Trading Terms

Investopedia Referenced

ASAIN SESSION (TOKYO):

When liquidity is restored to the forex (or FX) market at the start of the week, the Asian markets are naturally the first to see action. Unofficially, activity from this part of the world is represented by the Tokyo capital markets and spans from 7pm - 4am EST (Eastern Standard Time).

AUD:

In currencies, this is the abbreviation for the Australian dollar.

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. It is sometimes referred to as the "primary currency". For example, if you were looking at the CAD/USD currency pair, the Canadian dollar would be the base currency and the U.S. dollar would be the quote currency. The price represents how much of the quote currency is needed for you to get one unit of the base currency.

CAD:

 In currencies, this is the abbreviation for the Canadian Dollar

CHF:

In currencies, this is the abbreviation for the Swiss franc.

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.

DAILY CHART:

 A graph that displays the intraday movements of a given security. This contrasts to longer term charts, such as those that show a security's movement over a period of days, months or even years. Daily charts display all of the price movement for the period and are typically used by day traders to implement short-term strategies.

DXY (U.S DOLLAR INDEX aka USDX):

A measure of the value of the U.S. dollar relative to majority of its most significant trading partners. This index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies.

EUR:

In currencies, this is the abbreviation for the euro.

EUROPEAN SESSION (LONDON):

The European session takes over in keeping the currency market active just before the Asian trading hours come to a close. This FX time zone is very dense and includes a number of major financial markets that could stand in as the symbolic capital. London has taken the honors in defining the parameters for the European session to date. Open from 3am - 12pm (noon) EST.

EXOTIC CURRENCY:

A foreign exchange term for a thinly traded currency. Exotic currencies are illiquid, lack market depth and trade at low volumes. Trading an exotic currency can be expensive, as the bid-ask spread is usually large. Exotics are not considered major currencies because they are not easily traded in a standard brokerage account. Major currencies include the U.S. dollar, Euro, Canadian dollar and Swiss franc. Examples of exotic currencies include the Thai baht, Uruguay peso or Iraqi dinari.

FOREX (FX):

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. There is no central marketplace for currency exchange; trade is conducted over the counter. The forex market is open 24 hours a day, five days a week, and currencies are traded worldwide among the major financial centers of London, New York, Tokyo, Zürich, Frankfurt, Hong Kong, Singapore, Paris and Sydney. The forex is the largest market in the world in terms of the total cash value traded, and any person, firm or country may participate in this market.

GBP:

In the currency market, this is the abbreviation for the British pound.

JPY:

This is the currency abbreviation or the currency symbol for the Japanese yen

NEW YORK SESSION:

 The Asian markets have already been closed for a number of hours by the time the North American session comes online, but the day is only halfway through for European traders. The Western session is dominated by activity in the U.S., with contributions from Canada, Mexico, and countries in South America. Open from 8am - 5pm EST. 

NZD:

In the currency market, this is the abbreviation for the New Zealand dollar.

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 1/100th of one percent, or one basis point. For example, the smallest move the USD/CAD currency pair can make is $0.0001, or one basis point. The smallest move in a currency does not always need to be equal to one basis point, but this is generally the case with most currency pairs.

PROPER RISK MANAGEMENT:

In the financial world, risk management is the process of identification, analysis, and acceptance or mitigation of uncertainty in investment decisions. Essentially, risk management occurs when an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment, such as a moral hazard, and then takes the appropriate action (or inaction) given the fund's investment objectives and risk tolerance.

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". Understanding the quotation and pricing structure of currencies is essential for anyone wanting to trade currencies in the forex market. If you were looking at the CAD/USD currency pair, the U.S. dollar would be the quote currency, and the Canadian dollar would be the base currency. Major currencies that are usually shown as the quote currency include the U.S. dollar, the British pound, the euro, the Japanese yen, the Swiss franc and the Canadian dollar.

SECURITY:

The term "security" refers to a fungible, negotiable financial instrument that holds some type of monetary value.

STOP-LOSS (SL):

A stop-loss order is an order placed with a broker to buy or sell a security when it reaches a certain price. Stop-loss orders are designed to limit an investor’s loss on a position in a security.

SYDNEY SESSION:

3 p.m. to 12 a.m. (EST)

TAKE-PROFIT (TP):

As the name suggests, take-profit orders are used to lock in profits in the event the rate moves in a favorable direction. For example, if you are long a currency pair position and believe the price will rise to a certain level, but are unsure what it will do beyond that level, placing a take-profit order at that point will automatically close out your position allowing you to lock in profit.

USD:

In currencies, this is the abbreviation for the U.S. dollar.