Common Trading Terms and Definitions for Currency Market

Arbitrage
The simultaneous buy and sale of an asset in order to profit from a difference in the current price. It is a trade that gains by exploiting price differences of similar financial instruments, on different markets.

Hedging
The practice of removing the price risk in any cash market position by taking an equal but opposite side position in the futures market. Hedgers generally use the Option & futures markets to protect their capital from adverse price changes.

Liquidation                                            
Any transaction that closes out a long or short position or long cash position.

Short
The selling of a spot contract, in this you first sell currency or commodity and then later buy that currency with a certain amount of profit/loss.

Scalp
To trade for small gains in quick time. Scalping generally involves establishing and liquidating a position quickly, usually within the same day, an hour or even just a few minutes.

Speculator
One who Buy and sell, commodity and currency for a short period of time to make a certain amount of profit from the market.

Day Order
An order that is put for execution during only one trading period. If the order cannot be executed that particular day, it automatically cancels at the close of the trading day.

Stop Order
Sometimes called a Stop Loss Order, it used to start a new position as well as close an existing position. An order to buy or sell of an instrument at the market when a specified price is reached. This order active up to price reaches that point.

Open Order
An order to an exchange that is open until it is cancelled by speculator or executed in the market.

Market Order
An order to buy and sell of a specified stock, commodity, currency including the quantity of instrument and delivery month at the best possible prices available in the market.

Intraday Trade
The buy and sell of a currency spot contract and square off that position in the same trading day.

Settlement Price
The last price traded on a currency and commodity market on any trading day.

Leverage
It gives you to control large dollar amounts of currency and commodity with a comparatively small amount of capital. This leverage is provided by your brokerage and Its different from broker to broker. In currency market ratio is 400:1.

Initial Margin
The minimum amount requires on your trading account to establish a new position or to add to an existing position. Initial margin amount levels differ from instrument wise. Currency market requires minimum initial margin.

Margin Call
A request from a clearinghouse or from a brokerage firm to a client, to bring margin deposits up to a minimum level required to support the current positions hold in your trading account. This can be done by either depositing more funds or square off some or all of the positions held.

Position
In spot currency market amount of open buy (long) and sell (short) quantity hold by particular trader and firm.

Ask
A purchase price, indicating a willingness to buy a futures contract at a given price.

Bid

An offer and sell price, willingness to sell a futures contract at the best market price.

Bear
One who expects the price to slip further from the current market price.

Bull
One who expects prices to advance further from the current market price.

Bear Market
A market in which trend is a downside. When prices decline 20% from top-level then we can call bear market start.

Bull Market
A market in which trend in the upside. When prices rose 20% from a low level then we can call bull market start.

Spread
The price difference between the bid and ask price.

Commodity
A product that can be used for commerce purpose and products traded on a commodity exchange. The types of commodities include agricultural products, natural gas, crude oil.