Forex Trading Terminology

Spot Deal: A deal taking part between two parties who can deliver a certain amount of
different currencies to each other within 2 business days of each other (excluding
Canadian dollar where the trade is executed within 1 business day)

Market Order/ Instant Execution: This is the execution you make when deciding to
buy/sell a currency. In other words you see a currency exchange rate quote on screen and
you place a ‘market order’ when you click the button to execute the trade.

Limit Order: This order type is used to buy or sell a pair at a predetermined price. A buy
limit order will only be filled if the market trades (ask) at or below the limit price. A sell
limit order will only be filled if the market trades (bid) at or above the limit price.

Stop Order: This order type is used to buy or sell a pair at a predetermined price. A buy
stop order will only be filled if the market trades (ask) at or above the stop price. A sell
stop order will only be filled if the market trades (bid) at or below the stop price.

Entry Orders: This is basically and advance order, you decide at what price you want to
buy or sell a currency and you place an ‘entry order’. As soon as the currency reaches this
rate your trade is executed.

Stop-Loss Order: This is a function offered by some brokers which is aimed at reducing
your risk; you can decide the maximum and minimum amount of profit or loss you want
to exit a trade at. In other words if you decide you are happy to make $500 from one trade
but don’t want to lose anymore than $500 should the trade go the other way you can
place this safety net on your trade.

Spread: The difference between the Bid and Ask price.

Lot: The amount of units of the base currency when you enter the market. I will like to
explain further in this as many are not getting the concept of the LOT. This is simple the
contract value of the currency you are buying or selling.

Trend: The direction the market is currently moving in.

Long Position: This is used to describe a market in a long-term buy trend.

Short Position: This is used to describe a market in a short-term sell trend.

What does it mean to be "long" or "short" a currency?
Being long means buying a currency. Being short means selling a currency. If a trader goes long GBP/USD, he or she buys GBP and sells USD. Buying a currency is synonymous with taking a long position in that currency. A trader takes a long position in a currency if he or she believes it will appreciate in value.
If a trader goes short GBP/ USD, he or she sells GBP and buys USD. Selling a currency is synonymous with shorting that currency. A trader would short a currency if he or she believes it will depreciate in value.

Bid and Ask Price: Currency is traded in pairs as mentioned above; where one is Base
and the other is Counter currency. The currencies are two-sided quoted, consisting “Bid”
and “Ask” e.g. 2.0440/2.0443. The bid is always lower than the ask price. The Bid is the
price at which the dealer is willing to buy the base currency in exchange for the quoted
currency. This means the Bid is the price at which you (as the trader) will sell i.e. 2.0440
The Ask is the price at which the dealer will sell the base currency in exchange for the
quoted currency. This means the Ask is the price at which you will buy. i.e. 2.0443.

Pip(s): Is the Percentage Interest Points and the last decimal point in a quoted price of
any currency. The most common increment of currencies is known as the "pip." It is the
smallest value change in a currency pair exchange rate. Example: the movement of GBP/USD of 1.7896 to 1.7897 signifies a pip movement. A positive or negative pip value
is how you calculate your profit or loss.