Forex Glossary

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Forex Glossary-Important Terminologies of Forex Trading System

If you have ever been interested about the world of Forex trade and want to study more, your study may come up as less
than educational, merely because of the terms used in the business. [expand title="Read More" swaptitle="Hide" trigclass="arrowright"]

Forex trading basically has its own language. In this article, you will find some short Forex glossary trading words which may assist you to interpret your research.

Taking a part in the foreign trade market (FX) occupies trading currencies by a global market. Also named as Forex, the market permits international assets and trades to happen among purchasers and suppliers, during the different time regions of the world. The terms can be perplexing for those unusual with the practice and the procedure. This Forex glossary term gives an essential explanation of what they signify in this industry. Some terms used in Forex glossary are:

Foreign Trade Market: The FX market is where money is traded. This is the major, most fluid trading market in the whole world. Trade markets for currency are prepared up of banks, profitable companies, asset companies, organization firms, hedge funds and retail Forex agents. The FX market is the major financial market internationally. It is created by a global network of electronic announcements that joins its members with each other.

Broker: Another term used in Forex glossary is a FX broker, retail FX dealer or money trading agent. It is the money trading agent who deals with a division of the volume on the whole foreign exchange market. These agents have the right of entry to use trading platforms through which they buy and sell currencies on a usual basis.

Spot Rate: The third term used in Forex glossary is Spot Forex. It is the present exchange rate at which a money pair can be purchased or sold. It differs from the onward rates. The most important thing in this type of trading is the price that is most usually used by traders when dealing with an online retail Forex dealer.

FX Account: One more important term used in Forex glossary is FX account. This is a type of trading account when someone opens with the help of a retail FX agent. The purpose of opening such an account is to trade. There are a variety of accounts, but the first one is often a Forex demonstration account. A demonstration account is used for teaching purposes with no actual losses or profit.

Market Hours: Forex glossary also includes market hours, and market members are able to purchase, sell, switch and wonder on currencies. The market is open 24 hours a day and six days a week. Due to the reality that the market functions in numerous time zones, trading can take place without any restriction of time.

Analysis: Forex glossary analysis includes an assessment of changes and development in the FX market so that the trader could understand whether the purchase or transaction of a currency pair would be suitable for him or not. It is a technological study using service of charts, utensils, economic indicators and present affairs.

Charts: Forex glossary also includes charts. These charts permit an FX trader to view past currency trade rates provided via Forex charting software. This software can be used frequently for free when opening a new trade account.

Forex outlooks: Forex glossary may have weekly or daily outlooks. The outlooks are placed on customary financial or Forex sites. A number of these outlooks also contain alerts concerning upcoming proceedings and reports like attention rate decisions and market pointers.

Indices: Forex glossary also follows indices of most important markets. The index should be evaluated with changes that happen in a Forex glossary market and also with changes in convinced currency pairs.

Internet blogs/forums: In Forex glossary, you can stay and take part in the Forex forums. This will assist you in studying extra about Forex from other’s skill. On the other hand, you must also accept the fact that some of the members of the Forex glossary forum can be unfair and they will only encourage either their individual agenda or an exacting Forex platform. These were few terms regarding Forex glossary. Thus, Forex glossary dealing forums are helpful resources and a foundation of priceless information for the customer. There are a lot of other factors to be measured before trading Forex glossary, but if you make use of this article as an initial point and follow its proposals, you will have a very fine chance to be a victorious Forex glossary trader.
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A

Accrual

- The allocation of discounts and premiums that are given to forward exchange transactions which are in direct relation to deposit interest deals, which are over the period of each deal.

ADX (Average Directional Index)

- A technical indicator used to measure the strength of a trend.

Adjustable Peg

- This is an exchange rate regimen, used to describe where a country’s currency rate remains fixed against other (usually stronger) currencies and may be changed from time to time to give the country a competitive edge. E.g. China’s Yuan adjustable pegging against the USD.

Aggregate Risk

- The exposure of a Bank, with regards to its Forex contracts, from one single client.

Agio

- Name given to the fee charged when changing money from one currency to another.

American Option

- Name given for an option that can be exercised at any point throughout its life up to maturity date.

API Trading

- Application Program Interface; This is trading that is performed such as the one for FXTrade, where traders can customarily build various trading functionalities into their own software systems.

APIs

- Application Program Interface. Used in Forex to allow for automated trading. See API Trading.

Appreciation

- Word used to describe the strengthening of a currency brought on by demand for that currency.

Arbitrage

- Risk free trading where the same financial instrument is bought and sold simultaneously from two different sources in order to cash in from the difference in price quotes from these markets.

Asian Option

- A type of option that gives off dividends in accordance with the average price of the underlying asset over time.

Ask Price (offer)

- The price at which a client may purchase a certain currency pair at and at which a broker is willing to sell.

Asset

- A word given for a valued item.

At or Better

- An order given to trade at a specific rate or better

At Best

- Phrase used when requesting from a dealer to buy/sell at the best available rate in the market.

AUD/USD

- Abbreviation of the Australian Dollar against the U.S. DollarIt signifies how many U.S. Dollars you can get with one Australian Dollar.

Aussie

- Forex slang for Australian Dollar

Authorized Dealer

- A dealer who possesses authorization (via a regulatory body) to deal in Forex

Automated Trader

- A Trader who uses an automated system which trades on his/her behalf. No human intervention is implied.

Average Rate Option

- Same as Asian Option. The exercise price of this option is calculated from the strike price minus the average spot rate over the period of the contract.

B

Back Office

- Investment Firm’s department where the processing of financial transactions takes place.

Balance of Payments

- Used to describe the systematic record of the economic transactions during a given period for a country.

Balance of Trade

- Term to describe the calculation of Country’s exports minus Country’s imports.

Band

- The limit at which a currency is permitted to fluctuate in accordance to currencies that have been pegged.

