Forex Glossary----------------------------------------------------------------- Forex Glossary - a unique guide for the study of forex trading. The Forex Glossary will be regularly updated.
Accrual - The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap deals , over the period of each deal. Appreciation - A currency value strengthens in price in response to market demand. Ask Price or Offer Price - The price the market is prepared to sell. For example, USD/CHF 1.4527/32, the ask price is 1.4532, you can buy one US dollar for 1.4532 Swiss francs. Ask is the lowest price acceptable to the buyer At Best - An instruction given to a dealer to buy or sell at the best rate that can be obtained. Balance of Trade - A country’s exports in value - its imports in value. Bar Chart - A chart that consists of four significant points: the high and the low prices ( the vertical bar ) , the opening price, which is marked with a small horizontal line at the left side of the bar, and the closing price, which is marked with a small horizontal line at the right side of the bar. Base Currency - The first currency in a Currency Pair. For example, if the USD/CHF rate equals 1.6345 then one USD is worth CHF 1.6345.. Bear Market - A market price is declining. Bid Price - The bid price is shown on the left side of the currency pair. For example, USD/CHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs. Bid/Ask Spread - The difference between the bid and offer price. For example, a USD/JPY rate might be 117.30/117.35. The spread is 117.35 - 117.30. Book - In a professional trading environment, a ’book’ is the summary of a trader’s or desk’s total positions. Bull Market - A market price is rising. Bundesbank - Germany’s Central Bank. Cable - Referring to the Sterling/US Dollar pair (GBP/USD). So called because the rate was originally transmitted via a transatlantic cable. Candlestick Chart - A bar chart that indicates the trading range for the day and the opening and closing price as well. If the open price is higher than the close price, the rectangle bar is shaded. If the close price is higher than the open price, that area of the bar is not shaded. Central Bank - A government organization that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank. Chartist - Also referred to as Technical Trader. Cleared Funds - Funds that are freely available, sent in to settle a trade. Closed Position - Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. Clearing - The process of settling a trade. Collateral - Something given to secure a loan or as a guarantee of performance. Confirmation - A document exchanged by counterparts to a transaction that states the terms of said transaction. Contract - The standard unit of trading. Counter Currency - The second listed Currency in a Currency Pair. Cross Currency Pairs / Cross Rate / Currency pair - A foreigh currency transaction against a second foreign currency. For example; GBP/JPY
Day Trader - Speculator. Dealer - A Dealer is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. Deficit - A negative balance of trade or payments. Delivery - An FX trade where both sides make and take actual delivery of the currencies traded. Depreciation - A fall in the value of a currency. Devaluation - The deliberate downward adjustment of a currency’s price, normally by official announcement. Economic Indicator - Statistic that indicates individual country current economic growth and stability. eg. employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc. End Of Day Order (EOD) - An order to buy or sell. This order remains open until the end of the trading day. European Central Bank (ECB) - the Central Bank for the new European Monetary Union. Federal Deposit Insurance Corporation (FDIC) - The regulatory agency responsible for administering bank depository insurance in the US. Federal Reserve (Fed) - The Central Bank for the United States. Forward - The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved. Forward Points - The pips added to or subtracted from the current exchange rate to calculate a forward price. FX - Foreign Exchange. G7 - The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.
