Monday, January 23, 2017

LEARN THE BEST

FOREX TRADING STRATEGIES

 

FOREX GLOSSARY

 
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

ADX (Average Directional Index) - A technical tool for measuring a trend's strength. This index works on a 0 to 100 scale. 0 indicates no trend at all. The closer the result is to 100, the stronger and more significant the trend is. ADX doesn’t indicate a trend's direction, but only its power.

Ask Price - Also known as the Offer Price (appears as the second part of a Forex quote). The price at which the market is ready to sell a particular currency pair. This is the price a trader must pay to buy the base currency.
 
B

Bar Chart - A common type of graphic representation of the price actions in Forex. Each bar is built of 4 points: Opening price, closing price, highest and lowest price for the time frame it represents
.
Base Currency - The left hand currency in a currency quote e.g. EUR/USD.

Bearish Market - A pessimistic market characterized with falling prices. In a bear market there are more sellers than buyers.

Ben Bernanke - The head of the FED (USA central bank) since 2006. Considered as controversial, mainly thanks to the global economic crisis which started in the U.S. but solid.

Bid Price - The price at which the market is ready to buy a particular currency pair. It appears as the first part of a Forex quote and is the price a trader receives when they sell the base currency.

Bid/Ask Spread - The difference between the Bid price and the Ask price.

Bollinger Bands - Technical indicators for measuring market volatility. Built of a band which includes 3 lines: Center, Top and Bottom. The center line connects the average prices over a period of time. The supporting lines define the band between the peaks and lows across the presented period. Bollinger bands are good for identifying upcoming trends.

Breakouts – These happen when the price breaks (Crosses) a support or resistance level. Breakouts lead to serious currency movements and increasing volatility in the markets.

Brokerage - The mediator between the buyers and sellers in the market. The broker executes the trader's buy and sell orders and charges the spread as a commission fee. Online Forex brokers enable everyone to easily participate in the market without the necessity to act through banks.

Bullish Market - An optimistic market characterized by rising prices. In a bull market there are more buyers than sellers.
 
C

Candlestick Chart - The most popular chart used in Forex. It is a nicer, more graphical version of the bar chart. Built of candle shaped sticks. Green (or white) candles indicate uptrends and red (or black) candles represent downtrends. Each candle shows the open, close, high and low prices for the specific time frame.

Carry Trade – A trading strategy that focuses on the interest rates of the currencies traded. The idea is to buy a currency with rising interest rate while selling a currency with falling interest rate. The profits are derived from the growing differential between the two rates. The JPY is relatively very popular for Carry Trade due to its extremely low interest rates across the years (usually interest rates are at or near 0). JPY is efficient against currencies with rising interest rates.

Central Bank - Governmental bank whose job is to manage and run the monetary policy in the country, while at the same time maintaining the currency's strength and stability.

Channels - An excellent, easy to use tool, mainly for beginners. It defines the price movement inside a channel, helping us to identify trends.

CPI (Consumer Price Index) - A monthly report that measures the average change in the prices paid by urban households for a basic basket of consumer goods and services. CPI is a good indicator of the level of inflation in the market.

Cross Currency Pairs - Currency pairs which do not include the US dollar, e.g. GBP/CHF.

Currency Pair - Two currencies that are simultaneously used in a trade (one is bought and the other is sold).

D


Demo Account – A free trading account for practice (with no real money transactions involved). Fantastic for beginners who wish to get familiar with Forex trading. Nowadays most brokers allow their users to open demo accounts in order to try their Forex trading platforms before depositing real money.

Doji - A common type of candlestick. It is characterized by a lack of body and with long shadows. Usually it resembles a cross/inverted cross. In many cases, Dojis alert traders to a change in the balance of power in the market between buyers and sellers.

Double Bottom - A common chart pattern consisting of two lows at relatively equal levels. This identifying technique can help us to predict potential uptrends.

Double Top - A common chart pattern consisting of two peaks of relatively equal height. This identifying technique can help us to predict potential downtrends.

Downtrend - A trend whose general direction is down. Also referred to as a bear trend.

E

ECB - The European Central Bank

Economic Calendar - An important feature of your trading platform. It presents a roundup of all significant economic announcements and releases, as well as other fundamental events taking place around the world which might impact on the market.

Elliot Wave - A common trading pattern. An identification of Elliot Wave allows the trader to predict trends with high probability. The pattern is built of 8 waves. The first 5 build one trend and the following 3 belong to an opposite trend.

Enter Trade - Starting trading activity by opening a position (buying or selling a currency pair).

Exit Trade - Ending trading activity by closing a position.
 
F

Fakeouts - Fictitious breakouts. These happen when the price breaks a support or resistance level but turns back to its previous direction right after.

