Forex Glossary

A – B – C – D – E – F – G – H – I

- L – M – O – P – R – S – T – U – V

A

Ask (ask price)
The price at which a trader buys a currency. Also known as offer, it is the price at which a seller agrees to sell.

B

Central Bank
The organization in charge of the country’s monetary policy.
ECB
European Central Bank.
BdA
Bank of England, the UK central bank
BoC
Bank of Canada, Canada’s central bank.
BoJ
Bank of Japan, Bank of Japan.
Bear (Bear)
Person who believes prices / market will decline.
Bear Market (Bear Market)
A market where prices fall sharply while the general trend is towards pessimism (as opposed to the Bull Market / Market bullish).
Bid (Bid)
The price at which a trader sells a currency.
Bid / Ask Spread (margin between selling prices and purchasing)
See Margin
Bretton Woods Agreement of 1944 (Bretton Woods, 1944)
An agreement that established fixed rates of foreign currencies for the major currencies, with the intervention of foreign banks in the currency markets, and fixed the price of gold at U.S. $ 35 per ounce. This agreement lasted until 1971. More on Bretton Woods.
Bull (Bull)
Person who believes prices / market will rise.
Bull Market (Bull Market)
A market characterized by rising prices.
Broker (Broker)
An agent who handles orders for the sale and purchase of foreign investors. For this service, a commission is charged and which may or may not be negotiated by the broker and the amount of the transaction.

C

Cable (Cable)
Jargon brokers to designate the exchange rate Pound Sterling / U.S. Dollar.
Call Rate
The interbank interest rate during the night.
Cash Market (cash market)
The market sales and purchases of physical currency.
Currency Convertible (convertible currency)
Currency can be exchanged freely against other currencies or gold without special authorization from the relevant central bank.
Counter party (Contra)
The customer or bank with whom or which established a currency transaction. The term is also used on the market interest rate and currency swaps and means a participant in an exchange swap.
Broker
An agent who handles orders to buy and sell currencies on behalf of investors. On the foreign exchange market, no commission is charged because the broker derives its profits from the difference (spread).
Cross Rate (Courses cross)
Exchange rate between two currencies is generally built on individual exchange rates of the two currencies measured against the U.S. dollar.
Currency Risk (risk exchange)
The risk of incurring losses due to an adverse change in exchange rates.
Currency Swap (Currency Exchange)
Contract involving two counterparties to exchange streams exchange interest payments in different currencies for a period determined by mutual agreement and exchange of major currencies due to a predetermined exchange rate by mutual agreement.
Currency Option (Option on Currency)
An option contract that gives the right to buy or sell a currency with another currency at a specified exchange rate and for a specified period.
Currency Swaption (Swap Option on Currency)
Option-counter (OTC) to conclude a contract currency swap.
Currency Warrant (Warranty currency)
Option counter (OTC) currency option on long-term (over one year).

D

Base Currency
The currency used as a base to score a pair. For example, the EURUSD, the euro is the base currency. In USDJPY, the dollar was the currency base.
Day Trading (Trading on meeting)
Refers to opening and closing the same position (s) on a single negotiating session.
Dollar Rate (dollar rate)
Listing of a variable amount of foreign currency against U.S. dollar regardless of geographic location of the broker or quote currency. Except the rate Pound Sterling / U.S. Dollar (cable) is rated at a variable amount of U.S. dollar against the Pound Sterling.

E

EMS (EMS)
Abbreviation for European Monetary System, agreement between the member nations of the European Union visatn to maintain alignment between the exchange rates of their currencies.
European Monetary Union (EMU European Monetary Union (EMU))
EMU was founded in 2002 to officially replace the national currencies of member countries of the EU single currency called the Euro. Currently, the euro is the currency of twelve European Union countries, stretching from the Mediterranean to the Arctic Circle (namely Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland). The Euro banknotes and coins were put into circulation on 1 January 2002 and are now part of everyday life of more than 300 million Europeans living in the euro area.
Exchange Rate Risk (risk of course)
See Currency Risk.

F

Federal Reserve (Fed) (Federal Reserve)
The Central Bank of the United States.
Fixed Exchange Rate (Exchange rate fixed)
Official rate established by the monetary authorities for one or more currencies. In practice, even fixed exchange rates can fluctuate between highs and lows defined, leading to intervention.
Flat / Square (Balanced)
Being neither long nor short is synonymous with being balanced or ‘square’. A book will be balanced if a broker has any or all of its positions that cancel each other over.
Floating Rate Interest rate (floating interest)
Unlike the fixed rate, the interest rate on such trading comes to fluctuate with market rates or benchmark rates. An example of a floating rate mortgage is normal.
Foreign Exchange Swap (swap or exchange of interest rates)
Transaction that involves the effective exchange of two currencies (principal amount only) on a specific date, the rate reached when the contract (short leg) at a future date at a rate contract concluded at the time (long leg) .
Foreign Exchange (Forex or FX Gold) (market exchange (or Forex or FX))
The simultaneous buying of one currency and selling another currency at a market in OTC trading. Most major FX is quoted against the U.S. dollar.
Forward Contract (on back order)
Contract that starts at a specified date in the future. The deferred contracts are generally expressed a margin above (premium / premium) or below (discount) the spot price. For the price of FX Real deferred delivery contract, the broker adds the margin to the spot. The course reflects what the FX rate changes must be the contract date on back order, that way if funds were re-exchanged at that rate, there would be no loss or profit (ie d market neutral). The rate is calculated from the deposition rates in both currencies and the underlying rate from the spot. Unlike the market for futures contracts, negotiating contracts deferred delivery can be tailored to the needs of both parties and can involve more flexibility. Moreover, there is no centralized exchange.
Fundamental Analysis (Fundamental Analysis)
Detailed analysis of economic and political movements to determine the future of the financial market.

