Asset refers to the currency pairs or contracts used by traders in their operations.
Automated trading is a method used in the Forex market where trades are executed by automatic software. This software follows a specific algorithm that includes both trading rules and risk management strategies.
Alex Gerchik is a seasoned professional in the trading world. He has been active in financial markets for more than 25 years. Since 1998, he has traded on the NYSE/NASDAQ, RTS, and CME. From 2003 to 2009, he served as a managing partner at Hold Brothers LLC, one of the largest brokerage firms in the U.S. In 2006, he took part in Mojo Wall Street Warriors, a high-profile CNBC project featuring 24-hour coverage of global stock exchanges and financial markets. Out of 2,000 traders, he was named the safest trader, with virtually no losing days in day trading. He has lived in the United States for the past 30 years.
Arbitrage means buying or selling an asset while simultaneously opening the opposite trade on another financial asset to profit from a short-term price difference.
Ask Price is the highest price in a currency pair quote at which the base currency is purchased.
Appreciation of a currency pair is when the base currency strengthens relative to the quote currency, typically due to increased demand from market participants or economic factors.
Balance account is used for deposits and withdrawals, paying out the manager’s reward, and making internal transfers between a client's accounts. (Currently, it's also used to credit returns from closed investments and to pay the affiliate and agent’s reward. In the future, separate investor, affiliate, and agent accounts will handle these functions.)
Once the balance account is topped up, the client can proceed to open a trading account. The specified amount will be transferred from the balance account to the newly created trading account based on the client’s input during the setup process. The client also has the option to move funds from the balance account to the investor account and then submit an investment request to a TIMA account. When a TIMA account is opened, the investment amount is withdrawn from the balance account and credited to the TIMA account as the manager’s starting capital.
Base currency is the currency listed first in a currency pair. In Forex trading, you always buy the base currency against the second currency in the pair.
Bretton Woods Agreement is the international agreement that established fixed exchange rates for major world currencies. Under the agreement, the U.S. dollar was backed by gold, with one ounce valued at $35. It remained in effect until 1971, when U.S. President Richard Nixon ended it. (You can read more about the Bretton Woods system separately.)
Broker (Forex Broker) is a legal entity that gives traders access to the Forex market. A broker serves as a middleman between buyers and sellers of currencies and earns a commission from each transaction carried out by traders.
Bid/Ask spread is the difference between the buy price (Ask) and the sell price (Bid) of a trading asset, typically measured in pips.
Bid Price is the lower value in a currency pair quote, used when selling.
Central bank is the primary financial institution of a country and plays a key role in the national banking system. The Central Bank serves as the nation's treasurer, is responsible for issuing the national currency, and operates as a link between the government and private banks. Its main task is to maintain the stability of the national currency within the country and support its exchange rate on the international market.
Client account balance is the sum of all closed trades plus any balance operations (replenishments or withdrawals).
Chart refers to visual representations, such as graphs and diagrams, that display changes in exchange rates or indicator values. Types include candlestick, line, tick, Renko, bar, point and figure, and Kagi charts.
CFD (Contract for Difference) is a financial instrument that allows traders to profit from the price movements of various underlying market assets (e.g., stocks, currencies, indices, commodities) without actual ownership or taking physical delivery of the asset. This provides flexibility to trade both rising and falling markets. For example, over 600+ CFDs are available at Gerchik & Co.
Currency intervention is when a central bank steps in to influence the formation of currency rates to help control the price of the national currency. If multiple Central Banks act together to influence exchange rates, this is known as a coordinated intervention.
Currency basket is a method used to set and determine the average exchange rate of a currency in relation to a selected group of other currencies. The choice of currencies in the basket depends on the goal for which the rate is being calculated.
Currency pair is the value of one currency expressed in another. It consists of two currencies and forms a quote in Forex. A currency pair is typically written with a slash.
Currency risk is the chance that a trader may incur losses on a position due to incorrect predictions about exchange rate movements.
Commission is the broker’s fee for executing and routing the client's orders to the market. It can be a fixed dollar amount per certain volume or calculated as a percentage based on the trade size. For instance, on a Simple account, trading 1 lot in currency pairs will incur a $10 commission. When trading CFDs (on indices and others), a 0.01% commission is charged based on the trade amount, so the commission for these assets is always floating.
Counter currency is the second currency in a pair and represents how much of it is needed to buy one unit of the base currency.
Cross-currency pair or cross is a currency pair quote that does not include USD. For instance, EUR/JPY.
Closed position is a trade whose outcome has already been finalized, meaning that any further changes in the market can no longer impact it. To close a position, a trader makes a trade opposite to the initial one, using the same transaction volume.
Day trader is a market participant who carries out all trading activity within a single trading day, ensuring that no open positions are left overnight.
Deposit refers to the funds a client (trader or investor) deposits into their trading account. This deposit is used to open positions in the financial market according to margin trading rules.
Direct quote represents the price of one unit of foreign currency in terms of the national currency.
Economic event calendar serves as a source of up-to-date economic data and statistics that have a major impact on short-term price movements and can occasionally trigger long-term trend shifts.
