Our three part tour of FX trading terminology now concludes with the letters O through to Z.
FX Trading Glossary (O To Z)
Offer Rate – The rate at which you can buy a currency from a market maker or dealer.
OCO Order (One Cancels The Other) – A distinct type of FX order where as soon as one order position is opened, the other is automatically cancelled.
Opened Position – A trade that is currently live in the market. An open position can be neutral, or have an unrealized profit or loss. That profit or loss will only be realized when the trader closes the position.
Over The Counter – Abbreviated as OTC, Over The Counter transactions refer to those that are not executed within an exchange.
Overnight Position – Many FX traders will refuse to keep positions open beyond the existing trading session. In the event they do, this is known as an overnight position which remains open when the trader logs on the following morning.
Pip – The smallest unit of movement within the FX market.
Profit & Loss (P/L) Account – An aggregation of all FX trading activity conducted by a trader over a period that will show a net profit or loss.
Position – Refers to an open trade of any direction. Positions will either tend to be long (when FX traders wish the price to rise), or short (when they wish the price to fall).
Rally – A price surge in the opposite direction to recent activity.
Range – The price range in a session relates to the difference between the high and the low. Ranges can be specified for many different periods – days, hours, minutes or even years.
Retracement – A brief period of reversed price direction to the prevailing FX trend. Even when the price is trending keenly in one direction, FX markets never move in a straight, inclined line. Rather, the trend is broken by periods of price retracement. Technical analysis can help determine when retracements are just part of an overall and intact trend.
Reversals – A change in the direction of the price.
Resistance – A vital technical analysis concept referring to a region that price action struggles to penetrate. Resistance areas are important to FX traders because they often represent price reversal points.
Risk Control – The technique through which FX traders maximize the use of their capital by trading in positions that offer a good risk/reward return.
Slippage – The difference in the price quoted by an FX broker and the price that the transaction is actually executed at.
Stop Loss – A crucial trading technique used to minimize FX trading losses and protect equity.
Scalper – A type of short term FX trader who looks to gain small profits within highly focused time frames.
Support – Support levels are regions that price historically has not fallen below. Support price areas are extremely important as they often represent potential turning points in price (upwards).
Short – A short position is taken when a trader believes the currency pair will fall in value. When shorting, we sell the currency pair first, and then buy it back at a later date (hopefully when the price has dropped).
Technical Analysis – A form of market analysis which amalgamates various currency trading information into chart form.
Trend – The general direction of movement that price action is taking. This can be an uptrend (upwards movement) or a downtrend (downwards price movement).
Whipsaw – Choppy and uncertain price movement which jerks up in one moment or candlestick, and down the next.