The Forex trading terminology
Understand majors, minors and exotics as well as the day to day phrases and acronyms used in forex trading.
How many times have you been part of a conversation between fx traders, or reading a discussion on a forex blog / forum and many of the words or phrases used dont make sense?
In our blog today, we are going to be looking at the different types of pairs and what they mean (Majors, Minors, Exotics) as well as some of the basic terminology, acronyms and language used in forex trading.
Types of fx pairs
When deciding what to trade you'll see the symbols of the currencies available. For example if your are going to trade the EURO vs the US DOLLAR, you will see the currency symbols:
EUR / USD
The first currency mentioned which in this case is the EURO is called the BASE currency, and the second currency which in this case is the USD is called the COUNTER Currency.
The most commonly traded pairs are called MAJORS and these include:
EUR/USD (EURO - US DOLLAR) USD/JPY (US DOLLAR - JAPANESE YEN) GBP/USD (BRITISH POUND - US DOLLAR) USD/CHF (US DOLLAR - SWISS FRANC) AUD/USD (AUSTRALIA DOLLAR - US DOLLAR) USD/CAD (US DOLLAR - CANADIAN DOLLAR)
You will notice that the US Dollar is always part of the currencies in the MAJOR pairs. MAJOR Pairs are the most traded pairs in the forex market and make up the majority of all trades. Therefore majors offer multiple traded opportunities with high liquidity.
You can also trade crosses, which are pairs that do not include the USD but contain other major currencies. For example, this could be the EUR/JPY.
Lastly we have the exotics. Exotics are made up of one major currency and one from an emerging market. An example could be EUR/ZAR (Euro / South african rant)
As mentioned above, sometimes traders use language that might make no sense to a person who is not a trader.
If for example, we imagine a conversation that involves phrases like:
- Going short whilst watching guppy
- I am currently flat but looking to go long.
Would you understand what the traders were saying?
What the traders are actually saying in the first instance would refer to them selling GBP/USD and looking for trade opportunities in GBP/JPY.
In the second instance what the traders are saying would be that currently they have no positions open at the moment but they are looking for opportunities to buy.
We ‘ve prepared a list of the most common slang words used in trading.
Going LONG - When you place a trade that is going to profit if the exchange rate rises Going SHORT - When you place a trade that is going to profit if the exchange rate falls FLAT - You have no positions currently open GREENBACK - US Dollar or USD Aussie - Australian Dollar or AUD SWISSY - Swiss Franc or CHF KIWI - New Zealand Dollar or NZD LOONIE - Canadian Dollar or CAD FIBER - Euro / Dollar pair or EUR/USD CABLE - British pound / US Dollar pair or GBP/USD GUPPY - British Pound / Japanese Yen or GBP/JPY YUPPY - Euro / Japanese Yen or EUR/JPY CHUNNEL - Euro British Pound or EUR/GBP
Now that we ‘ve touched on the most important aspects of understanding the different types of pairs available as well as the basic acronyms used for currencies, you should be able to dive deeper and participate in conversations with other forex traders that would in the past make no sense.