Export Prices is an indicator that tracks monthly price changes and generally correlates with inflation trends. While it has a minor impact on the market, its growth can lead to a rise in currency prices if a hike in interest rates is expected. It’s published monthly on the 10th at 1:30 p.m. GMT, alongside the Import Price Index.
Equity is the amount of available funds in a trader’s account, including open position profit/loss.
European Monetary System (EMS) is a system established in 1979 to promote currency market stability and strengthen economic integration among the countries of the Old World. Member states were required to adhere to limits on exchange rate fluctuations, with an allowable deviation of no more than 2.25% in either direction. EMS was built on the foundation of a unified exchange rate mechanism, the introduction of a common currency unit (ECU), and collaboration within the European Cooperation Fund. The system remained in place until the end of 1998. In 1999, the euro was officially introduced into circulation.
Expert Advisor (abbreviated as EA) is an automated trading system (typically in MetaTrader) that operates using a preset algorithm or strategy.
Flat is a calm state of the market where there's no clear trend direction.
Futures contract is a legal agreement to buy or sell an asset at a specified future date.
Foreign Exchange Market is the international currency trading market, operating 24/7, allowing traders to profit from fluctuations in exchange rates.
Fundamental Analysis is a method of analyzing the market based on political, economic, or natural events to forecast future asset behavior.
Forex quote is the value of one freely convertible currency expressed in another, showing the current price of a monetary unit. The first currency is the base, and the second is the quote. In a pair, the base comes first and the quoted second.
Forex order is an instruction from a trader to execute a trade at a specified price, submitted to the broker.
Forex trader is a market participant who executes trades with various financial assets like currencies, stocks, or derivatives.
Free margin is the portion of a trader’s funds not tied up in open trades and available for opening new positions.
Free funds (Equity) refer to the amount in a trader's account that is available for opening new positions. This amount continuously changes during trading, depending on the trader's performance in the market.
Gap is a sudden price jump in currency quotes, where one candlestick closes at one level and the next one opens at a completely different price. Gaps are easy to spot on a chart with the naked eye. You can read more about gaps in Forex trading separately.
GDP (Gross Domestic Product) is a key macroeconomic indicator that shows the total value of goods and services produced within a particular country over the course of one year.
Giro refers to a form of non-cash payment that involves the use of checks or bills of exchange, accompanied by a written instruction to a banking institution to transfer funds to the account of a third party or organization.
Hedging is a risk management technique involving opening an opposite trade to limit potential losses on an existing position.
Investor is a client who allocates funds to TIMA accounts to earn passive income. The investor can choose one or several TIMA accounts and submit investment requests. By doing so, the investor agrees to the manager’s offer and sets a maximum risk level. If that level is reached, the investment will automatically close.
The investor has the option to submit requests to close an investment, withdraw profit, partially close an investment, or withdraw profit at any time. The request will be processed during the next daily rollover if it was submitted after the application submission cutoff time and if the investment hasn’t already been automatically closed due to Risk per Investment. If the request was submitted before the application acceptance cutoff, it will be executed on the following business day during the rollover period. If the investor withdraws part of the investment amount and the remaining balance falls below the minimum investment threshold set by the manager, the investment will be closed.
Indicative quote is a quote that reflects the current market value of a currency pair. If the trader chooses, a trade can be executed at this rate at the present moment.
Initial margin is a form of collateral required from a trader to open a position. It serves as a guarantee that the broker will fulfill its obligations toward the trader.
Indirect quote is the price of a unit of local currency expressed in foreign currency units.
Japanese candlesticks (candlestick chart) is a distinctive type of price chart representation where the opening and closing prices (referred to as open and close) are clearly displayed for a specific time period, along with their highest and lowest values. This format is also known as a candlestick chart. To make interpretation easier, candles typically use different colors to indicate the direction of the trend.
Long position is a trade a trader opens to buy a currency. In this position, the trader purchases the base currency.
Leverage is the ratio between the margin provided and the full value of the trade. It’s shown as a ratio, e.g., 1:200 means your capital is multiplied by 200. So $1 allows you to trade as if you had $200.
Liquidity represents the volume of buying and selling in the market at any time and reflects the ability to execute trades without major price shifts.
Locked positions mean opening long and short positions simultaneously with equal volumes on the same trading asset.
Lot is the base unit size in Forex. One standard lot is 100,000 units of the base currency.
Lot size refers to the volume of a trade on the forex market. Standard lot sizes can start from 0.01 and scale up depending on the trade size.
Level is an important price point from which the market has repeatedly bounced off or broken out with consolidation. It is considered a strong technical analysis signal.
Manager is a client who opens a TIMA account with the goal of managing investors’ funds. If the manager performs well, they receive a share of the profits as remuneration.
Margin is a deposit required to maintain open positions based on the leverage used by the client. For example, if a client opens a 1-lot trade on the EUR/USD currency pair at a rate of 1.08 with a leverage of 1:100, their account must have at least 1.08 × 100,000 / 100 = 1,080 dollars, as this amount will serve as the margin (collateral) to open the trade.
