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Index: a - b - c - d - e - f - g - h - i - j - k - l - m - n- o - p - q -r - s - t - u - v - w - x - y - z
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ACI Association Cambiste International An international society of foreign exchange professionals, now called The Financial Markets Association. Adjustable Peg Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e., fixed) in relation to another currency, like China's Yuan being pegged to the US Dollar, but where the rate may be changed from time to time. Agent Bank A bank acting for another bank, usually a foreign one. Aggregate Risk A bank's exposure to forex contracts from a single customer. Agio A fee charged to exchange physical money from one currency to another. American Option An option whose holder can exercise the option anytime before its expiry. Appreciation Increase in the value of an asset or currency. Arbitrage Profiting from temporary discrepancies in the price of a currency pair when it is traded on more than one market. Ask The price at which sellers are willing to sell a currency pair, also known as The Offer. Orders to buy on FXTrade are executed at the Ask Price or Ask Rate. Asian Option An option that payoffs according to the average prices of the underlying asset over time. Asset An item which has value. Asset Allocation Dividing funds among many different markets for diversification purposes in order to reduce risk. At Best An instruction given to a dealer to transact at the best rate possible. At The Money When the strike price of the option is equal to the underlying asset's current price. Aussie Traders' nickname for the Australian Dollar. Authorized Dealer Depending on the regulatory body, a dealer authorized to deal in forex. Average Option See Asian Option |
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Back Office The area within a brokerage that is responsible for settlement, transfer of funds, opening accounts and other administrative duties. Band In some countries where the currency is pegged, the range in which the rates are permitted to fluctuate. Bank Identifier Code See Swift Code. Bank Of Japan The central bank of Japan. Bank Notes Central bank issued paper which is considered legal tender. Bank Rate The rate at which a central bank lends to members of its banking system. Banking Day Days of the week when commercial banks are open for business in the country of the particular currency traded. Bar Charts A popular format for studying the price action of currency pairs. Barrier Option A type of option where the payout depends on whether or not the underlying asset reaches a predetermined price. Base Currency The first currency of two in a currency pair. For the EUR/USD, Euros are the base currency. The exchange rate quoted is how many units of the second currency, you will receive for one unit of the base currency. Base Rate Synonymous with prime rate, but used in the UK to refer to the rate that banks lend to their best customers. Basis Point One hundredth of one percent, or 0.0001. Basket Option An option with an underlying asset made up of a basket of securities (stocks or commodities). Bear A trader who believes prices will fall. Bear Market An extended period where prices decline for a single security or for the market in general. Bear Put Spread Buying a put option and selling another put option, both with the same expiry date. The put option sold usually has the lower strike price. The money paid buying the put option, is offset with the money received for selling the other put option. Losses are capped, as are profits. Bear Squeeze When traders who are short have to desperately cover their positions because markets are rising rapidly. See Short Squeeze. Best-Efforts Basis An attempt to fill an order at the next available price in light of above average order flow. Bermudan Option A hybrid of an American and an European option, whose holder can exercise the option only at predetermined dates, for example on the same day of every month. BIC See Bank Identifier Code. Bid The price at which buyers want to buy a currency pair. Sell orders on FXTrade are executed at the Bid Price or Bid Rate. Bid/Ask Spread See Spread. Big Figure The first couple of digits of a forex rate or price that doesn't usually fluctuate. Binary Option An option where the payout is predetermined and is not dependant on the price move of the underlying asset. Also known as a Digital option, and All-or-nothing option. BOJ See Bank Of Japan. Bollinger Bands A technical analysis overlay which plots three bands onto the underlying price curve. One is the moving average while the other two are bands of volatility: two standard deviations above and below the moving average. Bollinger Bands are available on the FXTrade platform. Book The total currency positions a dealer has at any given moment. Typically, the dealer aims to have a net position of zero in terms of risk. This means that for the aggregate, all customer's long positions and short term positions balance each other out. Passing the Book normally refers to transferring trading the bank's positions to another office, when business day is done in that time zone. Break Used to describe sudden movement of currency prices outside of a previous range. Breakaway Gap A gap in price when a new trend forms. Bretton Woods The location of the historic conference held in 1944, to establish the first foreign exchange system which was tied to US Dollars that were in turn backed by gold. Broker Traditionally, an agent who works for a dealer by soliciting customer orders and earning for himself a commission in the process. Currently, the terms broker and dealer are often used interchangeably. Brokerage A company, which offers trading services to the public. Bull