Automated trading system (ATS)

Automated trading system – software, which can execute all trades automatically according to programmed algorithmic rules. All steps are set in advance. Further, automated trading software opens and closes all buy and sell trading positions as pre-defined. Often, ATS can be called Expert Advisor (EA) and is mostly programmed for use in Metatrader 4 trading platform.

Familiar expression for AUD/USD currency pair.

Bull market
Period of rising prices, market grows.

Pip is the smallest possible change in measuring currency pair move. Usually, it is fourth or fifth number following decimal point.

Price trend
Currency movement in certain direction such as bull (uptrend) or bear (downtrend) trend. Traders try to maximize their profits by buying or selling speculative positions one way or another.

Familiar expression used by traders for GBP/USD currency pair.

Day Trading
Trading strategy, where a trader manages to open and close all trading positions during the very same trading day.

Long Position
If a trader holds “long position”, this means he entered BUY trade to buy a currency. At the same time he hopes for further growth of bought currency – to buy low, sell high.

Federal Reserve System is also known as Federal Reserve or FED. Fed is central banking system in United states. This institution also releases regular news and updates on US monetary policy, which can influence currency market (Forex).

Forex is a short name for Foreign Exchange market where currencies of all states are being traded for another currency by banks, institutional traders and individuals.

Forex robot
Automated trading software that can trade Forex automatically.

Fundamental analysis
Analysis of macro-economic market data which can influence exchange rates of currencies.

A transaction implemented by a forex trader to protect an existing or anticipated position from an unwanted move in exchange rates.

Familiar expression for NZD/USD currency pair.

Short Position
If a trader holds “short position”, this means he entered SELL trade to buy a currency. At the same time he hopes for further decline of sold currency – to sell high, buy low.

Cross rate
Trading of a currency pair where none of the two currencies in the pair is US Dollar.

Exchange rate
The price of one nation’s currency expressed in terms of another currency. Thus, an exchange rate has two components, the domestic currency and a foreign currency, and can be quoted either directly or indirectly. In a direct quotation, the price of a unit of foreign currency is expressed in terms of the domestic currency. In an indirect quotation, the price of a unit of domestic currency is expressed in terms of the foreign currency. The first currency is the base currency and the second currency is a counter currency. In a currency pair such as EUR/USD euro would be base currency and US dollar would be counter currency.

Limit Entry
A limit entry is an order to buy (or sell) at a specified price or better. A buy limit order (a limit order to buy) can only be executed at the specified limit price or lower. Conversely, a sell limit order (a limit order to sell) will be executed at the specified limit price or higher.

Familiar expression for USD/CAD currency pair.

It is a basic trading unit in which all trades are measured. One standard market lot consists of 100 000 units of base currency, mini-lot (0.1) consists of 10 000 units and micro-lot (0.01) consists of 1 000 units of base currency.

Minimal investment which a trader must allow to be used for a transaction (buying or selling a currency). Trading Forex using margin increases buying power of a trader, but at the same time increases losses.

Bear market
Period of declining market prices.

Currency pair
A pair of currencies being traded on Forex such as AUDNZD (Australian dollar vs. New Zealand dollar). While trading a currency pair, a trader always buys one currency and sell the other at the same time.

Money management
Set of a trader’s rules to comply with while trading currencies. Rules are to determine the ratio of potential risks and losses of the trader’s strategy. Often, traders use stop-loss and take profit rules to limit losses and maximize potential profits.

Ask Price, Buy Price
Specific price at which the trader buys a base currency and sells a counter currency.

Leverage allows a trader with lower capital to trade larger volumes. This tool increases potential profits. At the same time it increases risk of potential loss of a trade or even whole trading account.

Bid Prices, Sell Price
Specific price at which a trader sells a base currency and buys a counter currency.

Price GAP
Gap between prices in the chart, which occurs when a share prices or an exchange rate performs substantial move up or down without any trades being done between these prices. Price gaps can be caused by too much buying or selling pressure, significantly better or worse data related to the shares or the country’s economy and its currency; furthermore, by significant change of credit agencies and analysts views.

Take Profit
Trading order, which automatically closes a position at a certain price according to the required amount of profit pre-set by a trader. This allows trader to not watch his trades all the time and keep the order to work the order without manual interference.

Risk Capital
Any trader should invest such funds into Forex trading, which he or she can afford to lose. In other words, a trader should not be existentially dependent on invested money in case of total loss.

Difference between buying and selling price.

Stop Loss
Stop loss market order autmatically closes position if a market moves against trader’s strategy and could cause further loss. This prevents further losses and even total loss.

Familiar expression for USD/CHF currency pair.

Technical Analysis
Technical analysis mainly focuses at graphs analysis. In this type of analysis, it is assumed that the future movement of an exchange rate can be somewhat predicted from historical price movements.

Counter Currency
Counter currency in a currency pair is always reffered to as the second one. For example, in the EURUSD pair, the counter currency is US dollar.

Base Currency
Base currency in a currency pair is always reffered to as the first one. For example, in the EURUSD pair, the base currency is euro. The base currency is also a currency in which a trade is being performed, on the other hand, profit or loss is counted in the counter currency.

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