Forex ABCs > Glossary

Forex Glossary

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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.

Forex scalping is a strategy used by forex traders to buy a currency pair and hold it for a short period of time, attempting to make a profit. This quick opening and liquidation of positions typically is done in a 3-5 minute window, but scalpers can maintain their position for as little as one minute. Typically forex scalpers make a large number of trades and earn a small profit from each trade. Scalping systems can be manual or automated.

A forex scam is any type of trading scheme that aims to defraud investors by convincing them that they can expect to make a large profit by trading foreign currencies. Scammers typically convince investors that these high returns are a sure thing, rather than advising them on how risky the market can be.

Forex scamming has been on the rise in recent years. Forex trading is loosely regulated by the Commodity Futures Exchange Commission (CFTC).

Forex signals are signs (usually based on technical indicators) that it is a good time to buy or sell a particular currency pair. Forex signals can be made by both human analysts or automated applications.

Forex software is software that is designed for the buying and selling foreign currencies.

A Forex spread is the number of pips between the bid and asking price. Forex brokers utilize spreads to make money on the trades placed on their network. For example, a Forex broker might pay a price of 1.4600 for buying or selling. The broker could then let you buy the currency for 1.4601 or sell it for 1.4599.

Forex trading systems are based on a series of analyses that determine whether to buy or sell a currency pair at any particular time. These trading systems can be manual or automated, which are algorithm-based programs designed to run around the clock.

A forex trading program is a piece of software designed for buying and selling foreign currencies.