Ask price: the price to buy a currency
Australian Dollar (AUD): the currency of Australia, called “Aussie” among FOREX traders.
Bank of Canada (BoC): the central bank of Canada.
Bank of England (BoE): the central bank of the United Kingdom.
Bank of Japan (BoJ): the central bank of Japan.
Bid price: the price to sell a currency.
British Pound (GBP): the currency of the United Kingdom.
A buffer account is a special account created for the calculation of the commission received by Master Investors, participating in the “Master Invest” project. A buffer account holds the commission received for all profitable copied trades of a Master. Commission on trades is pre-listed on the buffer account, which is also adjusted for unprofitable trades.
The Master’s commission is charged on the buffer account at the end of the billing period. If all Master’s trades were profitable, the commission is fully charged to the Master. If part of the trades were unprofitable, the calculation of the commission is reduced, according to the amount of losing trades and the remaining portion of commission previously listed on the Master’s buffer account is returned to the Investor’s account.
In case that the total sum in trades during the billing period registers a loss, meaning that the total sum of unprofitable trades is greater than the total sum of profitable trades during the same billing period, the commission is not charged on the Master’s buffer account and the entire pre-listed commission on trades due for this period returns to the “Investor account”.
Canadian Dollar (CAD): the currency of Canada.
CFD (Contract For Differences): financial instruments that speculate on price movements of the underlying financial instruments such as stocks, futures, metals or currency.
Chart Patterns: patterns of price movements on a chart.
Currency pairs which do not involve the U.S. dollar are called “cross rates” and can be any, such as the euro/pound (EUR/GBP), the pound/yen (GBP/GPY), the pound/Swiss franc (GBP/CHF), and so on.
Currencies are traded in pairs and their combination can be random. In general, the most widely traded currency pairs are 30. The major currencies, also accounting for the largest trading volumes, are the euro/dollar (EUR/USD), the pound/dollar (GBP/USD), the dollar/yen (USD/JPY) and the dollar/Swiss franc (USD/CHF).
A dealing room is a special room providing a range of services to traders who want to enter the financial market. It is equipped with computers, trading terminals and communication technology, through which traders are able to commit their transactions.
Demo Account: a practice account using virtual money, so that any profits or losses have no real financial effect.
Diversification is the distribution of investment funds among various financial instruments, including currency pairs, to reduce risk.
A drawdown is a measure of calculating the largest loss anticipated by a trader on a given period of time.
Euro: the currency of the Eurozone. The Eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.
European Central Bank (ECB): the central bank of the European Monetary Union.
Most often, investors are engaged in exchange transactions involving gold. These transactions are called gold-spot contracts and are referred to as GOLD. Gold is a global equivalent to money and none of the modern currencies has its value.
Forex brokers give the opportunity to traders to conduct electronic transactions on gold, while enabling them to keep track of the price fluctuations of this precious metal. Interest in such transactions is particularly high during times of crisis, as the currencies of all countries are impaired in varying degrees, resulting in the rise of the demand for gold.
Federal Reserve System (Fed): the central bank of the United States.
Free margin is the amount of available funds in a trader’s account. The existence of adequate amount of available funds for the opening of a transaction is checked at the moment before opening the transaction.
The more money you place on your “investor account”, the more available funds there will be at the time of copying a Master’s trade.
Fundamental Analysis: this examines economic and political influences on currency.
An Investor is the owner of an "Investor Account".
“Investor account” is the account of a client who is connected to a “Master Account”, under the "SyncInvest" project. This connection allows the Investor to copy the transactions made by the owner of the master account in an automatic mode. The trades are copied proportionately, depending on the amount of available funds on the investor account and on the terms of its connection to the master account.
Leverage: this means the borrowing of money from a broker. The most brokers provide usually the leverage ratio 1:100. Clients can usually choose different leverage ratios.
In order to carry out a transaction, a trader must first open an account with the Forex broker. The broker provides leverage to the trader to open an account, which is a type of loan. Usually, the leverage provided by the broker is 1:100. When using leverage, the client’s funds are called margin. The margin is freezed in the client’s account for as long as he holds the specific trade. Leverage gives the ability to the trader to manage an account much bigger than the one he would normally have and also significantly increase his yield in terms on investment.
Limit Order: an order to buy or sell a financial instrument at specific price.
In the American system, a U.S. dollar is being bought and sold at a fixed price against the foreign currency. TeleTrade, however, adheres to the European system, as the company carries out its main flow of transactions through European banks. In the European system, currencies are traded in lots. A lot refers to the transaction volume and represents 100 thousand units of the base currency.
For example, in terms of the euro/dollar pair, you may buy or sell 100 thousand euros (1 lot), through buying or selling the equivalent number of dollars. You can trade any multiple amount of 100 thousand units, i.e. 200 thousand euros (2 lots), 300 thousand euros (3 lots) and so on. Please note that big numbers in this case are misleading. In fact, a trader only needs to have one hundredth of the bid amount to actually carry out a transaction, i.e. 1,000 euros to trade 1 lot, 2,000 euros to trade 2 lots, etc.