A trader who believes that prices will rise. Bull Call Spread Buying a call option and selling another call option, both with the same expiry date. The call option sold usually has the higher strike price. The money paid buying the call option, is offset with the money received for selling the other call option. Losses are capped, as are profits. Bull Market An extended period where prices rise for a single security or for the market in general. Bundesbank The central bank of Germany. Business Day See Banking Day. Butterfly Spread Combining a bull and bear spread. In a long Butterfly Spread, you go long one call with a high strike price, long one call with a low strike price, and short two calls with a middle strike prices. Buy Limit Order An order to transact a purchase at a specific price underneath of the current market price. Buying On Margin Taking a position in a currency pair when only a portion of the total value is paid for. The rest is borrowed and interest is charged. The portion paid for is called margin. Buy Stop Order A stop order to buy which is placed above the current market. They are used to close out a short position. Buying Rate See Bid. |
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Cable The exchange rate for the British pound/US Dollar (GBP/USD) currency pair, so named in reference to how rates between the two currencies were previously communicated by transatlantic cable. Call Rate The interest rate charged in the interbank for overnight borrowing. Calender Spread Holding long and short positions of the same option with different expiration dates. Call See long call. Call Writer The writer of a call option, is another name for the seller of a call. Candlestick Chart A popular chart used for technical analysis purposes, made popular by Japanese rice merchants to track the price of rice over time. Capital Account The net of investment flowing in and out of a country. Capital Risk Risk where banks have to deal with another bank or financial institution who may not be able to uphold its side of the bargain. Carry The cost of keeping a position open overnight. Each currency has a different interest rate associated with it. You are paid interest on the currency you are long in, and must pay interest on the currency you are short. The difference is the carry or is sometimes referred to as the cost of carry. TADAWUL FX offers its clients interest rate free trading, no carry will be applied for trades closed within a week. Cash On Deposit Funds deposited in a trading account. Cash Settlement Spot and futures contract settlement procedure where instead of taking physical delivery, profits or losses are settled in cash. Central Bank Overseen by the government, it is a country's main bank, whose role is to regulate other banks and financial institutions, and to enact monetary policy. Central Bank Intervention When the central bank enters the spot forex market to buy or sell forex in order to stabilize the country's currency, usually when supply or demand forces are unbalanced. CFTC See Commodity Futures Trading Commission. Chartist An international wire system used by major banks. CHIPS Clearinghouse Interbank Payment System Quoting in variable units of domestic currency per fixed units of foreign currency. Choice Market Instead of a bid and ask price where there is a definable spread, a choice market is one where all trades whether buys or sell go through at the same price. Chooser Option An option where the holder can choose whether the option is a call or a put during the life of the option. Clean Float A type of exchange rate mechanism, where an exchange rate is determined just by market forces with no central bank intervention whatsoever. Clearing The trade settlement process. Close Of Business Day See Daily Cut-Off. Closed Position A transaction which offsets a previous open position. In the case of having bought, selling the exact number of units so that one's exposure in the market is zero. In the case of having short sold, buying the exact number of units. On FXTrade, you can close a position by locating it under the Position tab, clicking on it, or selecting the "close" option in the window that pops up. CLS Continuous Linke Settlement A means of settling foreign exchange transactions between major banks so as to eliminate settlement risk. CME Chicago Mercantile Exchange Collateral An asset which has value, given to secure a loan. Commission The fee that a broker may charge clients for dealing on their behalf. Commodity Futures Trading Commission The United States regulatory agency for commodity futures trading. http://www.cftc.gov/ Compound Option An option on an option. the right, but not the obligation to buy or sell the right, but not the obligation to buy (long call) or sell (long put) an underlying asset. Examples include a call on a call or a put on a put. Confirmation Written statement that acknowledges a trade occurred, providing important information such as date, quantity, price, and total amount involved. On FXTrade, confirmation is done through pop-up boxes and the activity log. Conversion Rate The value of one currency exchanged for another currency. Convertible Currency cy that can be exchanged for another without special permission. Today, most of the currencies which were previously unconvertible are now convertible such as the Polish Zloty. Correlation A statistical term that refers to a relationship between two seemingly independent things. In forex for example, one could argue that the Euro and the Swiss Franc have a higher correlation than for example the Euro and the Canadian Dollar. Correspondent Bank A foreign bank that performs services for another bank that has no branch in the foreign location. Wiring funds through correspondent banks usually result in higher charges