Forex Glossary — A to Z
Plain-English definitions of every forex trading term you need to know as a Filipino trader.
A
Ask Price
The price at which a broker is willing to sell a currency pair. Also called the 'offer price.' The difference between the ask and bid price is the spread.
Arbitrage
The simultaneous buying and selling of an asset in different markets to profit from price differences. Rare in modern forex due to high efficiency.
B
Base Currency
The first currency in a forex pair. In USD/PHP, USD is the base currency. The exchange rate shows how much of the quote currency you need to buy one unit of the base currency.
Bear Market
A market trend characterized by falling prices over a sustained period. In forex, a currency pair is in a bear market when its price has fallen 20% or more from recent highs.
Bid Price
The price at which a broker is willing to buy a currency pair from you. This is always lower than the ask price, with the difference being the broker's spread.
Bull Market
A market condition in which prices are rising or expected to rise. A currency pair is in a bull market when buying pressure consistently exceeds selling pressure.
C
CFD
Contract for Difference — a financial derivative allowing traders to speculate on price movements without owning the underlying asset. Most forex trading in the Philippines is conducted via CFDs.
Currency Pair
Two currencies traded against each other in the forex market. Examples: EUR/USD (Euro vs US Dollar), USD/PHP (US Dollar vs Philippine Peso). Major pairs include USD; minor pairs don't.
D
Day Trading
A trading style where positions are opened and closed within the same trading day, with no trades held overnight. Suitable for active traders who can monitor markets throughout the day.
E
ECN
Electronic Communications Network — a system that connects traders directly to liquidity providers, resulting in tighter spreads and faster execution. ECN brokers like IC Markets and Pepperstone offer ECN accounts.
Exchange Rate
The price at which one currency can be exchanged for another. For example, if USD/PHP = 57, you need 57 Philippine pesos to buy 1 US dollar.
F
FOMC
Federal Open Market Committee — the body of the US Federal Reserve that sets US interest rate policy. FOMC meetings often trigger major forex market volatility, especially in USD pairs.
G
GCash
A Philippine mobile wallet and payment platform by Globe Telecom. Exness is currently the only major international forex broker accepting GCash for direct deposit and withdrawal.
H
Hedging
A risk management strategy of opening positions that offset potential losses in existing trades. For example, holding both a long and short position on the same pair, or trading correlated pairs in opposite directions.
I
Indicator
A mathematical calculation based on price and/or volume data used to forecast future price movements. Common indicators include the RSI, MACD, Bollinger Bands, and Moving Averages.
L
Leverage
The use of borrowed capital to increase the potential return of an investment. A 1:100 leverage means you can control $10,000 with only $100. While it amplifies gains, it equally amplifies losses — use with caution.
Liquidity
The ease with which an asset can be bought or sold without affecting its price. The forex market is the most liquid in the world, with over $7.5 trillion traded daily.
Lot Size
A standardized unit of trade in forex. A standard lot = 100,000 units of base currency. A mini lot = 10,000 units. A micro lot = 1,000 units. Most retail brokers let you trade micro lots.
M
Margin
The amount of money required to open and maintain a leveraged position. If leverage is 1:100 and you want to trade $10,000, your required margin is $100.
Margin Call
A notification from your broker that your account equity has fallen below the required margin level. If not resolved by depositing funds or closing positions, the broker may automatically close your trades.
MetaTrader 4 / 5
MetaTrader (MT4 and MT5) is the world's most popular forex trading platform, developed by MetaQuotes. Almost all major brokers available in the Philippines support MT4 or MT5.
P
Pip
Percentage in Point — the smallest price movement in a currency pair. For most pairs, 1 pip = 0.0001. For JPY pairs, 1 pip = 0.01. Example: if EUR/USD moves from 1.1000 to 1.1001, that's a 1-pip move.
Position Size
The number of lots you trade in a single transaction. Proper position sizing — calculated based on your account balance, risk percentage, and stop loss — is a key element of risk management.
Q
Quote Currency
The second currency in a pair. In USD/PHP, PHP is the quote currency. The exchange rate tells you how much PHP you need to buy 1 USD.
R
RSI
Relative Strength Index — a momentum indicator (0–100 scale) used to identify overbought (>70) or oversold (<30) conditions in a currency pair. Developed by J. Welles Wilder.
Risk Management
The process of identifying, analyzing, and limiting losses in trading. Key techniques include setting stop losses, using proper position sizing, and never risking more than 1–2% of capital per trade.
S
Scalping
A trading strategy focused on making many small profits by opening and closing positions within seconds or minutes. Scalpers need very tight spreads and fast execution — ECN brokers are best suited for this.
Spread
The difference between the bid and ask price, representing the broker's primary fee. A spread of 1.0 pips on EUR/USD means you start each trade 1 pip in the negative. Lower spreads = lower trading costs.
Stop Loss
A pending order that automatically closes your position when the price reaches a specified level, limiting your potential loss. Setting a stop loss on every trade is a fundamental risk management practice.
Swing Trading
A trading style where positions are held for several days to weeks, aiming to profit from medium-term price swings. Requires less time monitoring charts than day trading.
T
Take Profit
A pending order that automatically closes your position when the price reaches your target profit level. Setting take profits helps you lock in gains without needing to constantly watch the market.
Technical Analysis
The study of historical price charts and patterns to predict future price movements. Common tools include trend lines, support/resistance levels, chart patterns, and technical indicators.
V
Volatility
The degree of variation in a currency pair's price over time. High volatility means larger price swings — more opportunity but also more risk. JPY, CHF pairs tend to spike in volatility during global risk events.