The forex industry is made up of so many definitions that it's easy to forget a few along the way. Do you know your Loonie from your Loti? Can you tell your Shooting Star from your Evening Star? Take the time to get to grips with forex jargon because understanding forex vocabulary is an important step in a trader’s journey.
Since no forex education can be complete without a glossary of basic forex terms, we've compiled one which explains key words and phrases in the simplest way possible. This way, you'll never be lost or confused with forex terminology!
The Moving Average Convergence/Divergence is a momentum oscillator developed by Gerald Appel. It is the difference between a 12 period and a 26 period Exponential Moving Average plotted usually as a histogram above (difference is positive) or below (difference is negative) the zero line. A 9 period Simple Moving Average of MACD is known as the Signal Line.
MACD follows the general rules of oscillator analysis:
Moroccan Dirham. The currency of Morocco. It is subdivided into 100 santimat.
See MGA.
See MWK.
See MYR.
See Depth of Market.
A technical indicator developed by Dr. Bill Williams to evaluate the efficiency of the price movement. An efficient market is defined as a market when all traders (long-term and short-term) are actively trading. The indicator combines price and volume:
MFI = (High – Low) * Volume
There are 4 combinations:
See Market Rate.
A technical analysis tool developed by J. Peter Steilmayer to allow traders to get information about the activity in the futures pit. It displays price distribution and reveals who is in control of the market:
A technical indicator developed by Donald Dorsey. It measures the difference between High and Low prices in order to identify reversals. Trading signals are triggered when a “reversal bulge” is identified. That is, a reading above 27.0 and then a decline of the indicator below 26.5.
A buy signal occurs during a downtrend and a “reversal bulge” in place.
A sell signal occurs during an uptrend and a “reversal bulge” in place.
A Japanese candlestick pattern signaling a bearish reversal. At the end of an uptrend, a long white candlestick and a smaller white candle that follows, share the same closing price. Even though the second candle opens lower than the previous close, it doesn’t manage to move lower and eventually it closes at the same price as the previous session. This is indicative of a possible top. Since the market failed to record a new high, a resistance may have been formed and a possible reversal may be in place.
A Japanese candlestick pattern signaling a bullish reversal. At the end of a decline, a long black candlestick and a smaller black candle that follows, share the same closing price. Even though the second candle opens higher than the previous close, it doesn’t manage to follow through and eventually it closes at the same price as the previous session. This is indicative of a possible bottom. Since the market failed to record a new low, a support may have been formed and a possible reversal may be in place.
See MUR.
A market breadth indicator. It was developed by Sherman and Marian McClellan. It is the difference of a 19-period EMA and a 39-period EMA of advancing minus declining issues in the New York Stock Exchange.
A reading above 100 implies extreme overbought conditions whereas a reading below -100 signals extreme oversold conditions. A buy signal is triggered when the oscillator falls in the area between -70 and -100 and then turns up. Similarly, a sell signal is generated when the oscillator rallies in the area between 70 and 100 and then turns down.
The midpoint of a period’s price activity. It is calculated as:
(High + Low) / 2
A Japanese candlestick pattern signaling a bullish reversal. During the course of the uptrend, the presence of a long white candlestick confirms the strength of the prevailing direction of the market. While the sentiment is clearly positive, the next session gaps even higher, creating an open window. Eventually the session closes lower but at the same level as the previous session’s close.
A Japanese candlestick pattern signaling a bullish reversal. During the course of the downtrend, the presence of a long black candlestick confirms the strength of the prevailing direction of the market. While the sentiment is clearly negative, the next session gaps even lower, creating an open window. Eventually the session closes much higher but at the same level as the previous session’s close.
See MXN.
A micro lot is equal to 10,000 units of the base currency in a currency pair.
Historical data modelling for backtesting Expert Advisors. There are three available methods:
See MDL.
It measures the difference between the current price and the price n periods ago of a financial instrument. If the difference is above the 100-line and rising then it is presumed that the uptrend is accelerating. If the difference is below the 100-line and falling then the downtrend is accelerating. If the difference is above the 100-line and falling then the uptrend is decelerating. Similarly, if the difference is below the 100-line and rising then the downtrend is decelerating. Momentum follows the general oscillator analysis:
It is a momentum oscillator developed by Gene Quong and Avrum Soudack.
It combines both price and volume. It measures the strength of money flowing in and flowing out of a financial instrument over a period.
There are two general interpretations:
A Japanese candlestick pattern signaling a bullish reversal. A long black candlestick forms in the direction of the prevailing trend, signifying that the decline is still in force. Next session gaps below, forming a small candle, in this case a Doji that acts as an obstacle to further decline. A long white candle drives the market higher, well into the long black candle’s body and more specifically above its mid-point, indicating a bullish reversal.
A Japanese candlestick pattern signaling a bullish reversal. A long black candlestick forms in the direction of the prevailing trend, signifying that the decline is still in force. The next session gaps below, forming a small candle that acts as an obstacle to further decline. A long white candle drives the market higher, well into the long black candle’s body and more specifically, above its mid-point - Indicating a bullish reversal.
See MAD.
In Elliott Wave theory, a complete cycle has two phases, Motive and Corrective.
The Motive phase consists of the waves 1, 2, 3, 4 and 5. The Motive wave moves in the direction of the wave of one larger degree.
A trend following indicator. It is a series of averages of sequential data subsets. It may be used as a curving trend line that follows the price action. Buy signals are seen when prices cross above the moving average whereas sell signals are in place when prices cross below the moving average. There are many moving average calculation methods:
The major difference between the calculation methods is the weight attached to the most recent prices.
See MACD.
A technical oscillator that plots the difference between MACD and the Signal Line.
Extremely high readings warn for overbought conditions whereas extremely low readings warn for oversold conditions. A crossing above the zero line signals uptrend confirmation while a crossing below the zero line signals downtrend confirmation
See MZN.