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- A -
Automated Forex Trading : a method of trading foreign currencies with a computer program that is based
on a set of analyses that helps determine whether to buy or sell a currency pair at any one time.
- B -
Bar charts : a type of chart that consists of four significant points. the high and the low prices,
which form the vertical bar ; the opening price, which is marked with a horinzontal line to the left of the bar ; and
the closing price, which is marked with a little horinzontal line to the right of the bar.
Base Currency : the first currency quoted in a currency pair on forex. It is also typically considered
the domestic currency or accounting currency. For accounting purposes, a firm may use the base currency to represent
all profits and losses. (For example, looking at GBP/USD pair, GBP is the base currency and USD is the quote currency).
Back testing: a method for checking the potential profitability of a trading system by applying it to historical data.
Bearish: in stocks, bearish means that the price of a stock is going down (or you think it will go down). Since forex is traded in pairs, bearish means the price of that pair is going down (or you think it will go down). If you are bearish on the EUR/USD, you think the EUR will go down vs. the USD. This makes you bearish on the Euro and Bullish on the US Dollar.
A candlestick where the closing price is below the opening price is sometimes called a bearish candle. A general downtrend in a price is a bearish market.
BoE: Bank of England. Controls the interest rate of the British Pound Sterling (GBP) and monitors the monetary policies of the United Kingdom and other territories and countries that have currency pegged to the pound in order to keep that currency stable.
Bullish: in stocks, bullish means that the price of a stock is going up (or you think it will go up). Since forex is traded in pairs, bullish means the price of that pair is going up (or you think it will go up). If you are bullish on the EUR/USD, you think the EUR will go up vs. the USD. This makes you bullish on the Euro and Bearish on the US Dollar.
A candlestick where the closing price is above the opening price is sometimes called a bullish candle. A general uptrend in a price is a bullish market.
Buy Limit: a pending order placed to buy a currency pair if the price falls to a certain level. You hope that if the price goes down to this level, that the price will then reverse and rise.
Buy Stop: a pending order placed to buy a currency pair of the price rises to a certain level. You hope that if the price goes up to this level, that the price will continue to increase.
- C -
Cable : used to refer to either the GBPUSD currency pair or just to the GBP. The name comes from the earliest form of electronic currency exchange - The dollar and pound were traded over the transatlantic cable.
Candlestick charts : a type of chart that consists of four major prices : high, low, open and close. The body (jittai) of the candlestick bar is formed by the opening and the closing prices. To indicate that the opening was lower than the closing, the body of the bar is left blank. If the currency closes below its opening, the body is filled. The rest of the range is marked by two "shadows" : the upper shadow (uwakage) and the lower shadow (shitakage).
Channel line : a parallel line than can be traced against the trendline, connecting the significant peaks in an uptrend, and in the significant troughts in a downtrend.
Consolidation : when the price of a currency pair seem to "settle" into a relatively narrow range after a strong trend or after a highly volatile period.
CPI: Consumer Price Index. This is a measure of retail prices of goods and services. This can also be called the "cost of living" index.
Generally, if the released number is greater than the forecast number, that is good for the value of the nation's currency. One of the reasons for this is that the CPI is a direct measure of inflation, and higher inflation often leads to increased interest rates.
Cross Currency : a pair of currencies traded in forex that does not include the U.S. dollar. One foreign
currency is traded for another without having to first exchange the currencies into American dollars. (for example,
EUR/GBP, EUR/JPY, GBP/CHF, EUR/CHF).
Cross Rate : the currency exchange rate between two currencies, both of which are not the official
currencies of the country in which the exchange rate quote is given in. This phrase is also sometimes used to
refer to currency quotes which do not involve the U.S. dollar, regardless of which country the quote is provided
in.
Currency : a generally accepted form of money, including coins and paper notes, which is issued by a
government and circulated within an economy. Used as a medium of exchange for goods and services, currency is the
basis for trade.
Currency Pair : The quotation and pricing structure of the currencies traded in the forex market: the
value of a currency is determined by its comparison to another currency. The first currency of a currency pair is
called the "base currency", and the second currency is called the "quote currency". The currency pair shows how
much of the quote currency is needed to purchase one unit of the base currency.
Currency Trading Platform : a type of trading software used to help currency traders with forex trading
analysis and trade execution. Currency trading platforms provide charts and order-taking methods. As with trading
platforms used for trading other securities like stocks or futures, most can differ greatly and can vary in cost.