Bank Of Japan

- The central Bank of Japan which is located in Nihonbashi, Tokyo; abbreviated as BoJ.

Bank Rate

- The domestic lending rate of a country’s central bank to other banks.

Banking Day

- Term to describe days in which a commercial bank is open for business.

Bar Charts

- A type of chart used to often study the movement of a particular instrument over time.

Base Currency

- The first currency when given a currency pair is known as the base currency. e.g. in EUR/USD – the EUR is the base currency.

Basis Point

- Term used to describe 1/10000 or 0.0001

Basis Price

- A Price given in terms of yield maturity or the yearly rate of return.

Basis Trading

- The process of taking a long and short position in the cash and dutures market with the hope of profiting from favourable movements in the basis.

Basket

- Term used when referring to a group of currencies. E.g. the USD appreciated against a basket of currencies – meaning the USD appreciated against a group of currencies.

Bear

- A trader who believes prices will fall.

Bear Market

- A period in time in which prices drop in an individual security/market.

Bid (Price)

- The price at which a client may sell a certain currency pair at and at which a broker is willing to buy at.

Bid/Ask Spread

- Difference between the bid and ask price of a financial instrument.

Big Figure

- The first 2 or 3 figures of a currency pair. e.g. For USDJPY rate of 85.452, the big figure is 85.

Binary Options

- Similar to a European call Option, with the exemption that the pay off at maturity remains at 1 unit of the counter currency, if the call expires in the money.

Black Scholes-Model

- An option pricing method for securities and futures options. A model that is very commonly used nowadays in the currency markets.

BOJ

- See Bank of Japan.

Book

- The number of currency positions a dealer is exposed to through the client trading at any moment. Ideally a dealer would like a net position of 0 from his client’s aggregate trading, as such offsetting any risk.

Boris

- Russian jargon for trading.

Bretton Woods

- Agreement of 1944 which led to the establishment of the post war foreign exchange system which remained intact until the early 1970′s.

Broker

- The name given to the market participant that acts as an intermediary between traders and the interbank market (or another broker).

BUBA

- Bundesbank – Reserve Bank of Germany

Bull

- Name given to trader who believes prices will go up.

Bulldogs

- Sterling bonds that are issued in the UK by foreign institutions.

Bull Market

- A period in time in which prices rise in an individual security/market.

Bundes Bank

- Germany’s Central Bank

Business Day

- See Banking Day

Buy Limit Order

- An order given to execute a trade at a specified price or lower.

C

Cable

- Forex slang used to describe the GBP/USD pair.

Call Option

- A type of option that allows the holder to buy the underlying instrument at a specific price throughout a fixed period in time.

Candlestick Chart

- A type of chart which uses candlesticks to denote price movement over a period of time. The Candlestick shows the range of the price over a period of time as well as open and close for that period.

Carry Trade (Interest-Rate Carry)

- The cost/benefit associated when keeping a position overnight. A cost/benefit which is brought on by the interest rates in the currency pair a trader is holding overnight.

Carry Currencies

- Name given to currencies that have a high interest rate.

Carry Positive

- A carry trade which will yield you money from the overnight roll as you are long on the high yielding interest rate currency and short on the low yielding one. E.g. Long on AUD/USD.

Cash on Deposit

- The funds placed within a trading account.

CBOE

- Chicago Board Options Exchange.

Central Bank

- A governmental organization that manages a country’s monetary policy.

CFD

- Contract For Difference; a financial instrument that allows for trading on various other financial instruments without actually trading those instruments.

CFTC

- Commodity Futures Trading Commission; USA regulatory bode which regulates futures traded on commodity markets.

Chartist

- An individual who attempts to predict future price movement through his/her analysis of historical price movement.

CHIPS

- Clearing House Interbank Payment System; New York’s clearing house system.

Clearing

- Name given to the process of clearing a trade.

Clearing House Automated Payment System

- A foreign exchange settlement system which is used in the UK.

Clearing House Interbank Payment System

- An wire system which is used by the world’s major banks internationally.

Closed Position

- As name suggests, a position which leaves the trade in a state in which it can no longer be influenced by price movement as it is closed.

Closing a Position

- Process in which a trader takes an opposite position on his currently open trade so as to square up and liquidate his position.

CME

- Chicago Mercantile Exchange.

Collateral

- Something that is given (usually an asset) to secure a loan as a guarantee.

Comex

- Commodity Exchange of New York.

Commission

- Fees charged by brokers for operation handling.

Commodity Futures Trading Commission

- U.S. regulatory body for commodity futures trading.

Confirmation

- Acknowledgement of a trade. Often in written form.

Contagion

- The spread in a crisis from one economy to another.

Contract

- An agreement to buy/sell a specified amount of a particular currency.

Conversion Rate

- Rate at which one currency may be exchanged for another.

Convertible Currency

- A freely changeable currency that can be converted to another currency without any special circumstances.

Copey

- Slang for Danish Krone.

CORRA

- Canadian Overnight Money Market Rate

Correlation

- A term used to describe the relationship between movements of two independent things. In Forex the word correlation is used when describing the similarity ion movement between various currency pairs.

Counter Currency

- The second currency n any currency pair. E.g. In EUR/USD the counter currency is the USD.

Counterpart

- Name for a participant in a financial transaction.

Counterparty

- Name for other party in a Forex deal. In Forex the counterparty is the market maker.

Country Risk

- Risks related with the cross border transactions.

Cover

- Term used when taking out a forward exchange contract or closing a short position by buying in that financial instrument which you have previously sold.

Crawling Peg (Adjustable Peg)

- Term to describe the fixing of one currency against another, which may be changed now and again over time. E.g. Chinese Yuan against USD.

Cross Currency Pairs

- A currency pair that does not have USD in it. E.g. EUR/GBP/

Cross-Rate

- See Cross Currency pairs.

Currency

- Money which is used by a certain currency which is available on paper and as coin.

