Currency Trading Dictionary: Forex Trading Glossary A-B
ABC Wave
A term used in Elliott Wave that describes a simple correction after a trending move. It is comprised of three-wave (waves A, B and C) forming a corrective or countertrend price movement.
Account Balance (Account Information)
The section of a trading screen that shows the amount of money in a trader’s account, including net profit or loss of any open positions.
Account Information (Account Balance)
The section of a trading screen that shows the amount of money in a trader’s account, including net profit or loss of any open positions.
Adaptive Techniques
These represent the alternative to fixed parameter techniques. Most indicators will include look back periods in their calculation. By considering factors such as adjustments in recent volatility, or the error between the forecasted price and real price, mathematical algorithms can be used to continually adjust formula weights to smooth the price series.
Adverse Excursion
Developed by John Sweeney, adverse excursion reviews past trades and scans for the largest open loss and typical open loss occurring in a trading system. This information can be used to determine stop loss points.
All or None
A limit price order that instructs the broker to fill the whole order at the stated price or not at all.
Alternation
(Elliott Wave)
Alternation is one of Elliott’s observations. He noticed that it was common that if Wave 2 in an impulsive wave is short and fast, then Wave 4 is sideways (flat) and slow. If Wave 2 retraces a large percentage of Wave 1 then Wave 4 will tend to be a shallow retracement.
Andrews Method
Also known as the Andrews pitchfork and developed by Dr. Alan Andrews, this is a technique for identifying upper and lower parallel lines for a trend. By identifying key first moves in a trend and the correction, a potential trend channel can be drawn.
Ascending Triangle
A pattern of corrective trading that develops between two converging lines where the support line is rising and the resistance line is horizontal. This pattern is generally described as a continuation pattern but can also be a reversal pattern.
Ask (Offer)
The price at which a dealer or trader is willing to sell a currency; also the price at which a trader can buy a currency.
Ask Price/ Ask Rate
The price at which a currency is offered for sale (as in bid/ask spread).
Ask Size
The number of lots being offered for sale at the ask rate.
Aussie
A market term for the Australian Dollar.
Back Office
The department and processes related to the settlement of financial transactions, including written confirmation and settlement of trades, and record keeping.
Back-Testing
The process of testing a set of rules that constitutes a mechanical trading system on historical data to determine the viability of the method. This normally involves optimization of the parameters for the trading rules employed and should also include Walk Forward testing to ensure the optimized parameters are stable.
Balance
Amount of money in a trading account.
Balance of Payments
A record of a nation’s claims and transactions with the rest of the world over a particular time period. These include imports and exports, services and capital flows.
Bandpass Filter
An algorithm that rejects high and low frequencies and passes only the frequencies in a predetermined range.
Bar Chart
A chart of price bars. Each bar shows the opening, closing, high and low price of a currency for a specific time period, with the length of the bar representing the range of prices traded for that time period.
Base Currency
(Traded Currency)
The first currency in a currency pair. The base currency is the currency against which the second or pricing currency is quoted. In the Forex market the U.S. Dollar is most frequently the base currency.
Basis Points
One basis point equals 0.01% yield of a bond or note and therefore 100 basis points equals 1% of yield.
Bear Market
A period of sustained declining prices.
Bear Trap
This occurs when prices decline through a previously identified key support level (perhaps a triangle base) but is immediately reversed causing short positions to be stopped out and therefore is considered as providing a false bearish signal.
Bearish
If the market is “Bearish” it implies that the underlying price data has conditions that suggest the price should decline.
Bid
The price at which a dealer or trader is willing to buy a currency; also the price at which a trader can sell a currency.
Bid/Ask Spread
The difference between the bid and ask (offer) prices.
Big Figure
100 basis points of the underlying foreign exchange rate. This equates to 1.00 in USDJPY and 0.0100 in EURUSD.
Blow Off Top
This is a dramatic rise in price that resembles a rising exponential curve. It is generally accompanied by strong volume and is often followed by a complete collapse in prices.
Boolean
George Boole, English logician (1815-1864), is credited with the invention of ‘Boolean logic’ in which information is represented as only one of two choices available such as true or false, 0 or 1, on or off.
Breakaway Gap
As a consolidation period or reversal formation is completed, price will exit the pattern with an opening price that causes a gap from that pattern. This could be a break through a trend line, a support or resistance line or even through a key point of the pattern such as the neckline of a head and shoulders pattern. Breakaway gaps are often filled during a brief correction after the break.
Breakeven Stop
Guards against a profitable trade turning into a loss. When the profit on a trade exceeds a certain amount, a breakeven stop order is generated at the trade entry price.
Breakout
The price point when the market price moves through key level of support of resistance and causes a sustained move in the direction of the break. This could be generated by break of a band of sideways trading or of a price pattern.
Broker
A firm that matches buyers and sellers in the currency market.
Bull Market
A period of sustained rising prices.
Bull Trap
This occurs when prices rally through a previously identified key resistance level (perhaps a triangle top) but is immediately reversed causing long positions to be stopped out and therefore is considered as providing a false bullish signal.
Bullish
If the market is “Bullish” it implies hat the underlying price data has conditions that suggest the price should rise.
Buy Order
An order to purchase the first, or base currency in terms of the pricing, or quote currency.
Buy Limit Order
Placed below the current market price, in an attempt to buy a currency for less than its current price.
“Buying the Dips”
The process of buying retracements or pullbacks in an uptrend.
Buyline
A number below which an indicator must fall before an upturn is considered significant.
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