Forex & Stock Market Glossary
Understand the essential terms and jargon used in the world of financial trading.
Ask Price (Offer Price)
The price at which a seller is willing to sell a security or currency pair. It's the price you pay when you buy.
Bear Market
A market condition where prices are falling, and investors are pessimistic, often leading to further price declines.
Bid Price
The price at which a buyer is willing to buy a security or currency pair. It's the price you get when you sell.
Broker
An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor.
Bull Market
A market condition where prices are rising, and investors are optimistic, often leading to further price increases.
Candlestick Chart
A type of financial chart that illustrates the price movements of an asset over a specific time period, showing open, high, low, and close prices.
Currency Pair
The quotation of two different currencies, with the value of one currency being quoted against the other (e.g., EUR/USD, GBP/JPY).
Forex (FX)
Short for Foreign Exchange, it is the global market for exchanging national currencies against one another.
Leverage
The use of borrowed capital from a broker to increase the potential return of an investment. It can amplify profits but also magnify losses.
Liquidity
The ease with which an asset or security can be converted into cash without affecting its market price. Forex is a highly liquid market.
Lot
A standardized unit of trade size in Forex. A standard lot is typically 100,000 units of the base currency, a mini-lot is 10,000 units, and a micro-lot is 1,000 units.
Margin
The amount of money required as collateral to open and maintain a leveraged position in the market.
Pip (Percentage in Point)
The smallest unit of price movement for a currency pair. For most pairs, it's 0.0001, but for JPY pairs, it's 0.01.
Spread
The difference between the bid and ask price, representing the cost of executing a trade. It's how brokers earn money.
Stop Loss
An order placed with a broker to buy or sell a security once it reaches a certain price, designed to limit an investor's potential loss on a position.
Take Profit
An order placed with a broker to close a profitable trade once the price reaches a predetermined target level, securing profits.
Volatility
A statistical measure of the dispersion of returns for a given security or market index. Higher volatility means greater price fluctuations.