Margin level is the ratio between a trader’s funds and the used margin, shown as a percentage. Each broker sets its own minimum acceptable margin level and includes this value in its trading terms.
Margin Call is a notification from the broker requiring the trader to deposit additional funds as collateral. This typically happens when there’s a drawdown during trading activity. If the trader fails to add the required funds, the broker will forcibly close open positions.
Margin trading is trading with the use of leverage, which allows the trader to open positions with volumes that are hundreds of times larger than the actual funds available in their account.
Market maker is a major participant in the currency market, including banks and financial institutions, who significantly influence the current exchange rate level through their large volume of trading operations. They manage the buy/sell pricing of various currencies, execute trades, and ensure liquidity for specific instruments by placing orders during trading sessions.
Non-trading operation is any financial activity not related to trading, deposits, withdrawals, or commission refunds by the broker.
Pending order is an order type where trade execution parameters are pre-set. The trade (either opening or closing a position) is executed only when the market price reaches the levels specified by the trader.
Profit/Loss on the market is the cumulative result of a trader's activity, including gains or losses from both open and closed positions.
Pips (point) on Forex is the smallest possible price movement for a currency pair, typically the fourth decimal place.
Price chart is a visual representation of a financial assets’s price movements, displayed in real time.
Protective order is a specific type of stop order that sets a price less favorable to the client than the previous one. It is used in the following scenarios:
• a buy order is triggered at the specified price or when that price is exceeded, and a sell order is triggered at the specified price or when that price drops below.
• a buy/sell order is executed strictly at the designated price.
Prop Trading (Proprietary Trading) is a trading financial instruments using a broker's capital, not personal funds. Traders receive company capital (e.g., $5,000-$200,000) and professional tools, keeping a significant share of the generated profits (e.g., 80%).
Quote is the current exchange rate of a trading asset, reflected as Bid and Ask prices.
Quote currency in the Forex market is the currency listed second in a currency pair and shows how many units of the quote currency must be given for one unit of the base currency.
Quotes flow is a continuously updated list of quotes for all trading assets available in the terminal. A trader can place trades at any of the current quotes listed.
Risk Management is a set of rules and tools designed for the systematic protection of trading capital. Its primary goal is to minimize potential losses, control the risks associated with each trade, and ensure the long-term survival and growth of the trading account in the market.
Risk Manager is the unique automated solution designed to protect a trading account from losses. It allows users to set predefined loss thresholds (per trade, day, or month), ensuring efficient risk management, minimizing emotional impact, and fostering consistent trading.
Short position is a trading operation in which profit increases when the market price of the asset decreases, when the asset’s value goes down. A short position means that the trader is selling the base currency of the currency pair.
Sell Limit Order is an order that a trader sends to a broker to sell a trading asset at a price equal to that specified in the order and higher than the current market quote.
South or going south is market slang for a downward trend, or “bearish” direction.
Swissie is a nickname for the Swiss franc (CHF), often referenced in USD/CHF.
Spike is a price peak or dip that stands out as significantly higher or lower than the surrounding highs or lows on previous and following days. Spikes can signal the climax of a buying or selling wave. In certain cases, they highlight critical high or low price levels.
Short refers to a short position. “Going short” is a slang expression for selling an asset.
Swap (Swap Forex) is a rollover fee charged by the broker for holding a position open overnight, which can be either positive or negative depending on the interest rate differential.
Straight Through Processing (STP) is a trade execution method where orders are passed directly to liquidity providers without dealer intervention, promoting transparency and speed.
Sell Limit Order is a pending request submitted by a client to open a sell trade at a price above the current market level. Once the specified price is reached, the order is activated, and a market order is sent for execution at the best available prices at that moment. During execution, the client may receive a price that is either better or worse than the one initially specified. The indicated price in the order does not guarantee execution at that exact level. This highlights a key difference between pending orders in the forex market and those on stock markets.
Stop out is a forced closure of open positions by the broker due to insufficient margin to maintain them.
Stop Loss is a risk management tool; this is a pending order to close a trade once the price hits a specified level, limiting potential losses.
Two-way quote is a simultaneous quote showing both the buying price (ASK) and selling price (BID) of a currency.
Timeframe is the selected interval of time (e.g., 1 minute, 1 hour, 1 day) used on price charts to analyze the movements of the price quotes.
Technical analysis is a method used to forecast market price direction by studying price charts, historical movements, and various technical indicators. The goal is to predict future price trends with as much accuracy as possible.
Tick is the smallest incremental movement in the price of a trading asset.
Trading account is a dedicated account that a trader opens to operate on the currency market. It is used for all trading activity, including opening and closing orders, tracking open positions, recording completed trades, and handling non-trading operations.
Variation margin is an additional amount a trader must pay to a broker to cover potential exchange rate fluctuations.
Volatility is the range within which the price of a financial asset fluctuates. It’s one of the key indicators of how attractive an asset is for trading. Volatility also shows the level of risk associated with trading a given asset. The higher the volatility, the wider the price swings over a set period.
World Trade Organization (WTO) is an international authority established in 1994 to manage trade relations between countries. Today, the WTO includes more than 160 member states.
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