Glossary of Terms

Search common forex trading terms and definitions from A to Z.

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Below is a glossary of terms that are used in the online trading industry. Select the first letter of the word you are seeking from the list above to jump to the appropriate section of the glossary.

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P&L Statement

A financial statement that summarizes the trader’s total profits earned or losses realized from his/her current trading positions. Also known as a “statement of profit and loss”.

P/E

Price/earnings ratio.

PCI DSS

Payment Card Industry Data Security Standard (PCI DSS). A proprietary information security standard for financial institutions and organizations that make online transactions using major credit card and debit card providers (Visa, MasterCard, American Express, etc.). Administered and managed by the international Payment Card Industry Security Standards Council, PCI DSS is designed to increase data protection of card holders and reduce the risk of credit card fraud. Brokerage firms such as Fortrade must comply with this standard in order to maintain accreditation.

Peak

The highest point (i.e. price, rate, value) of a specified security or financial instrument at a specified time.

Pending Order

An order that has not yet been executed and therefore has not yet become an actual trade. It can, for example, be an order that a trader states his/her intention of ‘buying’ or ‘selling’ a financial instrument only when it reaches (touches) above or below a certain price level.

Penny Stocks

What are penny stocks?

Penny stocks are essentially stocks that trade for very small sums, generally defined by under $5.00, and by and large are traded over-the- counter (OTC). In the United Kingdom, a penny stock is defined as any stock with a share price below 1 GBP.

How does one use penny stocks?

Trading on penny stocks is much more risky than other stocks and CFDs. For one thing, penny stocks are much more speculative than traditional stocks, which makes accurate assessments of how the stock price will move and when much trickier. Second, because penny stocks are traded OTC rather than on any of the major exchanges, they are not closely regulated, which can – and on occasion does – result in scams and fraud. Finally, because the price action on penny stocks is extremely volatile, the bid-ask spread tends to be much wider than on traditional stocks, thus cutting even more deeply into an already risky profit margin.

This is not to say that there is nothing to gain from trading on penny stocks, only that it really should only be done by very seasoned traders who are not averse to taking more extreme risks.

Links related to penny stocks
Bid-Ask Spread
CFD
OTC Market
Spread

People’s Bank of China (PBC)

The central bank for the People’s Republic of China, and the second largest national monetary authority after the Federal Reserve Bank of the United States.

Pip

A numeral point a security or financial instrument’s price which denotes the smallest amount by which it can change. In forex, most currencies have four decimal places, and a pip is therefore one unit of the fourth decimal point (i.e. 0.0001 of the currency’s value). In some currencies, such as the Japanese yen, a pip may at the second decimal point – making it worth 0.01 of the currency.

Pip-Squeak Pop

What is a Pip-Squeak pop?

When a stock price shows a moderate, but not extreme increase, in a relatively short period of time, this is known as a Pip-Squeak pop. Not to be confused with a Champagne stock, which is a stock whose value has shown an extremely dramatic increase, a Pip-Squeak pop is generally considered to be an increase of 25-50% over a period of days or weeks.

How does Pip-Squeak pop affect forex traders?

Pip-Squeak pop recognizes an uptrend in a stock price, but should not be seen as a “sure-fire” investment. While the price is certainly worth a close watch, and may continue to rise, it could also peak, or even reverse direction, thus disappointing investors who saw it as the next potential Champagne stock. A solid fundamental and technical analysis can be very helpful in determining whether a Pip-Squeak pop stock is a wise investment or a bubble ready to burst.

Links related to Pip-Squeak pop
Champagne Stock
Uptrend
Upward Trend

Pivot Point

What is a pivot point?

Pivot points are technical analysis indicators that reflect upward and downward trends, as well as predicting when a price can be expected to change direction. Pivot points are determined by accounting the averages of an asset’s high, low, opening and closing prices, as well as support and resistance levels for the previous trading period.

How does the pivot point affect forex traders?

While pivot points can be used to help traders make longer-term decisions (weekly, even monthly), most commonly they are used for intraday trading to determine how a market price is most likely to move in the coming hours for short-term trades. If the pivot point is lower than the current price of an asset, then it is a price support, and it is seen as a resistance if the asset is trading lower than the pivot point.
Pivot points are especially useful in enabling traders to recognize the best times to open and close positions on assets, as well as whether the market is bearish or bullish at any given time.
Two things about pivot points are very important for traders to bear in mind. First, a pivot point is only one of several technical analysis indicators, and is most effective when used in conjunction with other technical and fundamental analysis tools. Second, like all analysis indicators, pivot points are predictive, which means that the market will not always behave in the way that the indicators, such as pivot points, could lead us to believe they will.

Links related to pivot point
Bear/Bearish
Bull/Bullish
Closing Price
Downward trend
Intraday Trading
Open Price
Resistance level
Support Level
Upward Trend

PLN

The official currency code for the Polish zloty.

Portfolio

A collection of investments held by an individual trader or financial entity.

Position

The net balance of trades held by a trader in his/her account at any given time. There are three types of positions a trader can hold: flat (i.e., no security bought or sold), long (i.e., more security bought then sold) or short (more security sold then bought).

Position Size

The amount of a security or financial instrument a trader buys (a long position) or sells (a short position).

Practice Account

What is a practice account?

A practice account, also referred to as a demo account, is just like a regular forex trading account in every way except for one – the trader does not invest, earn, or lose any real money. It provides traders with the opportunity to learn forex trading and develop effective trading strategies through experience, without the risk inherent in actual trading.

How does one use a practice account?

Many online brokers, including Fortrade, provide a practice account free of charge when traders register on the site, and “fund” the account with a sum of money (Fortrade, for example, starts traders off with $10,000 of imaginary money). Once the practice account is set up, you can start trading as though you were investing actual funds. It is a good idea to trade conservatively, at least at the beginning. A trader who “invests” unrealistic sums of the imaginary funds in the practice account simply because he has nothing to lose in real life, is not able to benefit from the purpose of having the practice account, which is to develop effective trading skills for when actual funds are being invested. Most experts and experienced traders recommend trading on a practice account for several months before investing real money. Click here to create a Fortrade account, and you can start with the practice account today.

Links related to practice account
Broker
Position

Premium Buy/Sell Rate

With regard to currency and foreign exchange markets, a premium rate is the interest rate a broker or brokerage firm quotes to a certain security or financial instrument in order to compensate for the difference in national interest rates.

Previous Close Rate

A security or financial instrument’s closing rate on the previous day of trading.

Profit

A financial gain, especially the difference between the amount earned and the amount spent in security or financial instrument trading.

Pullback

A reduction in price or demand of a certain security or financial instrument (from its peak). Also referred to as a price reversal.

Put/Call Ratio

The number of puts (options to sell traded assets) in relation to the number of calls (options to buy traded assets). Acts as an important indicator for determining the general market trend.

Did you know?
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