Spot Forex Market

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The physical exchange of a currency pair, which takes place at the exact point the trade is settled – ‘on the spot’ – or within a short period of time. Currencies are bought and sold to the current price. The spot FX market is also known as an over-the-counter (OTC) market.

Spread

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A spread refers to the difference between two prices, for example the bid and the ask price. The smaller the spread, the greater the liquidity of the currency or given security. As professional traders we prefer average low spreads on ECN accounts such as 0.1 pips for EUR/USD and 0.4 pips for GBP/USD.

Stop Order

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Stop orders are orders that are triggered when a price moves past a specific price point, limiting the trader’s loss or locking in a profit.

Support

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A support is a price point on a chart where the probabilities favor a pause or reversal of a downtrend.

Technical Analysis Forex

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Technical analysis is the study of historical price action in order to identify price patterns and determine probabilities of future price movements in the market. For the technical analysis traders use price charts in different time frames, specific indicators and other analysis tools.

Trading Plan

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A trading plan represents a trader’s personal approach to trading and is a roadmap for how to trade. The plan is written down and followed on a daily basis.

Trailing Stop

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A trailing stop is a modification of a typical stop loss order that can be set at a defined percentage or pip amount, for example 15 pips. It is designed to lock in profits or limit losses as a trade moves favorably. A trailing stop is typically placed at the same time the initial trade is placed. For example, if we set the trailing stop at 15 pips, it trails the initial stop-loss 15 pips favorably as soon as our trade is 15 pips in profit. The use of a trailing stop reduces a loss when a trade moves favorably and we are not able to monitor and control our trade manually.

Volatility

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Volatility is a statistical measure of the dispersion of returns for a given security or currency. In most cases, the higher the volatility, the riskier the currency or security. We speak of high volatility if the prices fluctuate rapidly in a short time span. If the prices of a currency or security fluctuate slowly in a longer time span, it is termed to have low volatility.