When the trading volume is 0.1 lot, 0.2 lots, 0.3 lots, etc. special conditions apply. For a 0.1 lot deal, a trader will need 10 times less equity than for trading 1 lot – namely the trader will only need to place 100 euros. TeleTrade provides such a possibility, especially for clients with small accounts, giving this way access to Forex for people with low income.
When holding an open position, the margin requirements may be reduced or decreased depending on the changing rates of the financial instruments included in the transaction. TeleTrade calls for a margin requirement that is 10% of the initial margin provided.
Margin trading is when a trader conducts speculative transactions with the use of money borrowed from a Forex broker. Margin trading is like a form of loan, which allows you to buy more currency than you would be able to normally.
A Master is the owner of a "Master Account".
A "Master Account" is the account of a client who participates in the “SyncInvest” project. When a “master account” records a successful deal, it is automatically copied to an "investor account" in a proportional way.
The Master’s commission is set as a reward for the Master for the connection of an "Investor Account" to a "Master Account". The Master gets a commission for this connection. The fee is charged based on the actual total profits earned at the billing period (according to the results of all transactions recorded during the billing period). Read more about the mechanism of calculating Master’s commission on the "Buffer Account" section.
New Zealand Dollar (NZD): the currency of New Zealand, called “Kiwi” among FOREX traders.
Pip(s): the smallest exchange rate movement. The value of a pip can vary from one currency pair to another currency pair.
A point refers to the change of the last digit of a quote by 1 unit. For example, quotes 1.2815 and 1.2816 differ by 1 point and quotes 125.17 and 125.19 differ by 2 points. A difference of 100 points is called a "figure", for example, quotes 125.50 and 126.50 differ by a figure.
Profit maximization is when a trader obtains maximum earnings with the minimum risk.
Master accounts are ranked by their profitability. The profit rating includes a number of key features of the master accounts , such as their contracts, the total yield gained (by ranking), the number of active trading days, the Master’s commission, the last trading date, the maximum profit per trading day and the maximum drawdown per trading day. You can sort masters’ accounts by any of the above parameters.
A currency is quoted with regard to another currency. The reason for this is to estimate the value of one currency through the value of the other. The currency on the left (base currency) is equal to one unit and the currency on the right (quoted currency) is what that one unit is equivalent to. For example, if a quote on a GBP/USD pair is 1.5719, it means that 1 pound can buy more than 1 dollar and 57 cents. In general, currency pairs are quoted up to four decimal places. The only exception to that is the Japanese yen (JPY), which is quoted to two decimal places. For example, the quotation 105.17 for the USD / JPY pair shows that $1 equals to 105 yen “with a tail” or, more precisely, 105.17 yen.
Reserve Bank of Australia (RBA): The central bank of Australia.
Reserve Bank of New Zealand (RBNZ): the central bank of New Zealand.
Resistance Line: this connects at least two significant highs and prevents the exchange rate moving higher.
Rollover: a charge for holding a position overnight. The rollover could be positive or negative. It depends on each currency pair and on the type of position (buy or sell).
For exchange rates, banks charge fees which are called spread. A spread is the difference between the purchase price (bid price) and the sale price (ask price).
Spreads normally count just a few points. If we were to look at the following quote: EUR/USD 1, 2815/1, 2820 the spread would be 0.0005 or 5 points. This means that you can sell 1 Euro for 1.2815 dollars, and at the same time buy 1 euro for 1, 2820 dollars.
Stop Loss (S/L): an order to close a transaction when a loss reaches a threshold.
Stop Order: an order to buy or sell a financial instrument at a specific price.
Support Line: this connects at least two significant lows and prevents that the exchange rate dropping further.
A swap overnight is defined as the interest earned or paid for holding a position open through the end of the trading day. The swap rates are calculated based on the differentiation between the interest rates of the countries involved in each currency pair and whether the position is short or long, i.e. long/buy or short/sell. In any currency pair, the interest is deducted based on the currency sold and received based on the currency bought.
Calculations for swapping positions are made at 01.00 EET. If the deal is closed before this time, swap is not charged. Swap overnight rates usually range from a few tenths of a point up to 2.3 points. On Wednesday night, swap is calculated at triple rate, as bank payments for Friday to Monday are compensated. However, for transactions left opened from Friday to Monday, the normal single swap applies.
In general, swap does not constitute a considerable amount when it comes to calculating the results of a transaction. Traders have to be careful when planning a swap deal and think thoroughly if it is of benefit to them. Deciding whether to keep a position opened for the next day or close it on the same day, is based on whether the price movement on the next day will be in the right direction for the trader. Usually, experienced traders do not recommend keeping a deal opened for more than 3 trading days. Statistics say that after 2-3 days of a price movement to a certain direction, it would normally roll back. Therefore, holding a position opened for a long period of time, often leads to losing a significant amount of the accumulated profits of a transaction.
Swiss Franc (CHF): the currency of Switzerland.
Swiss National Bank (SNB): the central bank of Switzerland.
Take Profit: an order to close a transaction when a profit reaches a threshold.
Technical analysis: the analysis of price charts to forecast price direction based on past market data.