G

GTC (Good Till cancellation)
“Good Till Cancelled”. Imposed order to a broker to buy or to sell at fixed prices. The order is maintained until it is canceled by the customer.

H

Hedging (Cover)
Practice to engage in investment activity to cover the losses of another activity, eg selling short to cancel a previous purchase, or purchase cover to compensate for a short sale before. Although hedges reduce potential losses, they also tend to reduce potential profits.
High / Low (High / Low)
In general, the highest prices and lowest prices for the underlying instrument at a single trading session.

I

Initial Margin (Initial Margin),
Initial deposit of collateral to access a position serving as collateral on future performance.
Interbank Rates (Interbank rate)
The exchange rates at which large international banks cotent other major international banks.

L

Limit Order (Order Limit)
Order to buy at the specified price at or below the specified price or sell at the specified price at or above the specified price.
Long Position (Long Position)
Market position where the client has bought a currency he does not have its own before. Normally expressed as a function of the base currency, eg dollars long (short marks).

M

Margin (Margin)
Customers must deposit funds as collateral to cover any potential losses caused by adverse movements in prices.
Margin Call (Margin Call)
Request for additional funds. Application by a clearing member-compensator (or by a brokerage firm that a client) increases the minimum margin deposit, to cover an adverse movement of market prices.
Market Maker (Market Maker)
Broker that offers courses and is ready to buy or sell at the agreed price. A market maker is a book of transactions.
Maturity (Maturity)
Settlement date.

O

Offer (Offer)
The price, or rate at which a potential seller is willing to sell.
One Cancels Other Order (OCO Order) (One Cancels the Other Order)
Conditional order by which the performance of part of the order automatically cancels the other party.
Open Position (Position Open)
Any transaction that has not been settled by physical payment or was not reversed by an equal or opposite transactions for the same value date.
Over The Counter (OTC) (not rated)
Used to designate any transactions not conducted on a market.
Overnight Trading (Transaction night)
Refers to a purchase or a sale conducted between 21:00 and 08:00 the following day.

P

Pip (or Points)
Term used on the currency market to represent the smallest possible increment of the exchange rate. Depending on context, normally one basis point (0.0001 in the case of pair EUR / USD GBD / USD, USD / CHF and 0.01 in the case of the USD / JPY).
Political Risk (Risk Policy)
Uncertainty regarding the performance of an investment if the government takes actions against the interests of the investor.

R

Resistance (Resistance)
Threshold course that is expected to see sales occur.
Risk Capital (Venture Capital)
Amount of money a person can afford to invest, and if lost, would not impact on his lifestyle.
Rollover (Renewal)
When the settlement of a transaction is extended to another value date based on the interest rate differential of the two currencies.

S

Settlement (Settlement)
Actual physical exchange of one currency to another currency.
Shorts (Discovered)
Selling short means selling an instrument without actually owning and holding a short position in expectation that the fall in order to redeem the position later at a profit.
Spot (Cash Transaction)
Transaction that occurs immediately, but the money changing hands usually within two days after the conclusion of the transaction.
Spread (Spread)
Difference between demand and supply; used to measure market liquidity. Narrower spreads usually signify high liquidity.
Stop Loss Order (Stop Order)
Order to buy or sell on the market when the price specified is reached, either above or below the course record at the time the order is given.
Support Levels (Floor support)
Threshold course that is expected to see the purchase occur.

T

Technical Analysis (Technical Analysis)
Effort to forecast the future market activity by analyzing market data such as charts, price trends, and volume.
Tomorrow to Next (Current day)
Simultaneously buying and selling of a currency to be delivered the next day and sold the next day or vice versa.
Two-Way Price (double course)
The rate at which demand and supply are listed.

U

U.S. Prime Rate (Prime Rate U.S.)
The rate at which U.S. banks lend to their major corporate clients.

V

Value Date (Settlement Date)
Settlement date of a contract for cash or deferred delivery.
Variation Margin (Variation Margin)
Additional margin required by a broker to his client because of market fluctuations.
Volatility (Volatility)
A statistical measure of a market or the movement of a stock price in time and is calculated using a standard deviation. A high volatility is associated with a high degree of risk.