FED - The Federal Reserve, the central bank of USA

Fibonacci - Considered by us as the most popular technical indicator in Forex. It indicates changes in the balance of power between the sellers and buyers. With the help of Fibonacci ratios you can foresee whether the market will be bullish or bearish. Remarkable pivots are 38.2%, 50% and 61.8%.

Fiscal Policy - Fundamental economic policy conducted by governments for the benefit of their economies.

Forex (FX) - Foreign Exchange Market.

Fundamental Analysis - Analyzes economic, political and social events in an effort to determine present and future economic trends. In other words, the fundamental approach analyzes the sources of price movements in currencies.

G


G 8 - A group of the most industrialized countries in the world. The associates in the G8 are: USA, Japan, England, Germany, France, Italy, Russia and Canada.

GDP (Gross Domestic Product) - The total value of all goods and services produced in the market (excluding imports). GDP helps to measure the standard of living in the market. Negative data implies a weakened economy.

Go Long - A buying action. The trader buys a currency pair, hoping its value will increase.

Go Short - A selling action. The trader sells a currency pair, hoping its value will drop.

H


Heads and Shoulders - Considered as a relatively reliable and accurate chart pattern for long term trading. Built of 3 peaks, while the second peak (the head) is the highest (or lowest, in case of an upside head and shoulders). The other 2 peaks are about the same height - the shoulders. A head and shoulders pattern is a good sign to go short (or to go long, in the case of an upside head and shoulders).

I


ICBC - Chinese bank for loans. The largest commercial bank in the world (by market capitalization).

Inflation - An increase in the prices of goods and services in the market. Due to inflation, a soda can that used to cost 10 cents 20 years ago, costs 1 dollar today. Inflation weakens a currency's performance. The central bank is responsible for controlling inflation through the manipulation of interest rates and the money supply.

Interest Rate - The market rate at which the buyer (or borrower) has to pay the seller (or loaner) for continuing to hold the currency. Interest rates impact the performance of all currencies in the Forex market. Rising interest rates cause currencies to strengthen, falling interest rates cause currencies to weaken.

Intraday Trading – A trading strategy for very short terms. Dynamic activity in which traders open and close positions in a matter of hours up to a single day tops.

L


Leverage - The percentage of money you are allowed to "borrow" from your broker in order to open a position. Think of it as a "loan" from your broker. It helps traders to trade higher volumes with smaller amount of money. The more you leverage your money, the higher the potential for profit and the risk of loss from trades.

Line Chart – Line charts present general price movement over a period of time. The line connects the assets closing prices along the chosen period. However, it is less recommended for use than other types of charts.

Liquidity - Refers to the volume of the trades in the market. It is the ability to exchange currencies without really affecting the price of the pair. The more liquid a currency pair is, the less impact buy and sell actions will have on its price.

Live Quotes - A quote of a currency pairs' rates offered in real time.

Long Term Trading - Trading positions that last from a week up to few months. Long term trading is considered as an investing strategy. Long term traders usually base their trades on fundamental analysis, high capital amounts and very low leverage.

Lot - The standard trading unit that traders transact.
Micro Lot – The smallest tradable lot size: 1,000 units of the currency.
Mini Lot – A smaller lot size: 10,000 units of the currency.
Standard Lot - 100,000 units of the currency.

M


MACD - Moving Average Convergence/Divergence. A technical indicator that measures an average of the average prices (The average between EMA and SMA) over different periods of time. MACD helps to determine trends.

Majors - The most widely traded currency pairs in the world. The major currency pairs are those in which trading volume is highest. The major currency pairs are comprised of eight currencies: EUR, GBP, AUD, NZD, USD, CAD, CHF and JPY.

Marabuzo - A common type of candlestick characterized by a full body, with no shadows.

Margin - The deposit required for trading at a certain amount. Greater margin increases your buying power as well as your exposure to potential losses.

Market Leaders Forex Trading Course – The ultimate course for beginners and newcomers. Probably the most popular, professional, friendly and comprehensive online Forex trading course on the net. A true window to Forex trading for anyone who wishes to join this gigantic market and learn to trade like the pros. Written by our experts, it is responsible for introducing thousands of new Forex traders around the world to trading. Its goal is to prepare you in one weekend for this opportunity.


Market Risk - The chance for future price changes in the market's currency.

Money Management - controls how much of your money you risk when you enter a trade. A good money management approach is to always risk a fixed percentage of your equity, not higher than 10% per position. Smart money management is exactly what prevents us from losing all of our capital at once.

Moving Averages - An affective technical indicator which connects price averages over different periods of time. It points out a possible trend's direction.

N


NFP (Non Farm Payrolls) - The change in the number of employees in the market over the past month. It indicates the market's general economic condition.

O


Order - A trade execution

Overbought - Market conditions of excess buying. It signals that the momentum is about to change in favor of the sellers.

Oversold - Market conditions of excess selling. It signals that the momentum is about to change in favor of the buyers.

