Forex Glossary

Average Directional Index. Measures trend strength (not direction). ADX above 25 = strong trend; below 25 = weak or ranging. Used with +DI and -DI.

See also: trend, moving average, Ichimoku Cloud

Australian Securities and Investments Commission. Regulates Australian brokers.

See also: broker, regulation

The price at which you can buy a currency pair.

See also: bid, spread

Average True Range. A volatility indicator that measures the average range of price movement over a period.

See also: volatility, stop loss

Testing a strategy on historical data to see how it would have performed.

See also: trading system, optimization

The first currency in a pair. In EUR/USD, the euro is the base currency.

See also: quote currency, pip

The price at which you can sell a currency pair.

See also: ask, spread

A volatility indicator with a middle SMA and upper/lower bands. Price near the bands suggests overbought or oversold conditions.

See also: moving average, volatility

When price moves decisively above resistance or below support, often signaling a new trend.

See also: support, resistance

A trading approach that enters when price breaks above resistance or below support. Requires confirmation to avoid fakeouts.

See also: breakout, support, resistance

A chart type showing open, high, low, and close for each period. The body and wicks convey price action.

See also: doji, hammer

Borrowing in a low-interest currency and investing in a high-interest currency to earn the interest differential.

See also: swap, interest rate

Contract for Difference. A derivative that lets you speculate on price movement without owning the asset.

See also: leverage, broker

A currency tied to commodity exports. AUD (gold, iron), CAD (oil), NZD (dairy). Tend to rise when commodity prices rise.

See also: risk-on, DXY, gold

The degree to which two currency pairs move together. Positive = move same direction; negative = move opposite.

See also: diversification, risk

Commitment of Traders report from the CFTC. Shows positioning by commercials, large speculators, and retail. Used to gauge sentiment extremes.

See also: market sentiment, fundamental analysis

Consumer Price Index. Measures inflation. Central banks watch CPI to set interest rates.

See also: inflation, fundamental analysis

Opening and closing positions within the same trading day. No overnight exposure.

See also: scalping, swing trading

A practice account with virtual money. Used to learn the platform and test strategies risk-free.

See also: live account, broker

When price moves in one direction while an indicator moves in the opposite direction. Can signal potential reversals.

See also: RSI, MACD

A candlestick with a very small body, indicating indecision. Often appears at potential reversal points.

See also: candlestick, hammer

The peak-to-trough decline in account equity. Measures the worst loss from a high point.

See also: risk management, equity

US Dollar Index. Measures the dollar against a basket of six currencies. Rising DXY = dollar strength.

See also: USD, major pairs

Electronic Communications Network. A broker type that connects traders directly to liquidity providers, often with lower spreads.

See also: broker, spread

A two-candle pattern where the second candle's body completely engulfs the first. Bullish or bearish depending on direction.

See also: candlestick, reversal

Account balance plus unrealized P&L. Your total account value at any moment.

See also: margin, drawdown

Pairs that include a major currency and an emerging market currency, e.g. USD/ZAR. Typically wider spreads.

See also: major pairs, minor pairs

A false breakout where price briefly breaks a level then reverses. Traders can get stopped out.

See also: breakout, support, resistance

Financial Conduct Authority. UK regulator for financial services. FCA-regulated brokers offer strong protection.

See also: broker, regulation

A tool that plots horizontal levels at key Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%) to identify potential support/resistance.

See also: support, resistance

Federal Open Market Committee. The Fed body that sets US interest rates. Decisions move forex markets.

See also: Fed, interest rate

Testing a strategy on live or demo data in real time before trading with real money.

See also: backtesting, demo

Financial Sector Conduct Authority. South Africa's regulator for financial services. Brokers must be FSCA-regulated.

See also: broker, regulation

Analysis based on economic data, interest rates, central bank policy, and news. Focuses on the 'why' behind currency moves.

See also: NFP, CPI, technical analysis

A jump in price between closes, often after weekend or news. Less common in forex than stocks.

See also: volatility, news

Gross Domestic Product. Measures a country's economic output. Key indicator of economic health.

See also: fundamental analysis, recession

A bullish reversal candlestick with a small body at the top and long lower wick.

See also: candlestick, doji

Opening a position to offset risk from another position. E.g. long EUR/USD and short EUR/GBP.

See also: risk management, correlation

A comprehensive indicator with five lines: Tenkan, Kijun, Senkou Span A and B (the cloud), and Chikou Span. Shows trend, momentum, and support/resistance.

See also: trend, ADX, moving average

Borrowed capital that allows you to control a larger position than your account balance. Expressed as a ratio (e.g. 100:1).

See also: margin, lot

The ease of buying or selling without moving price. Major pairs have high liquidity; exotics have lower.

See also: spread, slippage

A unit of trade size. A standard lot is 100,000 units of the base currency. Mini lots are 10,000; micro lots are 1,000.

See also: pip, leverage, margin

Moving Average Convergence Divergence. A trend-following momentum indicator with a line, signal line, and histogram.

See also: RSI, moving average

When the MACD line crosses the signal line or zero line. Bullish when MACD crosses above; bearish when below. Used for trend and momentum entries.

See also: MACD, trend

Currency pairs that include the US dollar and are most heavily traded: EUR/USD, USD/JPY, GBP/USD, USD/CHF, etc.

See also: minor pairs, exotic pairs

The amount of money required to open or maintain a leveraged position. Your broker holds this as collateral.