Currency Trading Software : trading software to help the currency trader with forex trading analysis and
the execution of trades. Currency trading software provides charts and order-taking methods, which are usually free
of charge when a trading account is opened with a forex broker.
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Discretionary trading : Discretionary trading relies on a person's judgement to enter and exit investments. Descretionary traders make decisions that are based on personal knowledge and circumstances.
Daily Chart : Daily charts display all of the price movement for the period and are typically used by
day traders to implement short-term strategies. Because the forex operates 24 hours a day, there is technically no
stoppage of trading between one trading day and the next as there is in other markets. As a result, the convention
is to consider a forex day to be from 5pm EST to the same time on the following day, and most daily charts are
displayed this way.
- E -
ECB : European Central Bank. Controls the interest rate of the Euro and monitors the monetary policies of those countries in the European Union that use the Euro in order to keep that currency stable.
EMA: Exponential Moving Average. Similar to an SMA, except that exponential moving average give more weight to recent values and less weight to older values. This allows exponential moving averages to react more quickly than SMAs in the event of sudden shifts in a trend.
EUR/USD (Euro/U.S. Dollar) : the abbreviation for the Euro and U.S. dollar (EUR/USD) currency pair or cross. The currency pair tells the reader how many U.S. dollars (the quote currency) are needed to purchase one Euro (the base currency).
Trading the EUR/USD currency pair is also known as trading the "Eurus".
EUR/JPY (Euro/Japanese Yen) : the abbreviation for the Euro and Japanese Yen (EUR/JPY) currency pair or cross. The currency pair tells the reader how many Japanese Yen (the quote currency) are needed to purchase one Euro (the base currency).
Exchange Rate : the price of one country's currency expressed in another country's currency. In other words, the rate at which one currency can be exchanged for another. For example, the higher the exchange rate for one euro in terms of one yen, the lower the relative value of the yen.
Expectation/Expected : for most news announcements, there is an expected number. This expectation is the average taken from a number of expert news analysts.
- F -
Fed: short for the Federal Reserve System, which is the central bank of the United States. Has a Board of Governors (headed by Ben Bernake) in Washington, DC and 12 Federal Reserve Banks scattered across the US.
Fibonacci Retracements: are points which are fractionally related to the immediately previous move, where frequently a stop and reversal will occur in the retracement of that move. These fractions are of course Fibonacci Ratios.
The most common ratios used in trading for retracements are 23,6%, 38,2%, 50%, 61,8% and 76,4% with 38,2% and 61,8% holding the greatest weight with most technicians.
These of course can be completely ignored by the market and a retracement reverses at some other point or no reversal takes place and instead of a retracement the entire previous move is overdone with a move in the complete opposite direction now shown.
Due to those unknowns other technical approaches are often combined for greater reliability.
FOMC: Federal Open Market Committee. Consists of the Fed Board of Governors plus 5 of the 12 Federal Reserve Bank presidents.They set the key interest rates for the USA, and also control the money supply.
Forex : the market in which currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world.
Forex account : the type of account a forex trader opens with a retail forex broker. Forex accounts come in many forms, but the first that is opened is often the forex demo account. After the trader has tried out demo accounts with a few different dealers, a funded account would be the next step. Micro accounts, mini accounts, standard accounts and managed accounts are the most common types of funded accounts.
Forex charts : a charting package that allows a trader to view historical currency exchange rates. Currency charts are provided within forex charting software, which usually comes free of charge when a trading account is opened with a forex broker. As with charts used for trading other securities, like stocks or futures, they are used primarily by the technical analyst, or chartist.
Forex market : the market in which participants are able to buy, sell, exchange and speculate on currencies. The forex markets is made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The currency market is considered to be the largest financial market in the world, processing trillions of dollars worth of transactions each day.
Forex signal system : a set of analyses that a forex trader uses to determine whether to buy or sell a currency pair at any given time. Forex signal systems could be based on technical analysis charting tools or news-based events. The day trader's currency trading system is usually made up of a multitude of signals that work together to create a buy or sell decision. Forex trading signals are available for free, for a fee or are developed by the traders themselves.
- G -
GBP/JPY (Britsh pound/Japanese Yen) : the abbreviation for the British pound and Japanese Yen (GBP/JPY) currency pair or cross. The currency pair tells the reader how many Japanese Yen (the quote currency) are needed to purchase one British pound (the base currency).