Currency Converter

- A tool enabling traders to change a sum of one currency for another. Read More…

Currency Pair

- Two currencies placed together where the value denotes how much of the second currency the first currency is worth.

Currency symbols

- AUD – Australian Dollar; CAD – Canadian Dollar; EUR – Euro; JPY – Japanese Yen; GBP – British Pound; CHF – Swiss Franc.

Current Account

- The Sum of the Balance of Trades (Exports minus imports)

D

DAX

- Deutsche Aktien Xchange – German Stock Index.

Day Order

- An order with an expiration date at the end of that day.

Day Trade

- A trade which is both opened and settled on the same day

Day Trader

- A trader who opens and closes positions which run no longer than a day.

Day Trading

- The style used by a Day Trader. See Day trader.

Deal Blotter

- A summary of the trades that were performed in a trading day.

Deal Date

- The date at which a deal was initiated.

Deal Ticket

- A record of the transaction of a deal that is often kept by the dealer.

Dealer

- An individual or firm that performs actions of buying and selling in various instruments, either for their own portfolio or a counterparty to client’s orders.

Dealing Desk (DD)

- Place where dealers will execute orders and facilitate for client orders.

Default

- Term used to describe the ending of a contract through a breach of that contract.

Deficit

- Term used to describe a negative trade balance of payments.

Deflation

- A decrease, over time, in price of goods and services within a certain economy.

Delivery (Date)

- The maturity date of a Forex contract and the latest at which it may be exercised.

Delivery Risk

- Risk in which the counterparty of a deal is unable to fulfil his side’s agreement.

Depreciation

- The dropping in value of a particular currency.

Depth of Market

- The amount of persons willing to buy or sell a particular currency pair at a certain point in time.

Derivative

- a contract which may change in value according to the change in value of a related or underlying security.

Desk

- See Dealing Desk.

Details

- Information needed in order to be able to finalize a Forex transaction.

Deutschmark

- Former currency used by Germany.

Devaluation

- The process where a government allows its currency to weaken against other currencies.

Dirty Float

- Where a currency is allowed to fluctuate but the central bank of that currency may intervene from time to time.

Discount Spread

- A referral to when the bid price for a forward spread rate is less than the ask price.

Diversified Carry Basket

- A certain portfolio with the aim of benefitting through carry trades and has offset significant risk by taking positions in various currency pairs in an effort to limit losses in a particular carry trade position.

Dollar Rate

- When a foreign currency is quoted against the USD, in effect meaning how much USD that particular currency is worth.

Domestic Rates

- Interest rates that are implied to deposits of a foreign currency.

Drawdown

- the amount which an account may have fallen from its peak to its trough.

E

EA (Expert Advisor)

- a software used with a trading platform that will perform trades based on a pre-made script. Little or no manual intervention is needed. Read More..

Easing

- Used to describe the process when a central bank may engage in monetary policies and also may be used to describe a small price decline.

ECB (European Central Bank)

- The European monetary Union’s central bank.

ECB Conferences

- Meetings at which the top tier management of the ECB may discuss European concerns and action to be taken with regards to central bank decisions.

ECN broker

- Electronic Communications Broker ; provides streams of market depth with best available bid and offer prices. Such brokers usually do not mark up the spread and instead make profits through commission based on volume traded.

Economic Indicator

Economic Indicator – an Indicator used to measure certain economic events and their impact on a certain currency pair(s).

Effective Exchange Rate

- The explaining of a currency’s appreciation or devaluation, based solely on the currency’s counties trade balance.

Either Way Market

- An event in which the bid and ask prices in the interbank deposit market are the same.

Electronic Communication Network

- See ECN Brokers.

Elliot Wave Principle

- A way in describing the pattern cycle through 8 waves denoted as Elliot Waves. This method is more commonly used in non-currency markets.

Entity Trading Account

- an account that belongs to an entity rather than an individual.

Equity

- Assets minus liabilities. May also be referred to as net worth, of a certain corporation.

Equity Curve

- A graphed representation of an account in which trading has been performed, over time.

Escrow Account

- An account in which the client’s funds are kept in segregation from the dealer’s funds.

Euribor

- Euro Interbank Offered Rate;

Euro

- The current currency of the European Monetary Union

Eurocurrency

- Name given when a currency is placed within a financial institution which is located outside the currency’s originating country.

Eurodollar

- US Dollar’s that are placed within banks outside of the USA.

European Monetary System (EMS)

- An agreement in the 70′s and 80′s in which a number of European countries linked their currencies in an effort to eliminate large fluctuation in values.

European Monetary Unit

- The Currency of the EMU, brought forward in 1999.

European Union

- The uniting of a group of European countries.

Excess Margin Deposits

- The amount which is above the needed amount of Margin in an account.

Exchange

- The physical presence of trading activity.

Exchange rate

- The rate at which one currency may be traded for another.

Execution

- The process of performing a trade.

Exercise Price (Strike Price)

- See Strike Price.

Exotics

- Currencies which are not as liquid (due to lack of trading) as the major currencies.

Expiration Date

- A date, after which an option may no longer be exercised.

Exposure

- The amount which a trader has that may be influenced by movement in the market. It is in effect the remainder left when all long and short positions in each instrument are paired off.

F

Fast Market

- Term used to describe rapid buying or selling within the market which often leads to gaps being created in the market.

Fed Funds

- The account balances, in cash, held by banks at their local Federal Reserve Bank.

Fed Meetings

- The gathering of Federal Reserves in the US central bank, which has the responsibility to carry out monetary policies by influencing money and credit conditions in the economy.

Federal Deposit Insurance Corporation

- The regulatory body in the USA which administers bank deposit insurance.

Federal Open Market Committee

- A committee that is comprised of Federal Reserve members who meet 8 times a year to discuss the current monetary policy and its impact on the economy.

Federal Reserve

- The Central bank of the USA.

Federal Reserve Board

- The Senior members of the Federal Reserve who are appointed in place by the U.S. president. There is also a chairman of the Federal Reserve who serves a 4 year term.