P


Parabolic SAR – A popular technical indicator for predicting upcoming trends. Its location compared with the market price determines whether to go long or to go short (buy or sell). Parabolic SAR is affective in volatile markets and works well on strong trends.

Pip - The smallest price units in a price quote. It is the fourth number after the decimal in most price quotes. A 1 pip change is a price movement of 0.0001 .

Political Risk (Polirisk) - The extent of exposure to political risks that can increase governmental instability and affect investor activity and a currency's performance.

Psychology - An important element in Forex. One of the main keys for success in Forex is to eliminate emotions while trading. An experienced trader knows how to trade while in a proper state of mind.

Q


Quote (Counter) Currency - The right hand currency in a currency quote e.g. EUR/USD.

R


Rally – A price recovery which follows after a period of declines.

Ranging (Flat) Trend – A sideways trend which represents uncertain market conditions. Neither of the market forces (sellers or buyers) is dominant.

Recession - A period of sustained economic contraction. Recession is influenced by fundamental socio-economic factors, like industrial production, GDP and more.

Resistance Level - The upper barrier of a trend (Buyers' ceiling). The level at which a current uptrend is expected to stop as the price rise encounters “resistance”.

Retail Sales - A monthly report on the sales of retail goods and merchandise in a country.

Risk Management - Foreign exchange risk management allows the trader to define himself as a trader in terms of risk vs. odds. Smart risk management puts under control the levels of risks that the trader wishes to take throughout his trading. Risk management should determine your Forex trading strategies. It is designed to preserve the value of your currency inflows and investments, while enabling you to manage your initial trades.

RSI – A technical indicator that works on a 0 to 100 scale. The area below 30 signals a buying opportunity and the area above 70 signals a selling opportunity.

S


Scalping – A very frantic strategy for short, intraday trades. Based on openings of many positions, when the earnings potential from a single position is small, but the total earnings potential from a lot of winning positions simultaneously is high. Scalping helps to reduce risks, but its disadvantages are the need for high trading capital and the high number of spreads you will have to pay your brokers.

Short Term Trading - Trading strategies focused on short periods (day trading up to a couple of weeks top).

Signal (Market Alert) - Trading alerts coming from the market. Forex Signals services allow the trader to follow and copy trading actions and executions from experienced traders, with a high percentage of successful trades. FXMarketLeaders offer our users FREE market alerts on the different currency pairs!


Supply/ Demand Ratio - The difference between the supplied amounts of goods and services and the demand for them. As the demand rises or the supply drops, the value of goods or services (e.g. currency) goes up.

Support Level - The bottom barrier of a trend (Sellers' floor). It is the level at which a current downtrend is expected to stop as the price finds “support”.

Swing Trade – A short term trading strategy usually lasting from a couple of days to a week. The goal of this strategy is to ride on existing market trends and to take as much advantage of them as you can, in order to make relatively quick profits, while reacting fast to changes in market behaviors.

Stochastic – A technical indicator that shows oversold and overbought areas on the chart. The area below 20% surface implies oversold conditions and the area above 80% surface implies overbought conditions. Stochastic is considered as a relatively good buying and selling alerts provider.

Stop Loss Order - An exit trade order, which automatically closes an open position at a specific price, specified in advanced by the trader. A Stop Loss limits potential losses should the market go against you.

Symbol - The 3 letters used to identify a currency. These represent the country of origin and the name of the currency, e.g. USD (US dollar); EUR (euro), JPY (Japanese Yen).

T


Take Profits Orders - An exit trade order, which automatically closes an open position at a specific price, specified in advanced by the trader. When the price reaches this rate the trade closes at a predefined profit.

Technical Analysis - The technical approach uses tools, technical indicators, formulas and patterns on charts, in order to predict future trends and changes in currencies. It analyzes the trends and not the reasons why they happen.

Time Frame - Traders can choose to look at the trading charts in different time frames. For example, say you choose to look at a 30 minutes chart - it means that each single candle represents the trading activity over a 30 minutes period. The most popular time frames are 15 minutes, 1 hour and 1 day frames.

Trading Account - Your capital available for use in trades on the online trading platform. Trading Book - A self-compiled journal for managing and following your trading activity, while writing down actions, thoughts, results and anything which can improve your future trading.

Trading Platform - Online software provided by the broker. Forex trading platforms are used for trading transactions, executing orders and managing your account. That is why it is important to choose the right broker.


Trend Line - One of the simplest, most basic tools for the trader's usage on the trading platform. It connects a group of price rates throughout a chosen time frame (either price lows or highs). The more points it connects, the more stable and reliable a trend it will indicate.

U


Uptrend - A trend whose general direction is up, it is also called a bull trend.

V

Volatility - Describes the level of price fluctuation in a currency pair. Greater volatility indicates a greater level of uncertainty in market expectations.
GET THE 1 YEAR PREMIUM SERVICE FOR FREE!