FOREX BASIC TERMINOLOGY


To get a better understanding of how the forex market works it is essential to know some FX terminologies. Have fun learning with our forex glossary.
Settlement
The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another
Short Position
An investment position that benefits from a decline in market price. When one sells a currency their position is short.
Spot/Next
A currency deposit transaction or the simultaneous purchase and sale of currency, or vice versa by means of swap for spot value day against the next working day.
Spot Price
The current market price. Settlement of spot transactions usually occurs within two business days.
Spot (Rate)
In FX Markets, Spot refers to the cash price without interest factored in.
Spot Trade
When you trade foreign exchange you are always quoted a spot price 2 business days in advance. This is under normal conditions where there are no bank holidays in the traded currencies countries or is not over a weekend.
Spread
The difference between the bid (buy) and offer (ask, sell) prices; in other words the spread is the commission that the brokerage house makes on each trade. This can vary widely between currencies and between brokerage firms. For example, USD/JPY may bid at 131.40 and ask at 131.45, this five-pip spread defines the trader's cost, which can be recovered with a favorable currency move in the market.
Standard Lot
A standard lot is the equivalent to 100,000 units of the base currency in a forex trade. A standard lot is similar to trade size. It is one of the three commonly known lot sizes; the other two are mini-lot and micro-lot.
Sterling
Slang for British Pound.
Stop Loss Order
Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.
Stochastics Oscillator
This technical analysis indicator is based on the premise that during an upward trading market, prices tend to close near their high, and during a downward trading market, prices tend to close near their low.
Support Levels
A term used in technical analysis indicating a specific price level at which a currency will have the inability to cross below. Recurring failure for the price to move below that point produces a pattern that can usually be shaped by a straight line. It is the opposite of Resistance levels.
Swap
A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.
Swift
Society of Worldwide Interbank Financial Telecommunications. It is a dedicated computer network that is set up to support fund transfer messages between member banks worldwide

PACKED WITH THE KNOWLEDGE OF THE BASIC TERMS, YOU ARE ONE STEP AHEAD IN MAKING YOUR TRADING JOURNEY A PROSPEROUS ONE.