Hit the bid - Closing the deal at the offer or selling at the bid. Inflation - A persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency. Initial Margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance. Interbank Rates - The Foreign Exchange rates at which large international banks quote other large international banks. Intervention - Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates. Kiwi - New Zealand dollar. Leading Indicators: Statistics that are considered to predict future economic activity. LIBOR: The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank. Limit Order: An order to execute a transaction at a specified price (the limit) or better. A limit order to buy would be at the limit or lower, and a limit order to sell would be at the limit or higher. Liquidity: Refers to the relationship between transaction size and price movements. For example, a market is "liquid" if large transactions can occur with only minimal price changes. Liquidation: The closing of an existing position through the execution of an offsetting transaction. Long: To buy. Long Position:
In foreign exchange, when a currency pair is bought, it is understood
that the primary currency in the pair is 'long', and the secondary
currency is 'short'. Lot - A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots. Maintenance: A set minimum margin that a customer must maintain in his margin account. Margin: The amount of money needed to maintain a position. Margin Account: An account that allows leverage buying on credit and borrowing on currencies already in the account. Buying on credit and borrowing are subject to standards established by the firm carrying the account. Interest is charged on any borrowed funds and only for the period of time that the loan is outstanding. Margin Call: A call for additional funds in a margin account either because the value of equity in the account has fallen below a required minimum (also termed a maintenance call) or because additional currencies have been purchased (or sold short). Mark-to-Market: The theoretical value of an open position at the current market price. Market Close: This refers to the time of day that a market closes. In the 24 hour-a-day foreign exchange market, there is no official market close. 5:00 PM EST is often referred to and understood as the market close because value dates for spot transactions change to the next new value date at that time. Market-Maker: A person or firm that provides liquidity making two-sided prices (bids and offers) in the market. Market Order: A customer order for immediate execution at the best price available when the order reaches the marketplace. Market Rate: The current quote of a currency pair. Market Risk: The risks that occur when general market pressures cause the value of an investment to fluctuate. Maturity: The date on which payment of a financial obligation is due. Momentum:
The tendency of a currency pair to continue movement in a single
direction. Net Position - The amount of currency bought or sold which have not yet been offset by opposite transactions. OCO-One Cancels the Other Order: A combination of two orders in which the execution of either one automatically cancels the other. Offer: The price at which a currency pair or security is for sale; the quoted price at which an investor can buy a currency pair. This is also known as the 'ask', 'ask price', and 'ask rate'. Open Order: Buy or sell order that remains in force until executed or cancelled by the customer. Open Position: Any position (long or short) that is subject to market fluctuations and has not been closed out by a corresponding opposite transaction. Order: A customer's instructions to buy or sell currencies. Overnight
Position: Trader's long or short position in a currency at the
end of a trading day. Pips - The smallest unit of price for any foreign currency. Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points. Position - The netted total holdings of a given currency. Premium - In the currency markets, describes the amount by which the forward or futures price exceed the spot price. Price Transparency - Describes quotes to which every market participant has equal access.
Quote - An indicative market price, normally used for information purposes only. Rally - A recovery in price after a period of decline. Range - The difference between the highest and lowest price of a future recorded during a given trading session. Rate - The price of one currency in terms of another, typically used for dealing purposes. Resistance - A term used in technical analysis indicating a specific price level at which analysis concludes people will sell. Revaluation - An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of Devaluation. Risk Management - the employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk. Roll-Over - Process whereby the settlement of a deal is rolled forward to another value date. Round trip - Buying and selling of a specified amount of currency. Short Position - To sell. Spot Price - The current market price. Settlement of spot transactions usually occurs within two business days. Spread - The difference between the bid and offer prices. Square - Purchase and sales are in balance and thus the dealer has no open position. Sterling - British Pound. Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor’s position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49. Support Levels - A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance. Swap - A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate. Swissy - Swiss Franc.
Tick - A minimum change in price, up or down. Tomorrow Next (Tom/Next) - Simultaneous buying and selling of a currency for delivery the following day. Turnover - The total money value of all executed transactions in a given time period; volume. Two-Way Price - When both a bid and offer rate is quoted for a FX transaction. Unrealized Gain/Loss - The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains’ Losses become Profits/Losses when position is closed. Uptick - a new price quote at a price higher than the preceding quote. Uptick Rule - In the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.
Value Date - The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date. Variation Margin - Funds a broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements. Volatility (Vol) - A statistical measure of a market’s price movements over time. Whipsaw - slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal. Yard - A billion. |
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