Trading on the financial markets has become a hugely popular activity for people from all walks of life. Some people trade for the excitement factor and don’t focus on profits or losses. Others trade for more materialistic reasons. If you are more focused on profit than entertainment, then FX News suggests you start following the financial news and economic releases on a daily basis. To help you understand more of what the “experts” are saying, we’ve put together some of the most revealing trading terms used in business news and financial reports.
When everyone starts talking about a bear or bearish market, it means the overall price trend has turned downward. The mere mention of a bear can send traders running for the hills, which often provokes ‘Sell’ orders worldwide. A bearish market doesn’t indicate a lack of trading opportunities, it just means ‘Buy’ orders should go into hibernation until the “winter” is over.
News channels use the trading term ‘breakout’ to describe a currency pair moving outside of a defined price range. Traders call this ever-changing range “support and resistance”. Open a currency pair chart on your trading platform and draw two horizontal lines along the most recent highs and lows. That’s your range. A currency pair making an aggressive price shift beyond the range is likely a breakout—especially if there’s plenty of volume behind it. Breakouts tend to maintain momentum longer than common price fluctuations and surely deserve your attention, so go looking for them!
Traders speak of a bull or bullish market with enthusiasm. In general, it means that the financial world is in a good mood. Trading volume is high and rising, and traders are feeling optimistic about ‘Buy’ orders. A bullish market usually accompanies global economic strength. If news and market analysts are consistently reporting a bullish market, you can expect increased trading volumes and steady price trends in the coming days and weeks.
Whenever a news release has a dovish tone, it means the message or announcement is noncommittal and lacking an accompanying action plan. Banks often use dovish language in their releases when rates or performance are not as expected.
The next time you hear about a dovish speech or announcement, don’t bank on any major market moves, and perhaps hold your orders—until something more definitive hits the media.
A hawkish statement comes with aggressive implications. The language of a hawkish release sounds more direct, and usually includes actions to deal with the issue. Whenever “hawkish” shows up in a report, it tends to trigger trend reversals, breakouts, and a rally or two—which further boosts trading volume worldwide.
Whenever the world media channels hype a particular forex pair, they often use the word rally. A rally refers to a rapid and consistent price rise, although news outlets have also started using “bearish rally” to indicate a falling trend. The next time you see the word ‘rally’, check the price charts to see how early you’ve caught the start of the trend.
If you manage to trade a rallying pair at the beginning of a big move, expect some significant returns. But beware, a rally can stall out very unexpectedly, so keep your eye on your order with a mobile trading platform. As the name suggests, with a rally, you’ve got to move fast.
You can see volatility on a price chart without any need for indicators. Unlike a smooth or wavy price history, volatility makes a chart look jagged and dangerous. Volatility can occur because of massive opening and closing orders within a short timeframe.
Always remember that less popular pairs can be influenced by smaller volume fluctuations. If a major currency pair is experiencing volatility, then something serious is going on. Time to check the news and economic releases. Consider using an account with lower leverage for trading volatile pairs.
The forex industry use hundreds of trading terms and you should probably learn all of them over the course of your trading career. In the meantime, these trading terms will help you make sense of the economic releases and media reports so you can trade with a more informed mind. Read this article a few times. The next time you read a hawkish report about bullish market volatility, you’ll have a good idea which leverage to choose and whether to trade or wait.
Start searching for a breakout or rally today!
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