GLOSSARY OF OPERATING TERMS

Active

It is what we exchange in the market. Within the Forex, EUR / USD, GBP / USD… are active.

Fundamental analysis

Fundamental analysis is a method used to evaluate an asset and to analyze the factors that could influence its price. An analysis based only on news, economic indicators and global events.

Technical analysis

Technical analysis is a system that allows you to examine and predict price movements in financial markets based on historical data and market statistics. It is based on the idea that if an investor can identify previous patterns, then they will be able to predict future price movements fairly accurately.

Leverage

Leverage is a concept that can help you multiply your exposure to a financial market without having to invest more investment capital.

Appreciation

A currency “appreciates” when it increases in value based on another currency or currencies.

Arbitration

By arbitrage we mean to carry out buying and selling operations almost simultaneously to take advantage of a price difference.

Ask

It is the offer price, the price that is used when buying an asset.

ECB (European Central Bank, European Central Bank, BCO)

It is the main regulator of the eurozone financial system.

Bear Market

A bear market is a market that has a downtrend, that is, it suffers a sustained price drop over time. In this sense, a bear market is the opposite of a bull market, which is a market with an upward trend.

Beta

Beta is a measure of volatility. It measures the sensitivity of an asset with respect to the global market. We can also use it to compare one asset against another.

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Profit (Profit)

An amount of money earned at the close of the position.

Bid (Demand)

It is the ask price, the price that is used when it is sold.

Book order

The book summarizes the total positions, where we can view the buy and sell orders pending to be executed.

Broker

A broker is an intermediary who is responsible for matching supply with demand in a given market in exchange for a commission. There are physical brokers and online brokers, in which the entire order management process is carried out electronically where investors do not need to travel to perform operations.

Bull

Bulls are speculators who believe that a market, instrument or sector is going to have an upward trajectory. The thinking is the opposite of bears, who have a pessimistic view of the direction of the market.

Cable

A term to refer to the GBP / USD pair (the British pound vs. the US dollar).

Carry Trade

It is a strategy used in the forex trading market whereby an investor sells a certain currency with a relatively low interest rate and buys a different one with a higher interest rate.

The objective of this strategy is to obtain the difference between the two interest rates as a profit. Because the benefit comes from the interest rate differential, you can make a profit even if the price of the currencies does not change.

CFD

CFD stands for Contract for Difference. As its name suggests, a Contract for Difference is a contract whereby two parties agree to exchange the difference between the entry price and the exit price of the underlying asset on which the CFD has been established.

In the Forex market we operate using CFDs to enter and exit the market. Let's say it is our instrument for trading.

Chartism

It is based on the analysis of graphs to understand the variations in the prices of an asset, in order to obtain more reliable predictions and speculate on its behavior in the future.

Beware of chartism, its main drawback is subjectivity.

Commission

It is the cost that the broker charges us for the execution of the orders.

Short

In trading, short we refer to an operation in which profits will be obtained if the asset on which it is operated falls in price. We'll call it going short, taking a short position, or sometimes selling.

Glide

It is the execution of the order for differences with the expected price (ordered). The main reasons for this slippage are - a “fast” market, low liquidity and the broker's poor ability to execute orders.

Depreciation

Fall in the price of a currency with respect to the rest.

Base currency

The base currency is the first named currency in a pair. For example, in EUR / USD the base currency is the EUR (euro).

Quoted currency

The second currency names in a pair. It is also called a counter-currency. In the example above, the USD (dollar).

Drawdown

The drawdown of an income curve is the difference between our current capital and the maximum capital that we have previously had.

When we talk about drawdown we refer to the time and depth of the fall in our account with respect to its last maximum. In other words, which lowers the earnings curve and remains below its previous high.

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EA (Expert Advisor)

Expert Advisors (or EAs for its acronym in English) are programs that work on the MetaTrader platform and are used to monitor and operate in the financial markets through algorithms: they are dedicated to finding opportunities according to established parameters and, or are notify them, or open a position automatically. Once your position has been opened, you can add closing conditions to an EA, as well as stops, trailing stops and limits.

Equity

In trading it refers to the balance of our account including open operations.

Trading strategy

It is a comprehensive plan designed to achieve a certain benefit.

FED (Federal Reserve, Federal Reserve System)

The main regulator of the financial system of the United States that regulates, among other things, interest rates.

Fiber

It is a word that we use in the jargon of forex traders for the currency pair EUR / USD (euro vs. dollar).

Flat

A neutral state, when all the positions in our trading account are closed we say that we are 'flat'.

Floating

The float is the amount (profit or loss) of the positions that we have open.

Gap

A gap is the difference between the closing price of the past period and the opening price of the subsequent period. In Forex it occurs during the weekends (between the close of Friday and the opening of Monday) since the rest of the days it remains open.

Hedging

We generally refer to Hedging as the process of holding a market position that reduces the risk of other open positions in the opposite direction.

Kiwi

It is the term in Forex to refer to the New Zealand dollar.

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Long

In trading terminology, long refers to a position that generates profit when the market price of an asset increases. As a general rule, we talk about opening a long position or going long.