Fiat Currency

- A currency system in which a currencies value is in direct relation to the demand and supply for that currency.

Fibonacci Retracements

- The levels at which a breakout of a certain trend may reach; these levels are calculated at 23.6%, 32.8%, 50% and 61.8% of the ranges of the current trend.

FIFO (First in First Out)

- An accounting rule which implies that all positions which are opened in a particular currency pair, are closed off (liquidated) in the order in which they were originally opened.

Fill or Kill

- An order which is requested to be executed immediately based on some criteria. If the trade is not executed it is to be deleted.

Fill Price

- The price at which a particular order is executed at.

Financial Risk

- The risk in which a financial institution may not be able to fulfil its obligations.

Finex

- Currency trading at the New York cotton Exchange.

Firm Quote

- A firm quote is a quote given, upon request, from the seller to the buyer, in which both a bid and ask price are quoted and ay which the buyer may immediately have his order filled at.

Fiscal Policy

- The use of tax policies to steer economic conditions.

Fixed Exchange Rate

- a policy in which a bank keeps their currencies’ rate fixed within a given range, often intervening to keep the rate fixed within the boundaries.

Fixed Spread

- Where the spread between currency pairs is at a pre-specified value which is then not affected (positively or negatively) by the liquidity of that instrument.

Flat/square

- A term used to describe zero exposure.

Flexible Exchange Rate

- an exchange rate which is fixed but also which frequently changes.

Floating Exchange Rate

- An exchange rate which changes in accordance to the market supply and demand.

FOMC

- Federal Open Market Committee. The committee which will release the targets for money supply in the States, which are then obtained through the Fed Fund interest rates and via other means.

Foreign Exchange

- The process of changing one currency for another through buying or selling of a particular currency.

Foreign Exchange Centres

- A physical place where Forex transactions take place. The largest such centre is currently in London.

Forex

- Abbreviation of Foreign Exchange.

Forex Demo Account

- A Forex account in which virtual made up money is traded on the FX market, often with real live conditions.

Forward

- A transaction which is settles at a future date.

Forward Cover Taking

- A contract taken in the effort of offsetting risk brought on by movements in exchange rates.

Forward Rates

- An exchange rate which is variant from the spot exchange rate through forward points.

Free Reserves

- The amount by which excess reserves exceed the amount borrowed.

Front Office

- Front office describes the dealing department, in which normal trading activities are carried out by dealers.

Fundamental Analysis

- Analysis of the market and market movement which are based on economic and political factors.

Fundamental Trader

- A trader who performs transactions solely based on fundamental indicators.

Fundamentals

- Economic and Political Factors that may influence the currency market.

Funding Currencies

- Currencies that currently have low interest rates. E.g. USD.

Futures

- A contract within which you must exchange a good or instrument at a set price on a future date.

Futures Contract

- See Future.

FX

- Abbreviation of Forex

G

G5

- Top 5 leading Industrial countries; USA, Germany, Japan, France and UK.

G7

- Top 7 leading Industrial countries; USA, Germany, Japan, France, Canada, Italy and UK.

G8

- G7 and Russia. See G7.

G10

- G7 plus Belgium, Netherland and Sweden. See G7.

Gap

- A gap is referred to when a price in a Forex pair is missing and the currency pair continues moving above or below this price without ever having touched that price. This often occurs over the weekend and/or at times of important news events.

Globex

- An electronic futures and options platform which has been developed by Reuters for after hours.

Going Long

- An expression used when purchasing a certain currency pair.

Going Short

- An Expression used when selling a certain currency pair.

Gold Certificate

- A certificate signifying ownership of the commodity which is used as an alternative to the actual transfer of physical Gold itself.

Gold Contract

- One Gold contract is equal to 100 ounces.

Gold Standard

- a step that has been taken by some countries in which their domestic prices are in direct relation to the price of a specified amount of Gold.

Goldilocks Economy

- A term used to denote an economy with steady growth and acceptable inflation.

Good Until Canceled

- A order that stays throughout each trading day and which does not expire upon the wake of a trading day.

Good-Till-Сancelled order (GTC)

- A type of pending order which will remain in effect untill it gets filled or cancelled.

Gross Domestic Product

- The value of a countries output produced within that country’s borders.

Gross National Product

- GDP including production and income from nationals overseas.

H

Hard Currency

- A currency whose value is expected to remain steady or increase with time. E.g. USD.

Head and Shoulders

- A technical Analysis formation in which the movement of a certain currency pair forms an image of one shoulder, then a head, then a shoulder – this signifies also a change in trend for that pair.

Hedge

- The process by which risk is reduced/eliminated by the taking up of positions in opposite of your current position.

Hit the Bid

- Lingo used to initiate an order to sell at the bid price.

Holder

- The buyer of a currency pair.

Hyperinflation

- Excessive inflation levels.

I

ICCH

- International Commodities Clearing House Limited; based in London and operates for futures markets globally.

IFEMA

- International Foreign Exchange Master Agreement

IMF

- International Monetary Fund; A supranational fund established in 1946 to provide international liquidity through loans to member countries.

IMM

- International Monetary Market

Implied Rates

- The interest rate that is determined by taking the difference between spot and forward rates.

Inconvertible Currency

- A currency that may not be exchanged with other currencies, either through legal reasons or due to its high volatility.

Indicative Quote

- A price quoted from a market maker at a point in time which may be subject to momentarily change and as such it is not firm.

Inflation

- Used to describe either a rise in prices of goods and services or the lowering of the purchasing power of the domestic currency.

Initial Margin

- The deposit that is first made by the trader; an amount which is used to determine the maximum trade size.

Initial Margin Requirement

- The minimum amount needed in order to enter into a preferred position.

Interbank Market

- a market in which financial institutions can trade.

Interday Trading

- Term to describe trades that have been both opened and closed on the same day.

Interdealer Market

- See Interbank Market.

