Archive for April, 2011

The Basic Forex Trading Glossary, Part Two

April 20, 2011
by Pablo Soria De Lachica, Bforex’s Director of Business Development

The Basic Forex Trading Glossary, Part One here

Bid: The price at which a trader can sell a currency pair, or place an order to buy a currency pair. Some may refer to the bid as the “bid price” or “bid rate.”

Buy Limit Order: An order to complete a specified transaction at a given maximum price or lower. The limit refers to the quoted maximum price.

Buy Order: A demand to buy a currency or asset at its current market value. A buy order indicates that the investor wants to make a purchase immediately.

Cable: Slang for the exchange rate between the British pound and the United States dollar.

CFD (Contract for Differences): An arrangement through which the investor receives cash payments for differences in settlement rather than the actual asset. CFDs permit an individual to take part in equity and commodity markets without actually owning assets. Investors may trade CFDs at any point, unlike futures, which have a fixed trading date.

Day Order: An order to buy or sell that expires at the end of the trading day during which it was placed.

Discretionary Account: An account owned by a consumer but operated, according to predetermined rules, by a larger trading institution on the consumer’s behalf.

Dovish: An adjective denoting a passive, laissez-faire attitude toward inflation. Dovish policy makers and banks promote growth through low interest rates, believing this spurs consumer spending and drives the economy.

GTC: An order to complete a transaction that stands until fulfilled or retracted. GTC stands for Good ’Til Canceled. The order may remain in effect anywhere between 30 and 90 days, depending on the institution.

Hawkish: An adjective that refers to individuals and institutions who fight inflation. Hawkish banks and policy makers track inflation rates across a number of indexes and tweak interest rates to counteract them. When individuals become anxious about raising prices, hawkish banks hike their interest rates in response.

Pip: The basic increment of change in price for a foreign currency. Pip denotes the smallest increment allowable—1/100 of 1%— whether a decrease or increase in price.

Short-term Sentiment: Tracking changes in the daily and hourly market for quick, albeit small, turnaround opportunities.

Long-term Sentiment: Examining factors that will affect the world’s economy weeks, months, or even years in the future. Those trading with a long-term sentiment wish to invest now for a large payoff later.

To learn more about forex trading terms, visit www.bforex.com.