as the correspondent bank's fees would be deducted from the amount sent. Counter Currency See Quote Currency. Counterparty The other party in a forex deal. In online spot forex, the counterparty is the market maker. Countervalue In a deal where one of buys a currency against the US Dollar, the US Dollar value of the transaction is known as the countervalue. Cover Closing a short position by buying the exact units of the currency that was previously shorted. Covered Call A call option sold by someone who owns the underlying asset. CPI Consumer Price Index A month to month economic indicator which gauges changes in the cost of living by measuring price changes in a common basket of good and services most people use like food, clothing, transportation, and entertainment. Crawling Peg A method of exchange rate adjustment; the rate is fixed/pegged, but adjusted at certain intervals in line with the results of various economic or market indicators. Credit Risk The risk that a debtor will not repay; more specifically the risk that the counterparty does not have the currency promised to deliver. Cross Currency Contract A contract to buy or sell one foreign currency in exchange for another foreign currency, neither of which is the US Dollar. Cross Deal A foreign exchange deal in which neither currency is the US Dollar. Cross-Rate The exchange rate involved in a cross deal. Quite often, the rate is derived from exchanging one currency for the US Dollar and then exchanging US Dollars for the second currency. Currency The legal tender for a particular country which is issued by that country's government. Currency Pair In a foreign exchange transaction, it is the two currencies involved. Currency Risk For many businesses, it is the movement of forex rates which may erode profits from sources denominated in foreign currency. |
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Daily Cut-Off A particular point in the day chosen by a dealer to demarcate the end of one trading day and the beginning of the next, for administrative and logistical reasons. Day Order A buy or sell order to automatically expire at the end of the current trading day. Day Trade A trade which is opened and closed on the same trade date. Deal Blotter A list of all the deals that were done in a trading day. Deal Date The date a transaction is entered. Deal Ticket A record of the basic details of a transaction, a dealer keeps, as opposed to the statements which customers receive. Dealer An individual or firm that buys and sells assets from their own portfolio, acting as a principal or counterparty to a transaction. Dealing Desk Used loosely as the place where dealers facilitate pricing and executing trades. Dealing Systems Computer networks that link up banks to create the forex market. Examples of dealing systems are Reuters terminals and Bloomberg machines. Default A term for breaching a contract. Delivery Date When a forex contract matures, usually two days after the transaction is entered. In the scope of online forex trading, delivery of the actual currencies is not taken. Rather profits and losses are credited or debited from one's account balance. Delivery Risk Risk where a counterparty is not able to fulfill his side of the deal even though he is willing to. Depth Of Market The volume of buy and sell orders waiting to be transacted for a particular currency pair at a particular point in time. Derivative A financial contract whose value changes in relation to an underlying security. For example, an option changes value according to the asset that underlies it. Devaluation When a government allows the value of its currency to weaken in relation to other currencies. Direct Quotation Quoting in variable units of domestic currency per fixed units of foreign currency. Dirty Float Exchange rate policy where the value of a currency is allowed to fluctuate but the central bank will intervene from time to time. Discretionary Account An account where a customer allows the institution to make trading decisions and buy and sell on his or her behalf. Domestic Rates The interest rates that apply to deposits or borrowing of a particular currency that are similar to the rates citizens of that country would be entitled to by keeping their money in deposit accounts. Drawdown The size of a drop in the value of an account from its peak to its low. Durable Goods Order An economic indicator that marks the change in sales levels of products that have a lifespan of three years or more. |
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Easing Refers to either a small price decline in a currency or when a central bank engages in monetary policy to spur spending. An example of central bank easing would be lowering of interest rates. ECB European Central Bank The central bank of the European Monetary Union. Economic Indicator A statistic that is used to gauge current economic conditions. See Consumer Price Index and Durable Goods Order as examples. ECU European Currency Unit The predecessor of the Euro. Effective Exchange Rate Explanation of a country's currency strength or weakness entirely on its trade balance. Elliot Wave Principle An attempt to explain market activity by ascribing a pattern of eight waves to any complete cycle. The eight wave patterns consists of a five stage advance and a three stage correction. End Of Day Mark To Market The value of all open positions in a dealer's book based on the closing market rates. In addition, any profits or losses are recorded. Escrow Account A segregated account where customer money is kept separate from a dealer's operating funds. Eurocurrency A currency that is deposited in a financial institution located outside the currency's country of origin. Eurodollars US dollars deposited in a bank outside the USA. European Monetary Unit