Interest Rate

- A rate which you are paid and charged at when taking a position on a currency pair. Should the currency you have a long position on have a higher interest rate than the one you are selling, then you will gain from interest rates.

Intervention

- An action in which a central bank will purchase or sell its currency in order to move it towards a favourable value.

Intra Day Position

- Same as Interday trading.

Introducing Broker

- A person or Firm who will bring clients to a Forex Broker (Market Maker) and who is often reimbursed by a portion of the spreads incurred by the client he introduces.

IOM

- Index and Options Market part of the Chicago Mercantile Exchange

ISDA

- International Securities Dealers Association; an organization formed by Forex Banks in order to regulate interbank markets and exchanges.

J

Japanese Yen

- Japan’s Currency Unit

J Curve

- A term used to describe what will happen from the devaluating of a county’s trade balance – that being that imports will rapidly exceed exports in the short term and thus give increase to receipts.

Jean Claude Trichet Current European Central Bank President

- Appointed as of November 2003.

Jim Cramer

- Highly respected financial markets analyst.

Jobber

- a slang word for a trader who performs fast and small trades throughout each day. rarely will such a trader leave positions open overnight.

JPY

- Japanese Yen currency code.

Jurisdiction Risk

- Risk of losing funds when placed under jurisdiction of other authorities.

K

K

- Nasdaq stock symbol which signifies that a certain stock bears no voting rights.

Kill or Fill

- Lingo to express that an order must either be fully filled or cancelled. This implies that no partial filling is permitted.

Kiwi

- Slang for New Zealand Dollar; NZD.

L

Ladder Option

- This is somewhat similar to a trailing stop, as it is an option that locks gains as the underlying asset reaches predetermined price levels.

Lay Off

- The carrying out of a transaction in the market so as to offset a previoucly made trade and hence bring you back to a square position.

LDC

- Less Developed Countries.

Leading Indicators

- Economic Indicators that are considered to precede movement in the economic growth rate and business activity.

Left-Hand Side

- This refers to the bud price, often seen on the left hand side in relation to the ask price and is the first price quoted.

Leverage

- In a nutshell leverage allows a trader to magnify the amount he may trade so that he may be able to perform higher transactions than his initial capital allows for. Read More

Liability

- In Forex, liability is the term used for the obligation to deliver to a counterparty a specified amount of a particular currency.

LIBOR

- London Inter Bank Offer Rate

LIFFE

- London International Financial Futures Exchange

Limit Order

- This is an order given to a broker to buy a certain currency pair when it falls to as low as a pre-specified price, or lower or to sell a currency pair when it rises to a pre-specified price or higher.

Limit Price

- The Price of a limit order that has been placed.

Line Chart

- A chart that is constructed by straight lines over a period of time, often by attaching the previous highs or lows of a certain periodicity.

Liquid

- Term used to describe how much a certain instrument is sougfht. If a currency pair is said to be very liquid, this means that there are a lot of offers and bids currently in the market, something which will in a variable spread providing broker, allow for tighter spreads.

Liquidation

- The process of shutting down all open positions due to having reached a margin call.

Liquidity

- See Liquid.

Long

- A position in the market denoting the purchase of a particular currency.

Long Call

- An option which allows whoever holds this option to buy the underlying asset.

Long Position

- See Long.

Long Put

- An option which allows whoever holds this option to sell the underlying asset.

Lot(s)

- Term to define the units being traded. (in currency pairs, 1 lot represents 100,000 units)

M

M0

- Money that is in circulation and used only by the UK.

M1

- A money supply component made up of the total cash that is in circulation, money being kept in checking accounts and traveller’s checks

M2

- M1 plus money which is being held at money market funds, savings accounts and small certificates of deposit.

M3

- M2 including large certificates of deposit

Maintenance Margin

- The amount which a client needs to have in his account in order to support his current trades

Make A Market

- a definition in which a dealer/broker will make the market by providing continues bid and ask prices in which the dealer/broker is willing to buy/sell at. Brokers/Dealers are also known as market makers

Managed Float

- This is used to describe currencies in which central banks regularly will intervene in order to stabilize their local currency or steer it in a favourable direction

Manual Trader

- A trader that trades by himself; i.e. without the use of an API or EA

Margin

- The amount required to open a certain position.

Margin Account

- An account in which someone may purchase on leverage or short sell on credit.

Margin Call

- This is a notification to inform trader that more money must be added to the account as his current positions have a value lower than the margin call requirement and close to the minimum margin needed.

Mark-To-Market

- This shows the value if your open position were to be closed at the current market price

Market Maker (MM)

- a definition in which a dealer/broker will make the market by providing continues bid and ask prices in which the dealer/broker is willing to buy/sell at. Brokers/Dealers are also known as market makers

Market Order

- An expression in which an order is given to be executed immediately at the best available price

Market Price

- The current price for a currency on the market

Market Rate

- See Market Price

Market Risk

- Risk brought on by exposure to changes in the market price

Martingale System

- A strategy in which should a trader lose a position, he will double up next time and continue in this manner until he wins, thus gaining a profit of what would have been a win in his first position.

Maturity

- Expiration date of a position/contract. On this day payment of a traders financial obligation is due.

Maximum Leverage

- The largest leverage that one may use. See Leverage

Mean Reversion

- A theory in which it is stated that prices and returns will in the end go back to their mean/average values.

MetaTrader

- An online trading platform used for trading financial instruments, including currencies, CFD’s, Futures, Commodities, Stock Indices etc.

Middle Rate

- The midpoint of the bid and Ask prices offered by brokers.

Mini Account

- An account in which traders may trade in smaller unit increments. In most cases 1 mini lot is representative of 0.1 standard lots, where a standard lot, for most currencies, is 100,000 units.

Momentum

- The tendency for a market to keep in line with its current trend/direction

Monetarists

- Persons who are in belief that money and monetary policy strongly effect growth in an economy.

