com — Fri, 06 Jan 2012 12:33:04 GMT

Term Definition: A noise trader is a currency trader who makes trades purely on technical signals or market activity. The term noise trader comes from the stock trading world and is usually used to describe an investor who buys a stock without looking at the fundamentals. In forex trading, however, the majority of traders are noise traders in that they trade using technical analysis and trend reading tools.

Offshore Forex Broker

noreply@ForexDictionary.com — Thu, 05 Jan 2012 23:46:39 GMT

Term Definition: An offshore forex broker is a broker that is located in a different country than the trader opening an account. A trader may choose an offshore forex broker for tax or regulatory reasons. To open an account with an offshore forex broker, a trader may need to have an address within that country.

Overnight Position

noreply@ForexDictionary.com — Thu, 05 Jan 2012 23:44:24 GMT

Term Definition: An overnight position refers to a situation where a day trader chooses to keep a position open at the end of the trading session. Generally speaking, most day traders exit all their positions within a single day’s trading session and then start fresh the next day. However, a day trader may keep an overnight position if he believes the trend will continue to move strongly in the direction he is trading.

An overnight position is sometimes referred to as a one night stand in trading slang.

Unrealized Profit

noreply@ForexDictionary.com — Thu, 05 Jan 2012 23:42:36 GMT

Term Definition: An unrealized profit refers to a gain in an open position. Until the position is closed, the gain is considered to be unrealized profit as opposed to a realized profit. Unrealized profits are also referred to as paper profits.

Simple Moving Average

noreply@ForexDictionary.com — Thu, 05 Jan 2012 23:40:21 GMT

Term Definition: A simple moving average (SMA) is a technical analysis tool used by forex traders to summarize the price action of currency pair over a specific period of time. The simple moving average is calculated by adding up the closing prices and dividing by the number of periods. For example, a 5 period SMA on a 1-hour chart would be the closing prices for the last five hours added together divided by 5. A simple moving average can be calculated for any period, but the most common are 5, 10, 15, 20, 30, 50, 60, 200 - basically nice round figures.

Trading Desk

noreply@ForexDictionary.com — Thu, 05 Jan 2012 23:38:09 GMT

Term Definition: A trading desk is a division within a financial institution that is dedicated to buying and selling a particular type of investment. The forex trading desk at a financial institution is sometimes called a currency trading desk. The forex trading desk handles all the forex trades made by that institution.

Trading Psychology

noreply@ForexDictionary.com — Thu, 05 Jan 2012 23:35:55 GMT

Term Definition: Trading psychology refers to all the human impulses that have an effect on the forex market. Trading psychology is not a true field of academic study, but some traders pay as much attention to the thought processes of other traders as they do to market indicators in hopes of finding a trading edge.

Trading Strategy

noreply@ForexDictionary.com — Thu, 05 Jan 2012 23:31:17 GMT

Term Definition: A trading strategy is a set of defined rules that tell a trader how to enter and exit a trading position. A forex trading strategy is usually based around a particular style, such as swing trading or scalping. Once a trader know the type of trading he wants to do, he can create different trading strategies to fit that style.

South Korean Won

noreply@ForexDictionary.com — Wed, 04 Jan 2012 23:32:15 GMT

Term Definition: The South Korean won (KRW) is the official currency of South Korea. The won was one of many Asian currencies that were once pegged to the U.S. dollar. The won was allowed to float in the 1990s.

Swedish Krona

noreply@ForexDictionary.com — Wed, 04 Jan 2012 23:29:38 GMT

Term Definition: The Swedish krona (SEK) is the official currency of Sweden. It was originally part of a larger Scandinavian Monetary Union, including Denmark and Norway. The monetary union disolved following World War I, but the krona remained as Sweden’s national currency. The krona has been a fairly stable currency due to the overall stability of Sweden as a nation.

Swing Trader

noreply@ForexDictionary.com — Wed, 04 Jan 2012 23:27:12 GMT

Term Definition: A swing trader is a type of forex trader who attempts to profit from short to medium term trends in a currency pair’s price action. A swing trader generally works on a longer timeframe than short-term traders, but a shorter timeframe than long-term traders. Swing traders change their trading timeframe based on the perceived strength of the trend they are trading.

Systematic Risk

noreply@ForexDictionary.com — Wed, 04 Jan 2012 23:23:26 GMT

Term Definition: Systematic risk refers to the risks that are an inevitable part of the market and cannot be eliminated. Systematic risk refers to events and occurrences that affect the market as a whole. Systematic risks in forex trading include wars, financial crises and so on.

Take Profit Order

noreply@ForexDictionary.com — Wed, 04 Jan 2012 23:20:19 GMT

Term Definition: A take profit (T/P) order is a forex trading order that is executed when a preset level is reached. The take profit order is usually entered as a specific number of pips or price level. If the currency pair reaches that level, the order is executed and the position is closed out at a profit.

Weekly Chart

noreply@ForexDictionary.com — Wed, 04 Jan 2012 23:10:32 GMT

Term Definition: A weekly chart is a chart that displays the price action of a currency pair in one week intervals. This means that each data point, whether a bar, candlestick or line, will contain one trading week’s price data (high, low, open and close). The weekly chart is most useful in identifying longer-term formations and trends.