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Forex Glossary

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The foreign exchange market, also called forex or FX, is a worldwide market where currencies are traded. The foreign exchange market is the world’s most liquid, with over $2 trillion exchanging hands daily. The forex market determines the relative values of worldwide currencies.

A forex bonus is a monetary incentive to sign up with a particular forex broker. These bonuses are generally considered to be “welcome bonuses,” and are usually either measured in dollar amounts (e.g. $500 bonus) or percents (e.g. 10% bonus deposit).

A forex broker is the intermediary that arranges transactions between a buyer and a seller of foreign currency. Most forex brokers work for or are associated with large financial institutions, and earn their money by setting a “spread” between the bid and ask prices for a currency. Forex brokers also provide a trading platform. Forex broker usually handles a very small portion of the volume of the overall foreign exchange market, as much of it is now handled electronically.

A forex calendar or forex economic calendar tracks important events and news that drives the foreign exchange (foreign currency) market. Examples of these events include: government reports, major economic indicator releases, speeches/events of influential people of the world, etc…

Forex charts allow traders to view both live and historical exchange rates. These charts are normally provided by software used by forex traders, and typically come free with a forex trading account.  

Forex futures are contracts to buy or sell a currency at a certain price on a specific date in the future. It is done through an exchange and has a predetermined termination date – when the buy/sell must occur, unless an offsetting trade is made on the initial position. Forex futures are commonly used to hedge against risk in the foreign exchange market, and lock in future exchange rates.

Forex indicators are used for identifying patterns in the chaos of the currency market. They use statistics and market data to try and forecast Forex prices. This is done by taking raw market data and manipulating it to crate actionable trading scenarios. These indicators are normally mathematical calculations based on a price and/or volume. Popular forex indicators include Moving Averages, Stochastic Indicators and MACD.

A pip is the “percentage in point,” or the smallest price increment in forex trading. In other words, the basis point or the smallest change of an exchange rate between a currency pair. As forex prices are quoted to the fourth decimal point, a sample EUR/USD (Euro to US Dollar) pair might bid at 1.1823 and offered at 1.1820. In this example, the spread is 3 pips wide. An exception to this rule is the Japanese Yen (JPY), which is quoted only to the second decimal point.

Forex platforms are different types of software that allow banks, portfolio managers, retail brokers and retail traders to trade forex electronically from any location with an internet connection. There are a number of popular platforms, the most widespread of which is MetaTrader 4. Many brokerages offer their clients white-labeled versions of this popular forex trading platform.

Forex robots trade on your account on the MetaTrader 4 program using sophisticated, short-term Electronic Advisors (EAs) designed by professional forex money managers and traders. The programs utilize scripts coded with automated forex trading systems.