GBP/USD (British Pound/U.S. Dollar) : the abbreviation for the British pound and U.S. dollar (GBP/USD) currency pair or cross. The currency pair tells the reader how many U.S. dollars (the quote currency) are needed to purchase one British pound (the base currency).
Trading the GBP/USD currency pair is also known as trading the "Cable".
G20 : The G20 (Group of 20) is the central bank governors and finance ministers of 19 major countries plus the EU. They are deeply involved in international trade and finance, much to the help or hindrance of members.
Member counties are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States of America and the EU taking the 20th slot.
- H -
- I -
Interest rate parity : a theory that the interest rate differential between two countries is equal to the differential between the forward exchange rate and the spot exchange rate. Interest rate parity plays an essential role in foreign exchange markets, connecting interest rates, spot exchange rates and foreign exchange rates.
International currency markets : the market in which participants from around the world are able to buy, sell, exchange and speculate on different currencies. International currency markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, retail forex brokers and investors.
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- K -
Kiwi : Nickname for the New Zealand Dollar (NZD). Can also refer to the NZDUSD pair.
Kiwis are small, flightless birds native to New Zealand. Kiwi can be used as an adjective to refer to things from New Zealand. Kiwi can also refer to a person from New Zealand. (See Aussie to see how that term differs in use.)
- L -
Liquidation level : in forex trading, the specific value of a trader's account below which the liquidation of the trader's positions is automatically triggered and executed at the best available exchange rate at the time. The liquidation level is expressed as a percentage value of assets. If a forex trader's positions go against him or her, his or her account will eventually reach the liquidation level, unless the trader contributes further margin to top up his or her account.
Liquidity : something that has liquidity can be easily bought or sold without having a significant affect on market price. This is due to the high volume of trading activity. In forex, you want your broker to have ligh liquidity. A broker tied to multiple sources of liquidity is more likely to successfully execute your open or close position command without slippage or giving you a requote.
Loonie: nickname for the Canadian Dollar (CAD). Can also refer to the USDCAD pair.
Canadians claim that this name refers to an image on their $1 coin. Non-Canadians have been known to suggest that the name refers to the mental state of anyone who would invest in Canadian Dollars.
Lot size: would be the actual amount of currency bought/sold in a trade. One standard lot would be 100,000 units of the quote currency ($100,000 for xxxUSD pairs). For standard lots of xxxUSD pairs, a one pip move is worth $10.
LPOA: short for Limited Power of Attorney. In forex trading, this is an agreement by a client to allow an account manager to trade. It should clearly spell out the compensation for the account manager.
It should also have terms requiring that all positions be closed and all trading be stopped if drawdown (from both closed trades as well as floating loss on open trades) exceeds a certain percentage of the highest balance achieved by the account in order to protect the clients account from crazed account manager induced margin call syndrome
- M -
Major pairs : the four forex pairs which are considered to be the most heavily traded in the forex market. The four major pairs are: EUR/USD, USD/JPY, GBP/USD, USD/CHF. These currency pairs are considered by many to drive the global forex market and are the most heavily traded. Although it is widely regarded that the major pairs consist of only four pairs, some believe that the USD/CAD and USD/AUD pairs should also be regarded as majors. However, these two pairs can be found in the group of pairs known as the "commodity pairs".
Managed Forex account : a type of forex account in which a money manager trades the account on a client's behalf for a fee. Managed Forex accounts are similar to hiring an investment advisor to manage a traditional investment account of equities and bonds. Returns and fees between managed accounts can vary greatly; therefore, it is important to research your options thoroughly before assigning your account to a professional manager.
Margin call : when using leveraged investments, one often trades more money than is in the account. Originally, a margin call was a phone call from a broker notifying a trader that more money needed to be deposited when price moved too far against a trader's position and the equity in the account became too small to sustain the minimum margin requirements to maintain open positions.
Most forex brokers don't place this sort of phone call. When a forex account has too little equity to keep all the trades open, the broker usually automatically closes some or all of the open trades in the account.
Both the account leverage and the minimum margin requirements can affect when a margin call will happen. Read and understand your trading agreement with your broker.
Traders who exercise proper risk management can still lose money, but will rarely need to worry about margin calls.
Market Order : buy or sell a currency pair at the current price. Sometimes a trading signal will say to buy or sell a pair "at market."