Monetary Easing

- A phrase used to describe when central banks attempt to increase the individual spending by easing monetary controls. E.g. lowering of interest rates

Monetary Policy

- Where the central bank attempts to influence the economy through its supply of money

Monetary Policy Committee

- The Bank of England committee which meets on a monthly basis to discuss the UK’s current interest rate and decide if any changes should be made.

Money Manager

- A person who looks after a clients portfolio entirely. He receives imbursement for his effort spent in monitoring and choosing appropriate investments on behalf of a client.

Moving Average

- An average which does not remain static, but instead changes with price movement. Read More…

MXN

- Currency symbol for Mexican Peso

Mutual fund

- An investment company that is open-ended. It is the equivalent to unit trust.

N

Narrow Market

- A market in which trading is not so frequent; also known as a thin/light market

NAV

- Net Asset Value

Negative Carry Pairs

- A currency pair in which a carry trade is being performed and you have taken a long position on the pair which gives a lower interest rate and a short position on the pair with a higher interest rate

Net Interest Rate Differential

- This is the difference between the interest rates of 2 currencies

Net Position

- The amount in which a currency is bought/sold and which has not been offset by opposite positions

Netting

- This is a method for settlement, where the P/L is settled at the close

New Zealand dollar (NZD)

- The official currency of New Zealand. It is a currency in circulation in New Zealand, Cook, Islands, Niue, Tokelau and Pitcairn Islands

News Trader

- A trader who longs or shorts in accordance with events happening in the news. Quite often such a trader will scalp during the news in an effort to obtain gains from any sharp rise/fall during that period

NFP

- Non-Farm Payroll. An economic event, which is announced on the first Friday of every month and one in which the market very frequently experiences large volatility brought on by the fact that such an indicator is rarely correctly predicted

NOK

- Norwegian Krone currency symbol.

Nostro Account

- This is an account in which Foreign Currency is maintained within another bank. It is used for paying for and purchasing services/products in that other country in which the bank is located.

NYCE

- New York Cotton Exchange

O

OCO

- One Cancels Other; This is where two orders are submitted in a way that if one is executed, then the other is cancelled. This is commonly used in ECN platforms for placing a SL and TP level.

Odd Lot

- An amount which is not in line with a standard lot. In Forex 1 standard lot is 100,000 units. An order for, let’s say, 121,000 units would classify as an odd lot.

Off-Shore

- A company whose business operations are regulated by a different country to the one it may physically or not, be located in. This is due to the incorporation of that business having been in a different country

Offer

- This is also known as the Ask price and it is the price at which a broker may sell you a currency pair at, which in turn means it is the price at which you may buy a currency pair at

Offer Price

- The price at which the offer is being given at by the broker

Offsetting transaction

- A trade in which you make in an attempt to reduce any risk you may be exposed to. e.g. taking a short position on a currency pair that you currently have a long position on

Old Lady

- An expression used to describe the Central Bank of England

Omnibus Account

- An account which consists of multiple accounts and which is operated by one person on behalf of the other account holders

Open Order

- An order that has no expiration date and is only closed when cancelled

Open Position

- An executed order which moves into profit or loss in accordance with market fluctuations

Options

- An option gives the holder the right to buy (call option) or sell (put option) an underlying asset

Order

- An instruction to buy, sell, adjust or place a pending order

Oscillators

- A technical Analysis tool which works by evaluating overbought and oversold levels in a particular currency pair.

Out of the Money

- Where if you were to exercise your option you would not make any money

Over the Counter

- This is an expression that refers to trading activity which is not performed over a formal exchange. OTC is an expression used to describe the trading activity nowadays of Forex brokers as no spot exchange takes place and orders are performed through online platforms over the net

Overbought

- A currency pair is known to be overbought when its price, in the time frame in which it is being viewed, is seen to rise more rapidly than it is expected

Overheated Economy

- An Economy which has both inflation and high interest rates

Overnight

- When a trade moves through the current trade day to the next

Overnight Limit

- The maximum amount/volume which a trader can carry over to the next day in a given instrument (currency pair)

Oversold

- A currency pair is known to be oversold when its price, in the time frame in which it is being viewed, is seen to drop more rapidly than it is expected.

P

P/L

- Profit/Loss

Par

- The official value of a currency

Par Spread

- A description used to identify when the bid and ask prices for a forward spread are the same.

Parity

- Refers to equivalence between currencies; one currency is equal the same amount as the other. e.g. in recent months the AUDUSD currency pair had a parity rate when reaching 1.0000

Partial Lot

- A lot which may be expressed in increments smaller than 1 lot (100,000 units). e.g. 0.35 lots (35,000 units) is a partial lot

Pegged

- Where one currency is tied in value with another currency, often allowed to deviate by a small fraction in the positive/negative. e.g. the Chinese Yuan’s pegging with the USD

Petrodollars

- Where Forex reserves are generated from the sale of oil by oil producing nations

Pip

- The former smallest movement which could be denoted in Forex. For most currency pairs his is denoted by the 4th decimal place. Nowadays there has been the introduction of a fractional pip for most currency pairs and commodities, which denotes one tenth of a pip.

Pivot Point

- The first support or resistance level for a pair which is obtained by looking at the previous trend’s high/low prices

Point & Figure Charts

- Charts in technical analysis that solely concentrate on price with no acknowledgement of time.

Political Risk

- Government happenings which may influence the currency market.

Position

- Term used to describe your overall status of your open trades.

Premium

- In Forex it is the amount by which the forward or futures price is greater than the spot price.

Price

- In Forex it refers to the cost of purchasing a second currency in terms of the first.

Price Transparency

- The showing of various participants in the market with their offers for buying/selling

Principal Value

- The original investment

Put Call Parity

- A definition for the equilibrium between premiums of call and put options which have the same strike price and expiry date

Put Writer

- The person who sells the put option.

Q

Quantitative Analysis

- Where mathematical and statistical modelling/formulas are used to analyse the market.

