Currency
The monetary value a country uses for exchange of goods and services. For example, the name of the currency used in the USA is the United States Dollar, or abbreviated USD.

Currency Pair
The direct comparison of two different currencies and the equivalent values needed to buy or sell each one using the opposite currency. For Example, Eur / USD is comparing the European Euro to the United States Dollar.

Offer / Ask
This is the value at which you would trade (or buy) the second currency with the value of the first currency (Purchase Price). For example, if the currency pair EUR / USD had a OFFER / ASK price of 1.50000, then you would be getting 1.50000 United States Dollars for every 1.00000 European Euro traded (or sold). You add the second currency, and lose the first currency.

Bid
This is the value at which you would trade (or buy) the first currency with the value of the second currency (Selling Price). For example, if the currency pair EUR / USD had a BID price of 1.50000, then you would spend 1.50000 United States Dollars for every 1.00000 European Euro traded (or purchased). You add the first currency, and lose the second currency.

Pip
The smallest price increment in a currency. In the futures market, it’s similar to a “tick”. For example, in EURUSD, a move from .9015 to .9016 is one pip. In USDJPY, a move from 128.51 to 128.52 is one pip.

Spread
The difference between the Bid and Ask price of a currency pair, usually stated in pips. This also to value of the broker’s fee, so the smaller the spread the better for the trader.

Leverage
Expressed as a multiple or a ratio, it is the increased amount of currency that the broker will purchase of a currency for the investor. For example, if the leverage is 100:1 (read 100 to 1), then the broker would purchase 100 dollars worth of currency for every $1 the investor uses.

Limit / Stop
When placing a trade, you have the option to specify at what price you want your broker to buy or sell. The parameters that you set are considered limits. For example, if EURUSD was at a price of 1.3800, but you didn’t want to buy it until it reached 1.3750, then you would set a “Buy Limit” for 1.3750. Once the currency hit that price, your broker would automatically enter your trade.

Liquidity
The most common use for forex is when referring to the liquidity of a market. An indication of a more liquid market is the increase of price quotes and the bid/ask spreads are smaller. A liquid market has more activity and is easier for investors to buy and sell more frequently.

Margin
The amount of funds required in a clients account in order to open a position or to maintain an open position. For example, 1% margin means that $1,000 of funds on deposit are required for a $100,000 position.

Margin Call
A requirement by the broker to deposit more funds in order to maintain an open position. Sometimes a “margin call” means that the position which does not have sufficient funds on deposit will simply be closed out by the broker. This procedure allows the client to avoid further losses or a debit account balance.

Market Order
An order to buy at the current Ask price.

Premium / Interest / Cost of Carry
The cost, often quoted in terms of dollars or pips per day, of holding an open position.