The currency of the European Monetary Union (EMU). It was introduced in 1999. The following countries and their currencies were replaced with the Euro: Germany, Deutsche Marks; Italy, Liras; Austria, Schillings; France, Francs; Belgium, Francs; Netherlands, Dutch Guilders; Finland, Markka; Portugal, Escudos; Greece, Drachmas; Ireland, Punt; Luxembourg, Francs; Spain, Pesetas. European Option An option whose holder can exercise the option only at the expiry date. Excess Margin Deposits Deposited funds in a trading account above and beyond what is required for margin requirements. Exchange The physical location of trading activity. Some famous examples include the New York Stock Exchange, or the Chicago Mercantile Exchange. Exchange Control Various devices a central bank uses for controlling the movement of foreign exchange so as to not deplete a country's reserves. Execution Completing a trade. Exercise Price See Strike Price. Expiration Date The day on which a financial option is no longer valid. Exposure Possibility of adverse movements in exchange rates from an open position, resulting in a potential loss. |
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Factory Orders An economic indicator which marks the change from one period to another of the orders for durable and nondurable goods. More orders means economic growth whereas the opposite signifies a slowdown. Fast Market Strong buying and/or selling pressure in the market, in which prices often gap and move too quickly to be disseminated. Fed Federal Reserve The Central Bank of the United States. Fed Fund Rate The interest rate on Fed fund account balances which is closely monitored to gauge the Fed's view on the economy. The accounts are held by member banks and is usually used for lending or borrowing from one another. Fed Funds Account balances held by banks at their local Fed Bank. Fill Completing an order to buy or sell. Financial Risk The possibility that a business won't be able to meet its financial obligations. Finex Currency trading at the New York Cotton Exchange. Firm Quote When a buyer or seller requests a firm quote, the dealer provides a bid and ask quote that can be immediately executed if the buyer or seller wishes. See Indicative Quote. Fiscal Policy Using tax policy to affect economic conditions. Fisher Effect The effect of interest rates on international money movement such that money moves into currencies paying higher interest rates. Fixed Exchange Rate Foreign exchange policy where a central bank maintains an official rate for their currency, often intervening to keep the rate fixed within a limited range. Fixing Determining rates by selecting a level which as well as possible, balances buying and selling pressure. An example is London Gold Fixing. Flexible Exchange Rate An exchange rate that is fixed, but is revaluated frequently. Floating Exchange Rate An exchange rate whose value is determined by market forces. Foreign Exchange Centers The largest forex center in the world is London. Other financial centers which follow the sun across the sky are New York, Tokyo, Hong Kong, Singapore, and Zurich. Trading passes from one center to the next, the traders in one bank dealing desk handing off the trading book to their colleagues in another center. Forex The Foreign Exchange Market. Forward A transaction that settles at a future date. Forward Point Differential added or subtracted from the spot rate to calculate the forward rate. The differential is based on anticipating future conditions and fluctuates accordingly. Forward Rates An exchange rate which differs from the spot exchange rate by forward points. The forward points are either added or subtracted from the spot rate depending on anticipation of future conditions. Front Office Trading activity handled by a dealer. Fundamentals The macro economic factors that form the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit and interest rates. Fundamental Analysis Analysis of economic and political information with the objective of determining future movements in a financial market. Futures Contract An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange while forwards are traded over the counter (OTC). |
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G7 The seven leading industrialized countries: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States of America. G8 G7 and Russia. G20 A group composed of the following 20 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union. The Group of 20 dedicated themselves to financial stability in light of the financial crises during 1997-1999. Globex An after hours electronic futures and options trading platform developed by Reuters. Gold Standard The original system for supporting the value of currency by backing it with gold. Golden Cross In technical analysis, when two moving averages intersect, usually a short one like a 20 day and a long one such as 40 day. This is considered a favorable sign that the underlying currency will move in the same direction. Gross Domestic Product The total value of a country's output produced within its physical borders. Gross National Product GDP plus production and income from nationals abroad. GTC Good Till Canceled An order that does not expire at the end of the trading day as is usual practice. Unlike what its name suggests, it does expire at the end of the trading month though as opposed to being open forever. |