Quantitative Easing

- Where central banks of economies employ measures in an effort to encourage spending within an economy.

Quote

- Where a bid and ask price is provided for a currency pair.

Quote Currency

- Refers to the second currency in a currency pair. e.g. in EURUSD the quote currency is the USD.

R

Rainbow Option

- An option in which 2 or more underlying assets are contained and which only pays out when all such assets act accordingly.

Range

- The difference between a high and low for a currency pair for a given period of time.

Rate

- The price at which a currency can be bought or sold against another currency.

Rate Differentials

- Difference in interest rates of two countries.

Rate of Return

- The ratio between the amount of money gained from an investment relative to the amount invested.

Ratio Spread

- Where an unbalanced amount of long and short positions are held.

Realized P/L

- The amount gained or lost when a position has been closed.

Reciprocal Currency

- A definition for a currency pair in which the USD is the second currency in the pair. e.g. EURUSD

Regulated Market

- A market in which a government agency will monitor and regulate activity, primarily for the protection of inventors.

Reserve Currency

- A currency that is contained by central banks on a permanent basis so as to have international liquidity. Such currencies are normally the USD and EUR.

Resistance

- A price level at which selling or lack of buying of a currency may take place thus disallowing currency to move past this level.

Resistance Point or Level

- See Resistance.

Retail FX Market

- This market is made up of a range of non-institutional traders from large organizations to individual investors and has been booming in the past decade.

Revaluation

- The daily calculation of P&L based on previous day’s open trades value with today’s open trade’s value plus P&L of any closed positions.

Risk Management

- The steps and procedures used to control and/or reduce financial risk

Risk (Foreign Exchange Risk)

- The risk that a currency pair will move against the desired position of the trader.

Risk Capital

- The amount of money one is prepared to Risk and can affordably lose

Risk Management

- The steps and procedures used to control and/or reduce financial risk

Roll-Over

- The name given when a position moves from being open from one day to another. The time at which a rollover occurs is 17:00 EST or 22:00 GMT

Rollover Credit

- Money earned by holding a position overnight, caused by the fact that the currency in which the trader is long has a higher interest rate than the one he has went short on.

Rollover Debit

- Money lost by holding a position overnight, caused by the fact that the currency in which the trader is long has a lower interest rate than the one he has went short on.

Round Lot

- a lot size that can be denoted in increments of 1 lot (100,000 units for currency pairs)

Round Trip

- The completion of an order by having bought and sold the currency pair and obtained a P/L

Running a Position

- See Open Position.

S

S/N Roll

- See Spot/Next Role

Same Day Transaction

- a trade which is both opened and closed in the same day

Scalping

- A term used to describe when a trader opens and closes a position in a short period of time; this often refers to less than 5 minutes

Sell Limit Order

- An pending order in which a transaction may only be executed when a certain limit is reached.

Sell Stop

- A pending order in which a transaction may only be executed when a certain level is reached.

Selling Rate

- The rate at which a broker is prepared to sell a currency at and at which a trader may purchase at.

Selling Short

- The sale of a currency pair which implies buying the quote currency and selling the base currency.

Settlement

- This is the actual delivery of currencies when a contract reaches expiry/matures.

Settled (Closed) Position

- A position in which all needed transactions have taken place.

Settlement Date

- The time at which a trade must be completed, through physical delivery

Settlement Risk

- The potential loss that may be incurred as a result of a party being unable to settle

Short

- A position in the market denoting the sale of a particular currency/currency pair.

Short Call

- An option in which the seller is obliged to sell the underlying asset to the buyer.

Short Covering

- Where a trader purchases a number of currency units so as to offset an existing sale of the same units.

Short Position

- See Short

Short Put

- An option in which the seller of an underlying asset is obliged to purchase the underlying asset from the buyer

Short Sale

- See Selling Short

Short Squeeze

- When traders which have short positions frantically attempt to close their positions due to a sharp rise in the currency which they have a short position in. Ironically this forces the price eve higher as closing a short position involves buying that currency pair.

Sidelined

- Where one currency has above an ordinary interest rate and as a result other major currencies are traded much less against this currency.

Simple Moving Average (SMA)

- A moving average in which a pre-defined period of prior bars determines the average.

SL

- Stop Loss

Slippage

- An experience in which a trader is filled at a different, often worse, price than the one requested due to the sharp movement of the currency in which he is trading. Such an effect is often experienced when trying to trade during news announcements.

SOFFEX

- Swiss Options and Financial Futures Exchange

Soft Market

- A market condition in which there are more sellers than buyers for that currency and as such creates a scenario in which rapid price falls are quite common.

Sovereign Risk

- Risk brought on by the likelihood that a country may default on its bonds.

Speculative

- Where trading is performed with no guarantee that money will be made and large risk that you may lose. The appeal of this kind of trading is the potential for great gains to be made.

Spike

- Where a larger than usual price movement in the market may occur – such a move is often brought on by the release of economic events.

Spot

- Refers to the buying and selling of a currency with a settlement date. Usually the settlement period is 2 days.

Spot Market

- The currency market in which physical buying and selling of currencies takes place with a delivery date of usually 2 days.

Spot Price

- The current price of a currency being traded in the spot market.

Spot/Next Roll

- See Roll Over.

Spread

- The difference between the bid and ask price for a particular currency.

Square

- A term used to describe a scenario in which positions are all closed (squared-off).

Squeeze

- Where a central bank will decrease supply of money in an effort to increase the value of money.

Stable Market

- A market in which large buying and selling may take place efficiently and without causing large moves. e.g. EUR/USD pair.

Standard and Poors (S&P)

- A firm based in the States, which assesses the financial health of borrowers.

Standard Lot

- Denotes 100,000 units for currency pairs. For Gold 1 standard lot is 100 ounces, for Silver 5000 ounces and for Oil it is 1000 barrels.

