10 Essential Forex Definitions to Know Before Trading

In order to better understand the forex market and ease one’s forex trading journey, it is crucial to familiarize yourself with technical jargon and forex definitions. Unless you have an idea about what a term frequently utilized in the context of forex trading means, you cannot make the most out of it during trade sessions.

Forex markets are complex as any other financial market in the world but makes it easy is the abundance of educational material available for anyone interested to increase their knowledge.

In this article, we have collected and brought together 10 of the most critical and most used forex definitions that any trader would come face to face while trading foreign currencies.

The best way to learn about the basics of forex is through knowing what each of the following terms means. After gaining that any trader could incorporate the basic ideas, tools, and strategies into their trading style.

Furthermore, it becomes easy to improve one’s trading skills through constant learning about the market and what it has to offer at any given time.

Here are the 10 most important forex terms along with their definitions for new/expert traders:

• ECN Brokers:

Any forex broker that specifically uses Electronic Communications Networks in order to allow its registered users direct access to some of the most reliable liquidity providers.  ECN brokers are capable of matching orders of sell/buy at the best price available after checking with various market participants quickly and conveniently.

• Commission:

Commissions are commonly used in forex trading which refers to the charges levied by a broker to facilitate trader’s buy/sell orders. You might consider it as a service fee that varies for any investment broker that acts as an intermediary between you and the main foreign exchange market.

• Intraday:

The word “intraday” means within the day and in the world of forex intraday trading means trading markets during the regular business hours by “intraday traders”. It goes without saying that intraday is one of the busiest hours to place and settle trades before the markets close for forex traders.

• Evening Star:

The evening star is a particular Japanese candlestick pattern that traders come across as they are analysing a technical graph. The pattern signals a bearish reversal just below its mid-point. It is a great visual guide for tracking market sentiment so that traders running short on time can still make a calculated decision. 

• Asian Session:

The forex market is active for 24 hours every 5 days of the week. The total trading hours are divided into different trading sessions. Any trading activity which occurs between 11:00 PM (GMT+2) and 8:00 AM (GMT+2) is said to fall under the Asian trading session or simply Asian session.

• Data Window:

Data window is an important part of the MetaTrader4 client interface. The data window is used for showing all information about a bar/candlestick selected by traders. By simply hovering on the desired bar/candle, the data window can reveal OHLC prices, time and date of opening, volume etc. 

• Backtesting:

Backtesting in forex is an important trading strategy based on historical data so that traders can use past data and check the reliability and performance of any particular trading strategy. This feature is a must for all high-quality trading platforms as it allows independent testing and reaches a conclusive result.

• Swing Trade:

Forex trading involves different types of strategies. Some of these strategies are short-term and some are for long-term but both of them are aimed for profits. Swing trading is a well-known short-term strategy where forex traders are required to place buy/sell orders based on the impending price movement. 

• Requote: 

Most of the time, forex brokers despite all efforts, fail to fill a trader’s order to either buy/sell any particular fx pair due to unforeseen circumstances. When this happens, brokers are required to quote the immediate next available price for the same order known as requote.

• Margin Call:

Sufficient funds are needed to continue trading your preferred forex pairs without any problems. Traders receive margin calls as a notification that alerts them when they are required to deposit more funds into their active trading account.