Micro forex account : a type of forex account that allows the trader to enter positions that are one-hundredth the size of the standard lot of 100,000 units. A one-pip change in a currency pair (based in U.S. dollars), is equal to $0,10 when trading a micro lot, compared to $10 for a standard-lot trade. Micro lots are available to trade if you open a micro account with a forex dealer.
Mini forex account : a type of forex account that allows the trader to enter positions that are one-tenth the size of the standard lot of 100,000 units. A one-pip change in a currency pair (based in U.S. dollars), is equal to $1 when trading a mini lot, compared to $10 for a standard-lot trade. Mini lots are available to trade if you open a mini account with a forex dealer.
Monetary policy : the actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves).
Monetary Reserve : a nation's assets in foreign currency and/or commodities like gold and silver, which are used to back up the national currency. Monetary reserves also provide a cushion for executing central banking functions like adding to the money supply and settling foreign exchange contracts in local currencies.
Moving Average : a common technical indicator, consisting of the average closing value of the currency pair over a selected number of time periods. For example, MA (12) would indicate an average of the closing price of the last 12 time periods.
Moving averages are considered lagging indicators. The shorted the number of time periods used, and the shorter the time frame, the less lag there is, but this also increases the amount of statistical noise.
Some simple trading strategies use a crossover between a shorter moving average and a longer moving average.
- N -
NFP : Nonfarm Payrolls or Nonfarm Employment Change. Released by the US Bureau of Labor Statistics. This covers all US workers employed by any business, with a few exceptions (like farm workers).
This is generally considered to be the biggest news announcement of the month for the USD. If the number is rising over time, this is generally good for the dollar. If the number comes out higher than expected, this is also good for the dollar.
Unless there is a holiday, this report typically comes out on the 1st Friday of the month.
- O -
OCO : stands for One Cancels Other or Order Cancels Other. This is a way to place 2 orders where if one executes the other gets canceled. This can be used if a trader expects price to break out, but isn't certain which direction the breakout will occur in. In these circumstances, the trader could place a pending buy order (buy stop) above the current price, a pending sell order (sell stop) below it, and connect the orders as OCO. As soon as one order triggers, the other gets canceled.
OHLO : method of displaying the Spot price on charts over a time period. Stands for Open High Low Close.
Takes the form of a vertical line or bar. At the start (Open) of the time period the price level is indicated by a short horizontal line from the left. As the price rises a vertical line is drawn the top of which is the High point reached during the period. Similarly the line extends down to the low point during the period. At the Close or end of the period a short horizontal line is placed to the right of the vertical bar indicating the price at close. Thus each bar records all salient points through which the price has traveled during the period. See also Candles which show the same data in a similar but some consider more useful manner.
Overnight Trading : the buying or selling of currencies between 9pm and 8am local time. This type of transaction occurs when an investor takes a position at the end of the trading day in a foreign market that will be open while the local market is closed. The trade will be executed sometime that evening or early morning.
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Pending Order : an order that will not execute until the price reaches a level selected by the trader.
Pip : the smallest price change that a given exchange rate can make. Since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point - for most pairs this is the equivalent of 1/100 of one percent, or one basis point.
PPI : Producer Price Index. This is a measure of wholesale prices of goods and services.
Generally, if the released number is greater than the forecast number, that is good for the value of the nation's currency. One of the reasons for this is that an increase of the PPI is considered inflationary, and higher inflation often leads to increased interest rates.
Profit Target : usually, when entering a trade, you should have some idea of how far you expect price to move in your favor before reversing. Based on this, you would set a profit target for your trade. (If you don't expect price to move in your favor, why would you enter the trade?)
You can set your trade to automatically close when the profit target is reached (see Take profit), close your trade manually when it reaches your target, or manage your trade in other ways (adjust stops, scale in, scale out, etc.).
Pulling the Triger : in trading, this means to push the button to place your trade.
- Q -
Q/Q : Quarter to quarter, quarterly.
Quote Currency : the second currency quoted in a currency pair in forex. In a direct quote, the quote currency is the foreign currency. In an indirect quote, the quote currency is the domestic currency. Also known as the "secondary currency" or "counter currency".
- R -
RBA : Reserve Bank of Australia. Controls the interest rate of the Australian Dollar (AUD) and monitors the monetary policies of Australia in order to keep that currency stable.
RBNZ : Reserve Bank of New Zealand. Controls the interest rate of the New Zealand Dollar (NZD) and monitors the monetary policies of New Zealand in order to keep that currency stable.
