Forex Glossary

Average True Range—an indicator measuring market volatility based on price range over a period.

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

An expectation that prices will fall. A bearish trader believes the market will go down.

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

An expectation that prices will rise. A bullish trader believes the market will go up.

A chart element showing open, high, low, and close prices for a specific time period.

A period when price moves sideways within a range, indicating market indecision.

The decline in your account balance from its peak to a low point, usually expressed as a percentage.

Currency pairs involving one major currency and one from an emerging market economy.

Fear Of Missing Out—the anxiety that causes traders to enter trades impulsively without proper analysis.

Borrowed capital that allows you to control larger positions with less money. For example, 100:1 leverage means $1 controls $100.

An order to buy or sell at a specific price or better.

How easily a currency pair can be bought or sold without affecting the price. Major pairs have high liquidity.

Buying a currency pair with the expectation that its value will increase.

A standard unit of trading volume. A standard lot is 100,000 units of the base currency.

The most traded currency pairs, all including USD: EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, USD/CAD, NZD/USD.

The amount of money required to open and maintain a leveraged position. It acts as collateral for your trade.

An order to buy or sell immediately at the best available current price.

Currency pairs that don't include USD but involve other major currencies like EUR, GBP, or JPY.

An indicator that smooths price data to show the average price over a specific number of periods.

Taking too many trades, often driven by boredom, greed, or the need to 'be in the market.'

An order that will only execute when price reaches a specified level.

The smallest price movement in a currency pair, usually the fourth decimal place (0.0001) for most pairs.

Calculating how much of your account to risk on each trade based on your stop loss and risk tolerance.

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

A price level where selling pressure is strong enough to prevent further rise.

Making impulsive trades after a loss in an attempt to quickly recover, often leading to more losses.

A change in the overall direction of price movement, from uptrend to downtrend or vice versa.

The relationship between potential profit and potential loss on a trade. A 1:2 ratio means risking $1 to potentially make $2.

Relative Strength Index—a momentum indicator measuring the speed and magnitude of recent price changes (0-100 scale).

Selling a currency pair with the expectation that its value will decrease.

The difference between your expected entry price and the actual price at which your order is filled.

The difference between the bid (sell) and ask (buy) price. This is the cost of entering a trade.

An order to automatically close a trade at a specified price to limit potential losses.

A price level where buying pressure is strong enough to prevent further decline.

An order to automatically close a trade at a specified price to secure profits.

A written document outlining your strategy, risk management rules, and trading goals.

The general direction of price movement over time—uptrend (higher highs), downtrend (lower lows), or sideways.

The degree of price fluctuation. High volatility means larger price swings.