Forex Glossary of Trading Terms and Definitions

Fibonacci retracements are a technical analysis tool used by traders to identify potential support and resistance levels in financial markets. Based on the Fibonacci sequence, the key retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 100%, which traders use to predict possible reversal points after a price movement. By plotting these levels on a price chart, traders aim to anticipate where a price might pull back before continuing in the direction of the trend, thereby making informed trading decisions.

The Federal Open Market Committee (FOMC) is a component of the Federal Reserve System responsible for overseeing open market operations and guiding monetary policy in the United States. It meets regularly to assess economic conditions and make decisions regarding interest rates and the supply of money, with the goal of promoting maximum employment, stable prices, and moderate long-term interest rates. The FOMC's actions can significantly impact the U.S. economy and global financial markets.

Forex, short for foreign exchange, is a decentralized global market for trading national currencies against one another. It is the largest and most liquid financial market in the world, operating 24 hours a day, five days a week. Participants include banks, financial institutions, corporations, governments, and individual traders who speculate on currency price movements. The market is influenced by various factors, including economic indicators, geopolitical events, interest rates, and market sentiment, making it a complex environment for trading.

Free margin refers to the amount of money in a trading account that is available for making new trades, after accounting for the required margin for open positions. It represents the funds that are not tied up in current trades and can be used for additional investments, fostering greater flexibility in trading strategies. To calculate free margin, you can subtract the margin used for open positions from your equity.

Fundamental analysis in forex involves evaluating economic indicators, geopolitical events, and overall market sentiment to forecast currency movements. Analysts examine factors such as interest rates, inflation, employment data, and central bank policies, as these elements influence currency values. By understanding the underlying economic health of a country, traders can make informed decisions about buying or selling currencies. Additionally, news releases and financial reports can trigger significant volatility, making fundamental analysis essential for developing effective trading strategies.

Futures are standardized financial contracts obligating the buyer to purchase, and the seller to sell, an asset at a predetermined price on a specific future date. They are commonly used for commodities, currencies, and financial instruments to hedge against price fluctuations or speculate on market movements. Futures trading occurs on exchanges, such as the Chicago Mercantile Exchange, providing liquidity and transparency to market participants.