A time frame analysis refers to when a trader analyses the same currency pair over several different chart time frames, getting a more detailed idea of how the pair is behaving in the market. Traders usually organize their analysis based on three time frames; daily, weekly and 4-hourt charts.
To display the currency pair movement within one day, use a minute to hour chart (every line on the graph will show the price movement for 1 minute or 1 hour). To get an overview of the price movements over a period of several years, use a daily or weekly chart (each element of the graph corresponds to 1 day or 1 week and the overall chart may well encompass a period of several years).
A trader is a person who is engaged in trading on the exchange market. He is also referred to as speculator, because his aim is to profit from any market situation. The trader’s profit derives from the difference between the buying and selling price of a financial instrument.
The word trading is referred to the process of buying, selling or exchanging financial instruments in financial markets.
Trading Account: an account opened with a broker to carry out trading operations.
A trading day is a day during which the account holder has closed at least one transaction of any size and one of two following conditions were met; the final result of the transaction amounted to at least 25 points (no matter whether it was profitable or unprofitable) or the position for the transaction has been opened for at least 1 hour. Thus, a trading day may not coincide with a calendar day.
Before committing any transaction (whether buy or sell), you need to develop a trading plan.
But first, you have to decide on:
- Which currency pairs are you going to trade on;
- In which direction to trade (up or in both directions);
- In what price range and under which circumstances is it more favourable to trade;
- What are your earning goals;
- Your maximum allowable transaction risk.
The most basic trading plan should include the following information:
- On which direction, prices and conditions are you willing to make a deal? For example, the plan may be: Buy EUR / USD (euro against the dollar) after favourable news regarding the U.S. GDP in the price range of 1.3980 and 1.4040.
- Your goals for profit. How much profit do you realistically expect to make under specific market circumstances? For example, the plan may be: Following such favourable news, the prices are expected to increase above the nearest border and up to the next resistance level to 1.4040. When a milder market situation arrives, this plan is anticipated to record 50-60 pips.
- Decide on a price to fix potential damage (stop loss). Determine a scenario in case that your predictions are not realised or if something negative happens that might affect the market movement.
An important Forex principle is to let profits flow, but be able to react in time to cut of inevitable losses. According to statistics, in a well-planned trading system only 7-8 out of 10 trades end up to be profitable. The others, unfortunately, are unprofitable. It is, therefore, important that the revenue from the profitable trades exceeds the losses from the unprofitable ones. In order to achieve this, you have to follow the general rules of money management. You can also employ various trading tactics, such as reversal of position in the opposite direction in search of a more profitable position when the trend declines, as well as more sophisticated strategies.
You have to always be cautious to set up a stop-loss in order to minimise the level of risk you are taking. Your stop-loss should be determined by reasonable estimations and by also taking into account technical analysis figures. Determining a stop-loss is not just a method of risk protection against large losses, but also a tool to protect existing profits during a transaction.
Learn everything you need to know about developing a trading plan in our seminars!
Trading signals help you to spot trading opportunities. Each trading signal indicates when to buy, when to sell and where to set your stops and limits. When your trading plan is formed, you can go further by utilising trading signals to help you determine the most favourable time for transaction. However, trading signals must not be seen as comprehensive trading plans, but rather as a supplement to a previously prepared trading plan.
Trading signals are formed by figures of technical analysis. When a chart takes a specific pattern, it signals that the trend is about to reverse. Reversed patterns help us evaluate the situation before us; for example if a price is at the top or bottom of the market. Researching trading signals enable traders to form a detailed price range, where small movements and details are becoming apparent.
Technical analysis methods often utilise special auxiliary mathematical tools, such as computer indicators. They also generate additional trading signals. There are special details and applicability limitations that you have to be aware of in order to use each indicator. Such information can be found on lectures and practical sessions, where traders can look at examples of situations in which each indicator can be used.
Experienced traders tend to emphasise that computer signals are not a substitute of technical analysis graphs. While computer indicators can be a useful supplement to a trading system, it is possible to create a successful trading system without the use of any indicators. You have to keep in mind that a more difficult system does not always mean that it is better than a simpler one.
The objective of studying different methods of fundamental and technical analysis is to create a trading system that brings tangible results. In the future, any selected system should be able to adapt to each individual case, by taking into account factors such as the size of the investor’s deposit, the tendency to follow a conservative (cautious) or active (maximising) trading tactic, as well as psychological characteristics of the owner or manager of the account.
Thus, every trading system should be individualised and tailored to fit your specific needs. As demonstrated by our many years of presence in the market, the number of lectures and workshops we conducted, as well as our system of comprehensive training (seminars, workshops, one-to-one sessions), we understand quite clearly the operation of the Forex market and we are able to educate our clients to a solid foundation of successful trading.
A trailing stop is a stop-loss order that enables traders to minimise their risk by stopping one trade from binging losses to their account. The trailing stop is used to automatically close the position at a specific threshold, as soon as a certain price is reached. This tool is especially useful in cases of high directional movement of prices, when it is impossible to closely monitor the changes of markets and when the favourable movement (according to your opinion) is coming to an end. Thus, a trailing stop can protect and increase profits already attained.
Yen (JPY): the currency of Japan.