Sterling

- Another name for the UK’s British pound (GBP)

Stochastics Oscillator

- A technical Analysis indicator which derives its value by focusing on different aspects of price action.

Stock Broker

- An agent which is involved in the buying and selling of stocks and other securities.

Stocky

- Slang used to describe the Swedish Krona.

Stop-Limit Order

- An order to purchase or sell a particular currency at a pre-specified price.

Stop Loss Order

- An order placed in order to avoid further loss, should the market move against you. Stop loss orders may also be placed in winning positions in order to lock gains (provided your trade is in a winning position).

Stop Losses

- See Stop Loss Order.

Stop Order (or Stop)

- An order to buy or sell a currency ones it reaches a pre-specified level, in an effort to keep from losing further amounts.

STP (Straight Through Processing)

- An order processing system in which trades are processed automatically with no manual intervention.

Straddle

- Where a trader holds both a call and put option with the same strike price and expiry date.

Strike Price

- The price at which an underlying security may be bought or sold.

Sub-account

- Where a broker may allow you to open numerous accounts so as to accommodate for a traders need to perform various strategies when trading.

Support Levels

- A level which is believed to be a level at which a currency may face resistance in dropping past.

Swap

- Swaps are the amount of money gained/incurred from having kept a position open from one trading day to another. The close off of one trading day occurs at 22:00 GMT (17:00 EST). These fees are brought on depending on the interest rates of the currency pair that you have open.

Swissy

- Nickname for the Swiss Franc (CHF).

T

T-Bills

- See Treasury Bills.

T-Bonds

- See Treasury Bonds.

T-Notes

- See Treasury Notes.

T/N

- See Tomorrow Next.

T/N Roll

- See Tomorrow Next.

Take Profit Order

- An instruction (order) to close a position, after which a client’s balance will increase due to the gains obtained through that position.

Take Profits

- A limit order in which a client requests that an order is closed should a certain level be reached – at which the client will make a gain.

Take the Offer

- A verbal command at which a trader communicates to the dealer a price that he wishes to buy at and have the broker sell to him at.

Technical Analysis

- The use of mathematical and statistical methods in order to predict future price movement.

Technical Indicators

- Tools that technical analysts may use to attempt to predict future price movements.

Technical Trader

- A trader which uses technical analysis in order to make up his choice of whether to buy or sell an instrument.

The City

- One of the world’s largest trading centres, located in greater London, UK.

Thin Market

- See Narrow Market.

Tick

- The smallest viewable price movement.

Tomorrow Next (Tom/Next)

- Where delivery of a currency is not performed but instead re-opening the trade with the current trade date so as to push the delivery date further forward to the next trade date.

TP

- Take Profit.

Trade Date

- The date at which a position was opened.

Trading Platforms

- Software that is used to enable the performance of Forex trades. Usually used over the internet.

Trailing Stop Loss

- Similar to a stop loss. It, however, changes when the position is in a profit position and will remain a certain, pre-specified, amount of pips behind the current price of your position, provided it is in profit – in effect locking in your profit, should the trade turn against you. Read More…

Transaction

- The purchase or sale of a currency pair.

Transaction Cost

- The cost(s) involved in the purchase/sale of a currency pair.

Transaction Date

- A date at which a transaction is opened/closed.

Treasury Bills

- United Stated government short term obligations, which the government has an obligation to repay with 13, 26 and 52 week maturities.

Treasury Bonds

- U.S. government bonds with long term obligations. Usually 15 years or more.

Treasury Notes

- U.S. government obligations for repayment in the medium term. Typically between 2 – 10 years.

Trend

- The directional movement of the market. Usually up, down, or sideways (known as trading in a range).

Turnover

- The total in volume, of executed transactions. Read More.

Two-Way Price

- See Quote.

U

Unconvertible Currency

- A currency that cannot be exchanged for another as it may be restricted by foreign exchange regulations.

Uncovered

- See Open Position.

Under-Valuation

- See Undervalued.

Undervalued

- Where a currency is below its Purchasing Power Parity.

Unit

- Used to describe a quantity of currency. In Forex one unit of USD refers to one United States Dollar.

Unrealized P/L

- The profit or loss that would be made if a position were to be closed at that exact moment.

US Dollar

- United States of America’s currency.

Useable Margin

- The amount of money that may be used to open positions.

Used Margin

- The amount of money that is currently being used to hold a position(s) open.

US Prime Rate

- The price at which the United States banks may lend to their most valued customers.

US Treasury

- Department in the States which is responsible for the issuance of T-Bills, Notes and bonds.

V

Valuation

- The process in which the value of a currency is determined.

Value Date

- The date at which a currency contract must be settled in. Usually within 2 days from the commencement of the contract. Read More..

Variable Spread

- Where the spread within a currency pair will change depending on market liquidity. The more traders willing to buy/sell that particular currency, the tighter the spreads will become.

Volatility

- The measurement of change in a currencies movement.Read More.

VPS (Virtual Private Server)

- Used primarily for hosting trading platforms and to run expert advisors without unexpected interruptions

W

Wholesale

- The sale of goods, commodities or services in large amounts to clients.

Wire Transfer

- A method of moving money electronically from one bank to another.

Working Day

- A day in which the banks of a particular currency are open for business.

World Trade Organization

- An organization of countries which transact with one another and set the rules through which trading is performed.

WTO

- See World Trade Organization.

X

X

- A Nasdaq Stock Symbol which specifies that it is a mutual fund.

Y

Yard

- Slang for a billion.

Yield

- The amount gained on an investment and is often given as a percentage.

Yield Curve

- A curve showing the relationship between a yield and maturity date.

Z

ZAR

- Currency symbol for South African Rand.

Zero-Bound

- A term used to describe when interest rates are close or at 0%.

Swaps are the amount of money gained/incurred from having kept a position open from one trading day to another. The close off of one trading day occurs at 22:00 GMT (17:00 EST). These fees are brought on depending on the interest rates of the currency pair that you have open.