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Hard Currency A currency whose stability investors have confidence in. Examples could be the US Dollar or the Euro. Head And Shoulders A price trend pattern which has three peaks, the middle one higher than the surrounding two forming what looks to be a head with two shoulders on either side. This pattern is seen as an indicator of a trend reversal. Hedge A term used to describe reducing risk by using various investment strategies. Hedge Fund A private fund which usually solicits investments from wealthy individuals. It is unregulated as it's assumed that the investors are knowledgeable and realize the speculative nature of the fund. It usually invests in high risk, short term instruments in order to achieve above-average returns. |
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IFEMA International Foreign Exchange Master Agreement IMF International Monetary Fund Supranational organization established in 1946 to provide international liquidity and loans to member countries. IMM International Monetary Market The futures trading arm of the Chicago Mercantile Exchange. In The Money When the strike price of an option is cheaper than the underlying asset's current price. Inconvertible Currency See Unconvertible Currency. Indicative Quote A market-maker's price which is not dealable. It is for information purposes only. See firm quote. Inflation A rise in prices or a drop in the purchasing power of money. Initial Margin The first deposit by a customer which determines a corresponding maximum trade size. Initial Margin Requirement The minimum amount when entering a position that must be paid for in cash. Interbank Market The interbank market is the over-the-counter market of dealers that make markets in foreign exchange to one another. Interbank Rates The bid and offer rates that international banks use when trading with one another. Intra Day Position Positions that are opened and closed within the same trade day. Introducing Broker A person or firm that introduces customers to a market maker often in return for commission or a portion of the spread. |
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Key Currency For smaller countries, the act of orientating their currency to that of a major trading partner. Kiwi Traders' term for the New Zealand Dollar. |
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Lagging Indicator Economic indicators which change after the overall economy has changed, used to confirm effects of Fed policy. An example is CPI. Leading Indicators Economic indicators used to predict future economic activity like the levels of the S&P 500 index. Left-Hand Side The bid rate Leverage The ratio of margin to the maximum position size. With a deposit of $5000 and a leverage of 50, a trader could enter a position with a face value of $250,000. Leveraging allows you to profit quickly, but lose money just as quickly. Liability The obligation to deliver currency as part of a spot transaction. In speculative forex trading, currency is not delivered. All profits and losses are subtracted from margin deposits. LIBOR London Inter-Bank Offered Rate The rate which banks use when borrowing from one another. LIFFE London International Financial Futures Exchange. Limit Order An order to transact at a specified price. Limit Price The specified price as part of a limit order. Line Charts A particular chart style used for technical analysis of currency price movements. Liquid Term used to describe the FX market when there are lots of buyers and sellers generating a lot of volume. Liquidation When the capital requirement of open positions exceeds the available cash, all positions are closed or liquidated. Liquidity The amount that can be traded at anytime in a specific currency pair without causing a market move. Long Call An option which gives its holder the right, but not the obligation to buy the underlying asset. Long Position When a currency pair is long, the first currency is bought while the second currency is sold short. Lookback Option An option that lets the holder "look back" at the prices of the underlying asset during the life of the option and select the ideal price to exercise at. Lot Standardized method of trading in forex which is 100,000 units of a particular currency. Trading with FXTrade occurs in units and trade sizes vary from 1 to 10,000,000 units. |
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Maintenance Margin The minimum margin which must be available in an account to support all open trades. Managed Float Exchange rate policy where central banks regularly intervene to stabilize and/or steer the direction of their currency. Margin The amount of money required (a fraction) needed to maintain an open position. See leverage. Margin Call The need to deposit more funds into an account because the value of the account has fallen below the minimum margin needed to cover the size of existing position(s). Margin call on FXTrade results in closing all open trades. Mark-To-Market When an open position is revalued to the current market price. Market Order An order for immediate execution at the best available price. Market Rate The most current quote for a currency pair. Market Risk The risks that occur when demand and supply pressures in the market cause the value of an investment to fluctuate. Mid or Middle Rate The price halfway between the bid and ask quote offered by dealers. Momentum The tendency of the market to continue moving in the same direction as it is currently moving. Monetary Base Required and non-required deposits made at the central bank by member banks and the currency in circulation. Monetarists People who believe that money and monetary policy have a strong effect on capacity and growth in the economy. Monetarists focus on the work of Milton Friedman. Monetary Easing When a central bank encourages spending by easing monetary controls. An example would be lowering interest rates. Monetary Policy Central bank attempts to influence the economy through money supply levels. Moving Average Method of smoothing out data on price charts so that trends are more easy to spot. Average refers to a mathematical average or a statistical "mean" that is plotted over the original curve. |
