Trader's Dictionary


Term Meaning
A Round Financing “A” round financing is the first major round of business financing by private equity investors or venture capitalists. In private equity investing, an "A" round, or Series A financing, is usually in the form of convertible preferred stock. An "A" round by external investors generally takes place after the founders have used their seed money to provide a "proof of concept" demonstrating that their business concept is viable and will eventually be profitable.
Ask This is the offer price that is visible on the right side of a currency quote. This is the corresponding amount that a trader should pay on buying the base currency. For instance, the quote for EUR/USD is 1.2345/10, the trader will purchase one U.S. dollar at an amount of 1.2345 per 1 euro.
Bid This is the amount that a trader is willing to sell a currency pair. As opposed to ask where the trader wants to buy, bid’s purpose is to sell. A bid will always be lower than the asking price wherein the difference between them is the spread.
Close position This is when a trader invests in a length of (buy) position, then the rate of the currency pair base moved up. If the trader decides to gain his profit, he must close the trading position to complete the process.
Currency pairs This is the reference or quotation of a certain currency unit compared to another currency unit. For instance, Euro compared and/or to U.S. dollar creates the currency pair, EUR/USD. Euro, as the first currency, is the base currency while the U.S. dollar in second is the quote currency.
Equity This refers to the sum amount of money within a trader’s account which include both the losses and profits. Let’s say, a trader deposits a total amount of USD 20,000 into his account, in the near future he will gain USD 5,000. The trader’s total equity amount will be 25,000.
Exchange rate The rate or amount of exchanging one currency unit into another currency is the exchange rate in a certain currency pair. The exchange rate is the amount within a quote currency that is needed if a trader wants to invest or buy 1 unit of the other currency (base currency). Exchange rate id dynamic may change in days or a week and at some time it can even stabilize. Changes will depend on the social and economic factors around the world.
Execution It is the act when a trader is completing a certain order. When a trader places his order, his broker will receive them and will decide whether to fill it, re-quote it or reject it.
Expert Advisor/EA This is an algorithmic system that is developed to open up trades for investors on MetaTrader 4 platforms. EA is based on various technical indicators and can be accomplished online.
Fractional pip This is the extra decimal place within an exchange rate. Currency pairs have 4 decimal places, except for Japanese yen (with two decimal places only), on each quotation. Fractional pip includes or calls for an extra decimal place to provide a fraction of the total pricing (tenth pip).
Free Margin This is the amount of money available in a trader’s account that can be used to open another trading position. For instance, a trader has an equity amounting to USD 25,000 and he opened a trading position amounting to USD 3,000. The remaining USD 22,000, which is available to open a new position, is what most traders call “free margin.”
Hedging This happens when there is an opening of a new position within the opposite direction of the present position with the same trading instrument. Hypothetically, let’s say that a trader is to hedge a 0.2 lot purchase position on EUR/USD; this trader will open 0.2 lot sell position on EUR/USD.
Leverage This enables a trader to control a larger amount of money in a forex market as a forex broker loans a trader a bigger trading position or lots. Traders will be able to have a profit on normal daily currency movements with minimal risk on their capital within the provided trading position. Leverage will also depend on the broker and the flexibility of positions.
Limit order This is an order that is placed on a limit amount of rate from a current market price. For instance, EUR/USD can be traded at 1.28 and the traders want to place a short sell order on this currency pair when it goes higher at about 1.30. Thus, this trader will place an order at the price of 1.30.
Long position When a trader invests in a long trading position, the trader buys a base currency. This would occur when a trader expects that the base currency will become stronger against the exchange rate of its pair.
Lot(s) This is the amount of forex traded within the market. A certain standard lot has 100,000 units of the base currency in every pair, and a micro lot has 1,000 units.
MAM accounts M.A.M. (Multi Account Manager) are accounts within the Meta-Trader 4 platform which are designed to help Money Managers manage each investor’s accounts in a single interface.
Margin This refers to the amount of money needed for a trader’s account to open a trading position within the market. The margin is calculated from the current market quote of a base currency within the traders account against the base currency of the trader’s account or volume requested and the leverage level within this trader’s account.
Margin call This is an important and major part of forex trading risk management. When the trader’s equity goes lower than the percentage of the margin used, his broker will notify him to deposit more money if he wants to keep his trading position.
Market order/entry order This is the demanded order from a trader to instantly buy or sell currency at its most current price.
One-click trading This enables a trader to open a new trading position with just one click.
Open order This is the act of buying or selling financial instruments such as stocks, forex, and commodities (including gold, silver, oil, etc.) which will be opened permanently unless either the trader closes it or his broker closes it for him.
Pip This is the smallest amount of change within a provided exchange rate of a currency pair. Every currency pair has 4 decimal places/points, except for Japanese yen with only 2 decimal place or points.
Pip value This is the smallest price movement within a certain currency unit exchange rate. Pip’s value moves parallel with the movement of the global market. So, it will be best to stay updated with how the market changes to follow the movement of pip value.
Position The position is the trade that is to be hold open by a trader within a certain period of time.
Profit/loss calculation This is the process of calculating the trader’s gains or losses from time to time to keep track of and reorganize strategies if necessary.
Quote Trader’s market price always consists of two currency units; the first figure as the bid or the selling price, and the second unit as the ask or buying price.
Re-quote This is the discriminating execution process made by a few brokers. It sometimes occurs whenever a broker doesn’t want to execute a trader’s order with the amount he (trader) actually entered which will slow down the execution for the broker’s benefits.
Rollover/swaps When a trader bought a currency with a higher interest rate than the interest rate of the currency sold, this trader will earn an interest which is commonly referred to as “rollover/positive roll” (on the opposing scenario then will be a “negative roll”).
Safe haven currencies This term is used to address a trading scenario with less risk because their issuing managements are stable with the strong economy. Nonetheless, they aren’t meant to be perfectly safe.
Short position This is the process of entering a short position and the trader sells a base currency. When a trader chooses to use the same pair again but this time he expects that the base currency will become weaker than the quote value. The trader will then sell the base to gain the profit from its decreased value.
Spread This is the brokerage service cost which replaces the transaction fees. There are two types of spreads: fixed spreads and variable spreads. The fixed spreads are the maintained amounts of pips between ask and bid price which isn’t affected by any market changes. On the contrary, variable spreads fluctuate based on the liquidity of the market.
Stop-entry order As opposed to the idea of limit order, a stop-entry is the order that a trader gives to purchase above the current price or sell below the current price.
Stop-loss order (SL) A trader’s order to close a trade when it reached a certain level of loss. This will help minimize the loss a trader may have.
Straight through processing (STP) broker STP brokers enable a trader to have a straight access or connection with other participants within the currency market by associating price quotations from various banks.
Take profit order (TP) A trader is to set a profit limitation that will close the trading position once reached.
Used margin This is the amount of money kept aside by a trader’s broker that will be kept the account open and will prevent it from having a negative balance.
Virtual Private Server (VPS) This system is used to keep MetaTrader 4 platform running even if a trader exits the program. This will help minimize the possible occurrence of system downtime.

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