Forex Glossary

Forex Definitions: The Industry’s Most Important Terms Explained

The forex industry is made up of so many definitions that it's easy to forget a few along the way. Do you know your Loonie from your Loti? Can you tell your Shooting Star from your Evening Star? Take the time to get to grips with forex jargon because understanding forex vocabulary is an important step in a trader’s journey.

Since no forex education can be complete without a glossary of basic forex terms, we've compiled one which explains key words and phrases in the simplest way possible. This way, you'll never be lost or confused with forex terminology!

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It shows the hourly costs of maintaining employees.

Released quarterly by Eurostat.

The percentage of population (eligible to work) that is either looking for a job or already has a job.

Released monthly by the Bureau of Labour Statistics.
A quarterly report that measures the real gross domestic product per hour worked.  Released by Statistics Canada.
A technical indicator that triggers buy and sell signals with a lag.
Lao Kip.  The Currency of the Lao People’s Democratic Republic.  It is subdivided into 100 att.

See LAK.

In the financial markets, latency refers to time units (usually milliseconds) required for a trade order to be sent and executed by the broker’s server.

A Japanese candlestick pattern signaling bullish reversal.  During the course of a downward move, three long black candles- each opening and closing lower than the previous one, re-establishes the decline. Even though the fourth candle gaps below the previous body, it attempts to extend into the previous candle’s body, as shown by the relatively long upper shadow, but eventually retreats making a new low. It then forms a small black body. The last candle is a long white body that opens above the previous body- signaling a reversal.

A Japanese candlestick pattern signaling bearish reversal.  During the course of an upward move, three long white candles- each opening and closing higher than the previous one, re-establishes the rally. Even though the fourth candle gaps above the previous body, it attempts to extend into the previous candle’s body, as shown by the relatively long lower shadow, but eventually retreats making a new high. It then forms a small white body. The last candle is a long black body that opens below the previous body- signaling a reversal.

Lebanese Pound.  The currency of Lebanon.  It is subdivided into 100 piasters.
A monthly report that shows the performance of the Japanese Economy.  Released monthly by the Cabinet Office (Japan).
A technical indicator showing signs of possible change of direction, before the actual price changes direction. An indicator in the overbought area implies that prices may rebound, while in the oversold area it implies that prices may bounce back. Similarly, positive divergence between the price and the indicator implies price may change to the upside, while a negative divergence may hint for a reversal to the downside. Volume is another class of indicators that forecast price action. During an uptrend, volume should increase as buying pressures increases.  If volume doesn’t follow through then it hints for a reversal.  In a downtrend, volume should be heavier as selling pressure increases. If heavy selling pressure is not accompanied by increased volume then it hints that the downtrend is coming to an end and that a reversal is imminent.

See LBP.

See All.

See HNL.

Leverage is offered by brokers to maximize traders' buying power by giving them the ability to deposit a small amount of funds and trade larger volumes. Leverage is expressed as a ratio form, so if it is 1:100 for example, a trader's buying power is magnified 100 times. Leverage provides opportunities for multiplied profits but at the same time one may have multiplied losses as well.

See LRD.

See LYD.

An order to execute a trade at a specific price or a better one.
The specific price referred to in limit order.
A price chart that uses only the closing price for each period. A line connects all closing prices on the chart.  Extra information such as open, high and low prices are sacrificed for simplicity.

A Technical Analysis tool used for trend identification for a set of prices under a period of study. It is attached on the chart by selecting the first price representing the beginning of the trend and then dragging the mouse to the second price in the direction of the trend.

It consists of three lines:

  1. Linear Regression Trendline
  2. Upper Channel Line
  3. Lower Channel Line

The Linear Regression Trendline, is an equilibrium line that is, a straight line run through a set of prices using the statistical technique of best fit (or least squares) for a period under study.  The Upper and Lower Lines are parallel to and equidistant from the Trendline.  The distance between either Line and the Trendline, represents the maximum close price deviation from the Regression Trendline.

A technical analysis indicator. It is a moving average that assigns more weight to more recent prices.  As a result, it is more sensitive to price changes compared to the Simple Moving Average.
The volume available in the market for a specific currency pair.
A decentralized digital currency used for peer-to-peer transactions.  84 million litecoins are scheduled to be put into circulation.
Sri Lanka Rupee. The currency of Sri Lanka. It is divided into 100 cents.
Price charts that use log scales show equal distances for similar percentage change.  For example, the distance on the chart for a price move from 1.5000 to 3.0000 will be the same as a move from 5.0000 to 10.0000 as they both represent the same (100% change) percentage change.

A Japanese candlestick pattern signaling a bearish reversal.  It forms at the end of an uptrend or a resistance area.  It consists of a long black body and small shadows.

A Japanese candlestick pattern signaling indecision.  It has long upper and lower shadows.  The open price and the close price are equal.
Taking a long position on a currency means that you buy it. In a currency pair, you buy the first of the two currencies – the base currency.

A Japanese candlestick pattern signaling a bullish reversal.  It forms at the end of a downtrend or a support area.  It consists of a long white body and small shadows.

The nickname of the Canadian Dollar (CAD).
A lot is a standardized quantity of the instrument you are trading. In forex, one lot is 100,000 units of a particular currency.

See LSL.

The lowest price that a financial instrument is traded during a specific timeframe.
Liberian Dollar.  The currency of Liberia.  It is subdivided into 100 cents.
Loti.  The currency of Lesotho.  It subdivided into 100 lisente
28 day trading cycle. The theory holds that human behavior changes during different phases of the moon.  Also a 28-day or 20-day (working days) cycle exists in the stock markets. 
Libyan Dinar.  The currency of Libya. It subdivided into 1000 dirham.
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