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Net Position The aggregate of all open positions. Netting Settlement method where only the difference (profit or loss) is settled at the close. Nostro Account An account held by a domestic bank with a foreign bank where the original bank has no branches. It is used for cash management purposes. Nostro means "ours" in Latin. See Vostro Account. NYCE New York Cotton Exchange. |
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OCO One Cancels The Other Order A combination of a Limit and of a Stop order, if one is executed, the other one is automatically cancelled. Offer Also known as the Ask Price, it is the price at which a seller is willing to sell. Off-Shore A business entity who may or may not be physically located in a country, but whose operations and regulation of its operation fall outside the country, primarily because it is incorporated elsewhere. Open Order Buy or sell order that does not expire until cancelled. While, the order does not expire in theory, it usually expires at the end of the trading month rather than lasting forever. Open Position A position whether long or short that is subject to market fluctuations and thus profits or losses. Option The right, but not the obligation to buy (long call) or sell (long put) an underlying asset. Order Instructions to buy or sell. Oscillators Technical analysis tools which provide buy and sell signals, characterized by a signal that oscillates between: overbought and oversold levels. OTC Over The Counter Refers to trading that is not done over a formal exchange. Traditional forex is traded over the counter, meaning traders entered into forex transactions with one another over telephones or electronic devices. Counter refers to counterparty, in that with forex one trades with a counterparty instead of through an exchange. In online forex trading, the counterparty is the market maker. Out Of The Money When the strike price of the option is more expensive than the underlying asset's current price. Overnight Trades that extend past the current trade day into the next. Overnight Position A dealer's net position that is carried into the next trading day. Owner The account holder, the name that a forex account is held under. |
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Partial Lot Some brokerages allow trading in partial lots which is a fraction of 100,000 units which normally makes up a full lot. Trades on FXTrade range from 1 to 10,000,000 units. Pegged A system where a currency's value is tied with another, for example the Chinese Yuan with the US Dollar. Most pegs are allowed to deviate within a small band. Petrodollars Refers to the Forex reserves as a result of oil sold by oil producing nations. Pip The smallest upward or downward price movement in Forex. Point & Figure Charts Technical analysis graphs that focus solely on price without any consideration of time. Political Risk Changes in government policy or to a wider extent, government instability that might have negative effects on the currency. Position A trade which is still in effect. See open position and closed position. Price In technical terms, the point at which sellers and buyers meet and a trade occurs. Producer Price Index An economic indicator which gauges the price change from month to month, that producers receive for their output. Profit Taking Closing a position with a gain. Purchasing Power Parity Refers to functional equivalency. It is the relationship between the amount of currency to buy a common good in one country and the amount in a second currency to buy the same good in the second country. This is one way to establish an exchange rate between two currencies. Put An option which gives its holder the right, but not the obligation to sell the underlying asset. |
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Quote When both a bid and ask price are provided for a currency pair. Quote Currency The second currency of two in a currency pair. For the EUR/USD, USD is the quote currency. The exchange rate quoted is how many units of the second currency, you will receive for one unit of the base currency. See Base Currency. |
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Rainbow Option An option that has two or more underlying assets. The option only pays out when all the underlying assets act accordingly. Rally A period where prices surge upward. Range The difference between the highest and lowest price of a currency pair during a given trading period. Ratio Spread Holding an unequal amount of long and short options positions. Two short, and one long is a popular ratio spread strategy. Realized P/L The profit or loss that is generated by closing a position. Regulated Market A market in which a government agency monitors and regulates industry activity to protect investors. An example is Futures trading in the United States. Resistance A ceiling at which prices aren't able to penetrate because there is consistent selling activity at that price level. Revaluation Rate The price which an open position is revalued. Right Hand Side The ask rate. Risk Management The use of strategies to control or reduce financial risk. An example is a stop-loss order which minimizes maximum loss. Roll-Over See Carry. Round Trip The buying and selling of a currency pair and having the profit or loss applied to one's account currency. |