Liquidity

A market measure that describes the relationship between trade volume and price change. When there is no volume in the market and it is not trading, we say there is little liquidity.

Lot

The number of units or the amount of money accepted to handle the operations (usually a multiple of 100). A standard lot is 100,000 units of the base currency of the currency pair that are bought or sold.

Margin

The money that the trader must have in his trading account to execute the orders. The margin used to cover the possible losses that may occur. It works as a guarantee that we offer to enter the market.

Free margin

The amount of money in the account that we are not currently using.

Margin call

The Margin Call takes place when the losses cause the Free Margin to fall below the Margin required to cover the open positions, automatically the Broker acts by making a Margin Call or Margin Call. This process occurs when we do not have proper capital management, we do not place stops, we leverage ourselves excessively or we do not pay attention to margins.

Martingale

Trading strategy involves increasing exposure after each loss. An activity totally to avoid because it is the main reason for the bankruptcy of many accounts.

Moving average

One of the most basic technical indicators. Displays an average price calculated over a period of time. Exponential Moving Averages (EMA), Weighted Moving Averages (MMP), etc. they are just ways of weighing prices and periods.

Metatrader

It is a widely used platform for trading specialized in the currency market.

Momentum

It is a technique in which traders buy and sell according to the strength of the price. Traders trade by following strong movement in one price direction until the trend loses steam.

Order

An order is a disposition of the trader to the broker to carry out a trade operation. As its name suggests, an order to buy or sell an asset. When it is carried out it becomes an operation.

Market order

It is an order that we send to the broker to buy or sell a quantity at the market price.

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Limited order

This type of order is placed to buy the quantity for a fixed price or a lower price or to sell the quantity for a fixed price or a better price. In other words, it is an order that we send to buy at most or sell at least at a certain price.

Stop order

We use them to buy at a certain price or higher or sell at a price or lower. Stop orders are a type of order with which you can instruct your broker to execute a trade when a certain level less favorable than the current market price is reached.

Overnight

With overnight we refer to the operations that are carried out after the closing of a stock exchange and before its opening. Overnight hours of operation can vary depending on the type of exchange an investor is looking to transact on.

Forex markets provide an exception to overnight trading restrictions, as it can be done 24 hours a day, five days a week.

Parity

The term parity in forex refers to a relationship of equality. For example, we say that EUR / USD is trading close to its parity if the price of EUR / USD is close to 1.

Lost

It is the result of closing a buy position at a lower price than the one we bought or a sell position at a higher price. In short, a negative result. Be careful, because it can originate even when we have made a good operation but the cost is very high, for example when we hold a position for a long time with negative swap.

Pip

With a pip we mean the smallest movement of a currency cross (for example, in EUR / USD, 1 pip (point) = 0.0001).

Open position

Open positions are operations that have been carried out and that can still generate profits or losses. When a position is closed, all gains or losses are collected and the trade is no longer active.

Closed position

A position is closed when all necessary transactions have been closed.

Market price

The price at which the currency is trading in the market.

QE (Quantitative Easing)

It is a monetary policy applied by central banks. It is based on buying and maintaining financial assets of the country's financial institutions to provide liquidity and avoid the fall of these financial assets.

Rank

The range is the difference between the maximum price and the minimum price that exists in an asset within a certain period of time. Mainly, it is used as an indicator of volatility, if an asset has a wide range during a period, it means that its volatility was also during that period.

Endurance

A resistance is a price level where the sellout can lead to a price increase.

Rollover

In trading, rollover is the process of holding an open position beyond its expiration date.

Scalping

It is a style of trading that is based on opening and closing a position in a very short time, with the aim of obtaining benefits in very low price movements.

Medium

A price level where intensive buying can lead to a price decrease.

Spread

The spread is the difference between the bid and ask prices of an asset.

Stop loss

It is used to avoid additional losses if the market moves in the opposite direction. It is an order to buy or sell a quantity when the market reaches a certain price.

Swap

A payment or charge for holding an open position overnight. It can be for or against depending on the difference in interest rates between the two currencies of the pair.

Take profit

It is used to close the profits of open trades when the market moves in the direction of your position. It is an order to buy or sell a quantity when the market reaches a certain price.

Trend

A direction in which an asset or market is moving (bullish, bearish, or in range).

Interest rates

A percentage that central banks use to lend to the country's commercial banks.

Trader

Traders are those who buy and sell in the market, that is, those who trade.

Trailing stop loss

It is a moving stop loss. A stop loss level that approaches the current market price as the position loss decreases or your profit increases.

Volatility

A statistical measure of the number of price changes in the given currency pair for a given period of time.

VIX

VIX is a shorthand for the Chicago Board Options Exchange Volatility Index, the volatility index of the Chicago options market. In short, it is an index of volatility.

Volume

In trading, volume is the amount of a given asset that is traded over a given period of time.

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VPS

A virtual private server (VPS) is a virtual environment hosted on the dedicated server, which can be used to run programs independently of the user's PC. Forex traders use VPS to host trading platforms and run Expert Advisors without unexpected interruptions.

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