See also: leverage, margin call

When your broker demands additional funds because your account equity has fallen below the required margin level.

See also: margin, leverage

The collective mood of traders. Measured by COT reports, retail positioning, and options flow. Contrarians fade extremes.

See also: COT report, contrarian, fundamental analysis

A strategy that fades extremes—buying oversold, selling overbought. Works best in ranging markets when ADX is low.

See also: RSI, Bollinger Bands, overbought, oversold

Currency pairs that do not include the US dollar, e.g. EUR/GBP, EUR/JPY. Also called crosses.

See also: major pairs, exotic pairs

A line that smooths price data. SMA gives equal weight to all prices; EMA gives more weight to recent prices.

See also: MACD, trend

Non-Farm Payrolls. A key US employment report released monthly. High impact on forex markets.

See also: fundamental analysis, news

When price or an indicator (e.g. RSI) suggests buying has been exhausted. RSI above 70.

See also: oversold, RSI

When price or an indicator suggests selling has been exhausted. RSI below 30.

See also: overbought, RSI

Profit and Loss. The gain or loss on a trade or account.

See also: equity, realized

Stop and Reverse. Dots trail price—below in uptrends, above in downtrends. When price crosses the dots, the trend may have reversed. Used for trailing stops.

See also: trend, stop loss, Ichimoku Cloud

The smallest price move in a currency pair. For most pairs, one pip equals 0.0001. For JPY pairs, one pip equals 0.01.

See also: pipette, lot, spread

One-tenth of a pip. Some brokers quote to five decimal places; the last digit is a pipette.

See also: pip

Levels calculated from the previous period's high, low, and close. Pivot is the centre; R1-R3 are resistance; S1-S3 are support. Used for intraday trading.

See also: support, resistance, Fibonacci retracement

Determining how many lots or units to trade based on account size and risk tolerance.

See also: risk management, lot

Holding positions for weeks to months. Focuses on major trend moves.

See also: swing trading, trend

Proprietary trading firm. Provides capital to traders who pass evaluation. Traders keep a profit share.

See also: funded account, challenge

The second currency in a pair. In EUR/USD, the US dollar is the quote currency.

See also: base currency, pip

A price level where selling pressure tends to emerge, preventing further rise.

See also: support, breakout

Market environment where investors flee to safety. Stocks down, JPY and CHF strengthen; AUD, CAD, NZD weaken. Carry trades unwind.

See also: risk-on, safe haven, carry trade

Market environment where investors favor growth and higher-yield assets. Stocks up, AUD/CAD/NZD tend to strengthen, JPY/CHF weaken.

See also: risk-off, commodity currency, carry trade

The ratio of potential profit to potential loss on a trade. A 1:2 ratio means risking 1 unit to make 2.

See also: stop loss, take profit

Relative Strength Index. A momentum oscillator (0-100). Above 70 = overbought; below 30 = oversold.

See also: MACD, indicator

Trading when price and RSI disagree—e.g. price lower low but RSI higher low (bullish). Suggests potential reversal. Confirm with price action.

See also: RSI, divergence

Assets investors buy during risk-off. JPY and CHF are forex safe havens. Also gold and government bonds.

See also: risk-off, JPY, CHF

Adding to a winning position as price moves in your favor. Only add to winners; never add to losing positions.

See also: position sizing, scaling out, risk management

Taking partial profits at predefined targets. E.g. close 50% at 1R, let the rest run to 2R.

See also: take profit, scaling in, risk management

A trading style that aims for small profits on many quick trades. Typically uses very short timeframes.

See also: day trading, spread

Fraudulent scheme. In forex: fake brokers, guaranteed returns, signal sellers who disappear.

See also: regulation, broker

Trading hours for a region. Major sessions: Sydney, Tokyo, London, New York. Overlaps are most volatile.

See also: liquidity, volatility

The difference between expected and actual execution price. Common during volatile news events.

See also: spread, execution

The difference between the bid (sell) and ask (buy) price. The broker's compensation for executing your trade.

See also: pip, bid, ask

A momentum oscillator comparing close to the price range. %K and %D lines oscillate 0-100. Above 80 = overbought; below 20 = oversold.

See also: RSI, MACD, momentum

An order that closes your trade at a set price to limit losses.

See also: take profit, risk management

A price level where buying interest tends to emerge, preventing further decline.

See also: resistance, breakout

Overnight interest charged or paid for holding a position. Positive for high-yield currency longs; negative for low-yield.

See also: carry trade, rollover

Holding positions for days to weeks to capture larger moves. Uses daily or 4H charts.

See also: day trading, position trading

An order that closes your trade at a set price to lock in gains.

See also: stop loss, risk-reward

A stop loss that moves with price to lock in profits. E.g. move stop to breakeven when trade is 1R in profit.

See also: stop loss, take profit, Parabolic SAR

The general direction of price movement. Uptrend = higher highs and higher lows; downtrend = lower highs and lower lows.

See also: support, resistance

A strategy that trades in the direction of the prevailing trend. Enters on pullbacks to EMA or support. Cuts losses when trend breaks.

See also: trend, moving average, ADX

A line drawn along swing highs or lows to identify trend direction and potential support/resistance.

See also: trend, support, resistance

The degree of price fluctuation. High volatility means large price swings; low volatility means smaller moves.

See also: Bollinger Bands, ATR

South African Rand. The currency of South Africa. Many brokers accept ZAR deposits.

See also: FSCA, broker