Forex Glossary (H)

Commonly used forex terms and their definitions.

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Hard Currency - Any one of the major world currencies that is well traded and easily converted into other currencies.

Head and Shoulders - A pattern in price trends which chartist consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder; profit taking has caused the price to drop or level. The price then rises steeply again to the head before more profit taking causes the price to drop to around the same level as the shoulder. A further modest rise or level will indicate that a further major fall is imminent. The breach of the neckline is the indication to sell.

Head and Shoulders Bottom - Also known as a reverse head and shoulders, a well-known reversal pattern marked by three (or more) prominent troughs with a middle trough (the head) that is lower than the other troughs (the shoulders). When the trendline (neckline) connecting the peaks at the top of the pattern is broken, the pattern is complete.

Head and Shoulders Top - A well-known reversal pattern marked by three (or more) prominent peaks with a middle peak (the head) that is higher than the other peaks (the shoulders). When the trendline (neckline) connecting the troughs at the bottom of the pattern is broken, the pattern is complete. (See Head and Shoulders).

Hedge - The purchase or sale of options, spot, forward or futures contracts as a temporary substitute for a transaction to be made at a later date. Usually it involves opposite positions in the cash or futures or options market.

Hedged Position - One open buy position and one open sell position in the same currency.

Hedging - The practice of undertaking one investment activity in order to protect against loss in another, e.g. selling short to nullify a previous purchase, or buying long to offset a previous short sale. While hedges reduce potential losses, they also tend to reduce potential profits.

High/Low - Usually the highest traded price and the lowest traded price for the underlying instrument for the current trading day.

Hit The Bid - Selling at the bid by the trader.


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