Investopedia forex

Forex (FX) Definition and Uses


investopedia forex

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Investopedia Forex

Taking a long position on a product. Dollar pair. Cable earned its nickname because the rate was originally transmitted to the US via a transatlantic cable beginning in the mid s when the GBP was the currency of international trade. Call option A currency trade which exploits the interest rate difference between two countries.

By selling a currency with a low rate of interest and buying a currency with a high rate of interest, the trader will receive the interest difference between the two countries while this trade is open. Candlestick chart A chart that indicates the trading range for the day as well as the opening and closing price. If investopedia forex open price is higher than the close price, investopedia forex rectangle between the open and close price is shaded.

If the close price is higher than the open price, that area of the investopedia forex is not shaded. Capitulation A point at the end of an extreme trend when traders who are holding losing positions exit those positions. This usually signals that the expected reversal is just around the corner. Carry trade A trading strategy that captures the difference in the interest rates earned from being long a currency that pays a relatively high interest rate and short another currency that pays a lower interest rate.

Cash investopedia forex The market in the actual underlying markets on which a derivatives contract is based. Cash price The price of a product for instant delivery; i. CBs Abbreviation referring to central banks. Central bank A government or quasi-governmental organization that manages a country's monetary policy. It allows traders to leverage their capital by trading notional amounts far higher than the money in their account and provides all the benefits of trading securities, without actually owning the product.

Chartist An individual, also known as a technical trader, who uses charts and graphs and interprets historical data to find trends and predict future movements, investopedia forex. Choppy Short-lived price moves with limited follow-through that are not conducive to aggressive trading. Cleared funds Funds that are freely available, sent in to settle a trade. Clearing The process of settling a trade. Closed position Exposure to a financial contract, such as currency, that no longer exists.

A position is closed by placing an equal and opposite deal to offset the open position. Once closed, investopedia forex, a position is considered squared, investopedia forex. Closing The process of stopping closing a live trade by executing a trade that is the exact opposite of the open trade. Closing price The price at which investopedia forex product was traded to close a position. It can also refer to the price of the last transaction in a day trading session.

Collateral An asset given to secure a loan or as a guarantee of performance. Commission A fee that is charged for buying or selling a product. Commodity currencies Currencies from economies whose exports are heavily based in natural resources, often specifically referring to Canada, New Zealand, Australia and Russia.

Components The dollar pairs that make up the crosses i. Selling the cross through the components refers to selling the dollar pairs in alternating fashion to create a cross position, investopedia forex.

Confirmation A document exchanged by counterparts to a transaction that states investopedia forex terms of said transaction. Consolidation A period of range-bound activity after an extended price move, investopedia forex. Construction spending Measures the amount of spending towards new construction, released monthly by the U. Department of Commerce's Census Bureau.

Contagion The tendency of an economic crisis to spread from one market to another, investopedia forex. Contract The standard unit of forex trading.

Contract note A confirmation sent that outlines the exact details of the trade. Contract size The notional number of shares one CFD represents. Controlled investopedia forex A position which has a limited risk because of a Guaranteed Stop. Corporate action An event that changes the equity structure and usually share price of a stock. For example, acquisitions, dividends, mergers, splits and spinoffs are all corporate actions. Corporates Refers to corporations in the market for hedging or financial management purposes.

Corporates are not always as price sensitive as speculative funds and their interest can be very long term in nature, making corporate interest less valuable to short-term trading. Counter currency The second listed currency in a currency pair. Counterparty One of the participants in a financial transaction, investopedia forex.

Country risk Risk associated with a cross-border transaction, including but not limited to legal and political conditions. Crater The market is ready to sell-off hard. Cross A pair of currencies that does not include the Investopedia forex. CTAs Refers to commodity trading advisors, speculative traders whose activity can resemble that of short-term hedge funds; frequently refers to the Chicago-based or futures-oriented traders.

Currency Any form of money issued by a government or central bank and used as legal tender and a basis for trade. Currency pair The two currencies that make up a foreign exchange rate. Currency risk Investopedia forex probability of an adverse change in exchange rates. Currency symbols A three-letter symbol that represents a specific currency, investopedia forex. For example, investopedia forex, USD U, investopedia forex.

Current account The sum of the balance of trade exports minus imports of goods and servicesnet factor income such as interest and dividends and net transfer payments such as foreign aid, investopedia forex.

The balance of trade is typically the key component to the current account. D Day trader Speculators investopedia forex take positions in commodities and then liquidate those positions prior to the close of the same investopedia forex day. Day trading Making an open and close trade in the same product in one day. Deal A term that denotes a trade done at the current market price. It is a live trade as opposed to an order. Dealer An individual or firm that acts as a principal or counterpart to a transaction.

Principals take one side of a position, hoping to earn a spread profit by closing out the position in a subsequent trade with another party.

In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and investopedia forex for a fee or commission, investopedia forex. Dealing spread The difference between the buying and selling price of a contract. Defend a level Action taken by a trader, investopedia forex, or group of traders, to prevent a product from trading at a certain price or price zone, usually because they hold a vested interest in doing so, such as a investopedia forex option.

Deficit A negative balance of trade or payments. Delivery A trade where both sides make and take actual delivery of the product traded. Delta The ratio between the change in price of a product and the change in price of its underlying market. Depreciation The decrease in value of an asset over time, investopedia forex.

Derivative A financial contract whose value is based on the value of an underlying asset. Some of the most common underlying investopedia forex for derivative contracts are indices, equities, commodities and currencies.

Devaluation When a pegged currency is allowed to weaken or depreciate based on official actions; the opposite of a revaluation. Discount rate Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Investopedia forex Bank.

Divergence In technical analysis, a situation where price and momentum move in opposite directions, such as prices rising while momentum is falling. Divergence is considered either positive bullish or negative bearish ; both kinds of divergence signal major shifts in price direction, investopedia forex. Divergences frequently occur in extended price moves and frequently resolve with the price reversing direction to investopedia forex the momentum indicator.

Divergence of MAs A technical observation that describes moving averages of different periods moving away from each other, which generally forecasts a price trend. Dove Dovish refers to data or a policy view that suggests easier monetary policy or lower interest rates.

The opposite of hawkish. Downtrend Price action consisting of lower lows and lower highs. E European Central Bank, the central bank for the countries using the euro. Economic indicator A government-issued statistic that indicates current economic growth and stability. Euro The currency of the Eurozone. European session — London. Eurozone labor cost index Measures the annualized rate of inflation in the compensation and benefits paid to civilian workers and is seen as a primary driver of overall inflation.

It measures overall economic health by combining ten leading indicators including average weekly hours, new orders, investopedia forex, consumer expectations, housing permits, stock prices and interest rate spreads.

EX-dividend A share bought in which the buyer forgoes the right to receive the next dividend and instead it is given to the seller. These time periods frequently see an increase in activity as option hedges unwind in the spot market. Exporters Corporations who sell goods internationally, which in turn makes them sellers of foreign currency and buyers of their domestic currency.

Extended A market that is thought to have traveled too far, too fast. F Factory orders The dollar level of new orders investopedia forex both durable and nondurable goods. This report is more in depth than the durable goods report which is released earlier in the month, investopedia forex. Fill When an order has been fully executed.

Fill or kill An order that, if it cannot be filled in its entirety, will be cancelled, investopedia forex. First in first out FIFO All positions opened within a particular currency pair are liquidated in the order in which they were originally opened, investopedia forex. Typically these times are investopedia forex with market volatility.


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investopedia forex


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