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Sell Limit Order An order to sell at a specific price above of the current market price. Sell Stop Order A stop order to sell which is placed underneath the current market. They are used to close out a long position. Selling Rate Same as the Ask or Offer rate. Selling Short Selling a currency pair that involves being short the base currency and long the quote currency, with the intent of buying the currency pair at a later time when prices are lower in order to make a profit. Settlement The physical delivery of currencies made when a contract matures. In forex, it is usually 2 days after the trade. In practice, traders don't take delivery, but profits and losses are applied directly to their account balance. Settlement Date For forex the date when physical delivery must take place. For most currency pairs it is two days after the trade date. The USD/CAD currency pair settles one day after its trade date. Settlement Risk Loss as a result of one's counter-party being unable to settle. Short Call An option which obliges the seller to sell the underlying asset to the buyer. Short Covering Buying the exact same units of a currency pair to offset an earlier short sale of the same currency pair. Short Put An option which obliges the seller to buy the underlying asset from the buyer. Short Squeeze When short sellers frantically scramble to cover their short positions as the market is experiencing a sharp upward movement. The attempt exasperates the problem because more buying makes the prices higher and more difficult for other short sellers to cover their positions. Sidelined When there is above ordinary interest in a currency pair, other major currency pairs that are thinly traded as a result of this are considered "sidelined". Sovereign Risk Risk that a country will default on its bonds. Spot Buying and selling Forex with the current date's price for valuation, but where settlement usually takes place in two days time. Trades on Tadawul FX are settled immediately. Spot Price The current market price of a currency traded in the spot market. Spread The value difference between the bid and ask price of a currency pair. Square A condition where all positions in a dealer's books are closed. Squeeze Central bank attempts to reduce the money supply in order to increase the price of money. Stable Market A market that can accommodate huge volumes of buying and selling without large moves. Stop Order or Stop Loss Order An order to execute a buy or a sell at a price less favourable than the current position revaluation. Straddle An option strategy involving trading both a call and put with the same strike price and same expiry date. Strangle An option strategy involving trading both a call and put with the same expiry date but two different strike prices. Strike Price The price at which the underlying asset can be bought or sold as specified in an option contract. Support Levels A level or floor where a currency has a difficult time falling below, characterized by strong buying pressure. Swap A transaction which moves the maturity date of an open position to a future date. Society for World-wide Interbank Telecommunications Global electronic network for Forex settlement, whose office is based in Belgium. Known for the SWIFT Code which is an 8 or 11 alphanumeric characters long international standard uniquely identifying financial institutions for the purpose of transfers and settlement. The SWIFT code is also known as BIC (Bank Identifier Code). |
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Take Profit Order A limit order that closes an open position with a profit. Technical Analysis Use of historical rates, price charts, and other market data to forecast future prices. Tick See Pip Ticker Streaming display of the current price of a currency pair. Tier One The Bank of International Settlements' measure of a bank's financial strength. Tier One is the highest grade. Trade Date The date on which a position is opened. Trading Platforms A software application used for trading Forex usually over the Internet. Treasury Bills US government short term obligations with 13, 26, and 52 week maturities. Treasury Notes US government medium term obligations with 2 to 10 year maturities. Treasury Bonds US government long term obligations with 15 year or more maturities. Trend The current direction of the market, whether up or down or sideways (which is sometimes referred to as non-trending or sideways market). |
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Unconvertible Currency A currency that cannot be exchanged for another because of foreign exchange regulations. Undervalued When a currency is below its purchasing power parity it is considered undervalued. Unrealized P/L The revaluation of the open position. US Prime Rate The interest rate which banks in the US will lend to their most valued customers. U.S Treasury The department within the United States government that is responsible for issuing Treasury bills, notes, and bonds. |
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Value Date The settlement date for a currency contract which is usually two business days. For USD/CAD it is one business day. Volatility Measure of how much the price of a currency changes over time. Vostro Account An account of a foreign bank held at a domestic bank where the foreign bank has no branches. It is used for cash management purposes. Vostro means "yours" in Latin. |
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Wire Transfer Electronic transfer of funds from one bank to another. Working Day When the banks in the country of origin for a particular currency are open for business. For currency pairs, this is compounded by the fact that both banks must be open. WTO World Trade Organization A global organization of countries who trade with one another and set rules by which trading is conducted. |
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Yard Traders' term for a "billion". Yield The return on an investment. The yield is usually calculated in percentage terms. |
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