Requote : the price changed between the time you send the order and the time the broker tried to execute it. You can either cancel the order or accept a worse price. This can happen with any broker during fast moving market conditions. Bad brokers will do this to steal a few pips even during very calm markets.
Resistance : is a price level (often an area, not an EXACT price) that traders tend to sell at. This often prevents price from going above this level, thus creating a "ceiling" above which the price has difficulty moving.
Note that resistance can be defined by a horizontal or slanted line. The more times price tests and fails to break through (or close beyond) resistance, the stronger the resistance level is considered to be.
Revision : a recalculation of the previously released number. The monthly released number for employment, unemployment, consumer confidence, etc., is usually just a very good estimate. The next month, whatever group or agency released the data will update (revise) the prior number, usually at the same time they release the new one. Obviously, some numbers (like an Interest Rate Statement) are not subject to revision.
Risk Analysis : the study of the underlying uncertainty of a given course of action. Risk analysis refers to the uncertainty of forecasted future cash flows streams, variance of portfolio/stock returns, statistical analysis to determine the probability of a project's success or failure, and possible future economic states. Risk analysts often work in tandem with forecasting professionals to minimize future negative unforseen effects.
Rollover : a rollover is when you do the following:
1. Reinvesting funds from a mature security into a new issue of the same or a similar security.
2. Transferring the holdings of one retirement plan to another without suffering tax consequences.
3. A charge that is incurred by Forex investors who move their positions to the following delivery date.
- S -
Sell Limit : a pending order placed to sell a currency pair if the price rises to a certain level. You hope that if the price goes up to this level, that the price will then reverse and fall.
Sell Stop : a pending order placed to sell a currency pair if the price falls to a certain level. You hope that if the price goes down to this level, that the price will continue to fall.
Slippage : You place (or close) an order at a certain price. Your broker fills your order at a worse price (the price "slips") and blames it on fast moving market conditions. Some brokers do this and only hit you for a few pips. Others will burn you for 20, 30, or even more.
SMA : Simple Moving Average. The easiest form of moving average. Just add up the selected number of most recent time frames and divide by the selected number. For example, if you had an SMA (8) on a 1 hour chart, just add up the closing values of the last 8 hours and divide by 8.
NOTE: Default values to use in most programs are closing values. This can often be customized if you prefer opening values or pivot values.
SNB : Swiss National Bank. Controls the interest rate of the Swiss Franc (CHF) and monitors the monetary policies of Switzerland in order to keep that currency stable.
Spike : a sudden, significant change in value of a currency pair, plainly visible on 1 minute or shorter timeframe charts. Spikes are often caused by news releases.
Spot Exchange Rate : The rate of a foreign-exchange contract for immediate delivery. Also known as "benchmark rates", "straightforward
rates" or "outright rates", spot rates represent the price that a buyer expects to pay for a foreign currency in another currency.
Standard forex account : a type of forex account that allows the trader to enter positions of 100,000 units. A one-pip change in a currency pair (based in U.S. dollars) is equal to $10 when trading a standard lot, compared to $1 for a mini-lot trade.
Stop Loss : a price you enter on your trading platform to limit the maximum amount of pips you can lose on an open trade. If the price moves against you and touches your stop loss, your order should close automatically (see Stopped out).
Support : is a price level (often an area, not an EXACT price) that traders tend to buy at. This often prevents price from falling below this level, thus creating a "floor" below which the price has difficulty moving.
Note that support can be defined by a horizontal or slanted line. The more times price tests and fails to break through (or close beyond) support, the stronger the support level is considered to be.
Swing High: a peak in price on a chart where the high price of a candle is higher than the candle to either side of it (sometimes two candles to either side - it depends on how your trading system defines it).
Swing Low: a low point in price on a chart where the low price of a candle is lower than the candle to either side of it (sometimes two candles to either side - it depends on how your trading system defines it).
Swissy : slang for the USD/CHF pair.
- T -
Take-profit Order (TP) : an order used by currency traders specifying the exact rate or number of pips from the current price point where to close out their current position for a profit. The rate deemed to be the level where the trader wants to take a profit is sometimes referred to as the "take-profit point".
Time Frame : Forex charts are available in different time frames. For MT4, the standard time frames available include M1 (1 Minute), M5, M15, M30, H1 (1 Hour), H4, D1(1 Day), W1(1 Week), and MN(1 Month).
A candle in each higher time frame can be though of as a combination of the candles in a lower time frame. For example, take the 60 1 minute candles from 2:00 pm until 2:59 pm, combine the data, and you'll have the 2 PM hourly candle.
