Forex Glossary Definitions
A profit target is a price at which you decide to exit the market and take the profit that you have made. A profit target is generally determined ahead of time when the trader enters the market.
Consequently, draw the basic down trendline trough the widest swing (top), parallel to the channel line. Fibonacci retracements equal to 61.8%, 100%, 161.8% and 261.8% of the channel width, are drawn as potential retracement levels. During an uptrend, prices will find support at the diagonal Fibonacci retracements, once they break out below the channel.
A technical indicator (AO) designed by Dr. Bill Williams. It’s the difference between a 5-period simple moving average and a 34-period simple moving average, applied to bar’s mid-point prices (H-L)/ 2. A technical analysis price pattern, where price action is contained within two upward sloping parallel lines. The basic line is drawn through the bottoms, whereas the return line is drawn through the tops.
This was the basis of the Bretton Woods system. In trading, volume is the amount of a particular asset that is being traded over a certain period of time. It is often presented alongside price information, as it offers an extra dimension when examining an asset’s price history. A resistance level is a key tool in technical analysis, indicating when an asset has reached a price level that market participants are unwilling to surpass.
It is also known as range or consolidation. Even though it is expected to break out in the direction of the prevailing trend, it is not unusual to break out in the opposite direction. Breakout of the range should also be accompanied by heavy volume Bitcoin Trading to be considered valid. Measuring implications are calculated as the width of the range. Identifies investment potential by studying unquantifiable factors that affect the market movement, such as traders’ sentiment, Psychology and behavior.
The price pattern, isolated by the two gaps, is known as Island Reversal. A Technical Analysis chart pattern signaling a bullish reversal. It consists of three bottoms and their corresponding tops. The lowest bottom is known as the Head, where the bottom to the left is known as the Left Shoulder and the bottom to the right is known as the Right Shoulder.
This usually happens during periods of high volatility, when traders use market orders and stop loss orders. The investors’ expectations about the direction of a financial instrument or market. A pending order that combines the Sell Stop and Sell Limit Orders. It allows a trader to specify a price lower than the current price that when reached, a Sell Limit ordered is placed at a higher price level. A pending order to sell at a predefined price higher than the market price in anticipation that the market will eventually decline.
The added flexibility of being able to trade forex 24 hours a day, 5 days a week provides ripe opportunities for FX traders. The foreign exchange market, also known as forex or FX, is a global marketplace where currencies are speculated and traded. Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds.
Each band is plotted two standard deviations away from the SMA of the market, and they are capable of highlighting areas of support and resistance. You always trade one forex currency against another currency. Going back to our example of the EUR/USD, if you go long on this pair, you are effectively buying the euro and selling the US dollar.
Forex Definitions: The Industry’s Most Important Terms Explained
A unit is a piece of currency. A lot comprises https://forexbitcoin.info/ 10,000 or 100,000 units of currency.
- Maturity The date of settlement or expiry of a financial product.
- Your free margin equals your total equity (account size + any unrealized profits/losses), minus your used margin.
- When buying, they’re going “long”, and when short-selling, they’re going “short”.
- GMT does not change during the year, as opposed to daylight savings/summer time.
- Hence, a falling wedge appears during an uptrend whereas a rising wedge appears during a downtrend.
- A true contrarian will trade in the opposite direction.
Inflationary pressures typically show earlier than the headline retail. Working order Where a limit order has been requested but not yet filled. WSJ Acronym for The Wall Street Journal.
The currency of the Dominican Republic. In Technical Analysis, price is considered the most reliable indicator. Chart patterns are filtered by indicators and confirmed by price. For example, price makes a new high in a buy setup or a new low in a sell setup. The currency of Switzerland and Liechtenstein.
Japanese Candlestick bullish pattern. A long black candle forms in the direction of the downtrend. The next candle is a hammer that opened higher and tested lower prices levels but eventually rejected as shown by the long lower shadow.
For example, to be short USD/JPY means you have sold USD against yen, with the intention of buying back USD/JPY when the rate has fallen in order to profit. The International Monetary Market division of the Chicago Mercantile Exchange. This is the exchange where the bulk of the currency futures trading takes place worldwide.
A charting method that has gained a lot of popularity recently, because the charts are more visually appealing than bar charts that reflect the same information. They are also generally easier to read and interpret. The chart makes it easier to see the relationship between the open and close and the high and low of price movements. They also give a more accurate depiction of market sentiment. A reading above 50 is bullish for the US Dollar, while a reading below 50 is bearish.
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The most popular reversal pattern is “Head and Shoulders”. Camarilla Pivot Points provide a “road map” for both range and break-out traders, looking for potential turning points in the market.
A technical oscillator developed by Tom DeMark to determine overbought and oversold conditions for the currency pair under study. A reading above 0.7 is considered overbought and a bearish reversal may be imminent. A reading below 0.3 is considered oversold and a bullish reversal may be in the making.
Prior to the development of forex trading platforms in late 1990s forex trading was restricted to large financial institutions. The central bank attempted to contain the rate of the zloty’s appreciation by intervening in the forex market within the band.