Forex Glossary | Currency Trading Terms & Definitions

B

Base Currency

The first currency listed in a forex pair, representing one unit against which the quote currency is measured.

C

Correlation

The statistical relationship between two currency pairs, indicating how they move relative to each other (together, opposite, or independently).

Technical Analysis

Cross Pair

A currency pair that doesn't include the US Dollar, such as EUR/GBP, EUR/JPY, or GBP/JPY.

Trading Basics

Currency Strength

A measure of how strong or weak a currency is relative to other major currencies, calculated by analyzing its performance across multiple forex pairs.

Currency Strength

D

Divergence

When two related indicators or currencies move in opposite directions, often signaling a potential trading opportunity or trend reversal.

Currency Strength

L

Liquidity

The ease with which a currency pair can be bought or sold without significantly affecting its price, reflected in tight spreads and fast execution.

Trading Basics

M

Major Pair

The seven most traded currency pairs, all including USD: EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD, and NZD/USD.

Trading Basics

P

Pip

The smallest price movement in a forex pair, typically the fourth decimal place (0.0001) for most pairs or second decimal (0.01) for JPY pairs.

Trading Basics

Q

Quote Currency

The second currency listed in a forex pair, showing how much of it is needed to buy one unit of the base currency.

Trading Basics

S

Spread

The difference between the bid (sell) price and ask (buy) price of a currency pair, representing the broker's transaction cost.

Trading Basics

Stop Loss

An order that automatically closes a trade at a predetermined price level to limit potential losses.

Risk Management

Support and Resistance

Key price levels where buying (support) or selling (resistance) pressure historically causes price to pause or reverse.

Technical Analysis

T

Take Profit

An order that automatically closes a trade at a predetermined price level to lock in profits when the target is reached.

Risk Management

Trend

The general direction in which a currency pair's price is moving over time - upward (bullish), downward (bearish), or sideways (ranging).

Technical Analysis

V

Volatility

The measure of price fluctuation in a currency pair over time, indicating how much and how quickly prices are moving.

Technical Analysis

Apply Your Knowledge

Use our Currency Strength Meter to see these concepts in action with real-time forex data.

Currency Strength Meter