Each time frame can have it's own trends. Moving to smaller timeframes is sometimes considered to be "zooming in" and moving to larger timeframes is sometimes thought of as zooming out.
Many traders will trade a specific time frame, but will check one or two timeframes down for trend changes and one or two timeframes up to see the "bigger picture".
Trailing Stop : A special form of stop loss. Exactly how this works varies some between trading platforms. For MT4, setting a trailing stop means that if a trade moved into profit by as many pips as the trailing stop, then a stop loss is set (or pre-existing stop loss is adjusted) to stay a certain number of pips behind the best price in your favor. This can be used as a way to manage a trade and try to get more profit out of it without having to personally monitor it. Note that for MT4, trailing stops are managed from your computer, not your brokerage's server. This means that if you turn off MT4 or your computer loses it's connection to the broker, the stop loss will not be adjusted any more.
Example: You open a trade with a 30 pip stop loss. Things go well and the trade moves 20 pips into profit. You set a 25 pip trailing stop loss. The moment the trade hits 26 pips profit, the stoploss moves to 1 pip in profit (might be 25 pips/0 profit - I never watched it closely enough to be sure).
If the trade goes to 30 pips profit, the stop trails up to 5 pips profit. If the trend reverses and the price moves the other way, the stop does not move unless it is hit (closing your trade at +5 pips automatically) or the price again moves farther in your favor (moving the trailing stoploss in your favor).
Using a trailing stop loss is an excellent idea if you set the stop wide enough that it doesn't get taken out by random noise in the market. Using a stop loss is a bad idea if the market suddenly goes against you and you give away the entire width of the trailing stoploss. Figuring out which of these is going prove true on a particular trade isn't easy.
Transaction Risk : the exchange rate risk associated with the time delay between entering into a contract and settling it. The greater the time differential between the entrance and settlement of the contract, the greater the transaction risk, because there is more time for the two exchange rates to fluctuate.
- U -
USD/CAD (U.S. Dollar/Canadian Dollar) : the abbreviation for the U.S. dollar and Canadian dollar (USD/CAD) currency pair or cross. The currency pair tells the reader how many Canadian dollars (the quote currency) are needed to purchase one U.S. dollar (the base currency).Trading the USD/CAD currency pair is also known as trading the "Loonie".
USD/CHF (U.S. Dollar/Swiss Franc) : the abbreviation for the U.S. dollar and Swiss franc (USD/CHF) pair or cross for the currencies of the United States (USD) and Switzerland (CHF). The currency pair shows how many Swiss francs (the quote currency) are needed to purchase one U.S. dollar (the base currency). Trading the USD/CHF currency pair is also known as trading the "Swissie".
USD/JPY (U.S. Dollar/Japanese Yen) : the abbreviation for the U.S. dollar and Japanese yen (USD/JPY) pair or cross for the currencies of the United States (USD) and Japan (JPY). The currency pair shows how many Japanese yen (the quote currency) are needed to purchase one U.S. dollar (the base currency). Trading the USD/JPY currency pair is also known as trading the "gopher".
- V -
Volatility : a measurement of the speed of change of the value of a forex pair. A highly volatile time means that the price shifts up and down more rapidly and by larger amounts than during times of low volatility. Some pairs are inherently more volatile than others.
- W -
Weak Dollar : a situation where the U.S. dollar's value is decreasing relative to one or a basket of foreign currencies. Essentially, a weak dollar means that a U.S. dollar can exchange for fewer amounts of foreign currency. The dollar may weaken due to changes in the interest rate and outlook on the U.S. economy's future.
Whipsaw : very volatile, unpredictable or counter-trend short term market activity that will take out the stops of many traders. Price appears to gain momentum in one direction and will suddenly reverse.
Wicks : is the part of a candlestick outside the body. The wick at the top shows the highest point the price reached during the period and the wick at the bottom shows the lowest point.
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- Y -
Y/Y : year to year, yearly, annual.
Yard : trading slang term for 1 Billion units. A standard lot is 100,000 units of currency, so an order with a lot size of 1 Yard would be for 10,000 standard lots.
A one pip move on 1 Yard of xxxUSD would be worth $100,000.
- Z -
ZEW : Zentrum fur Europaische Wirtschaftsforschung (Center for European Economic Research) - Issues monthly economic reports for Germany, Switzerland, and the Euro zone.
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