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Forex Glossary
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
A
Appreciation
An increase in the value of a currency.
Arbitrage
The simultaneous taking of two equal positions in opposite positions. This is done in order to take advantage of a small differential between the markets.
Ask Price
The ask price (right of quote display) is the price at which a trader can purchase the base currency. For example in the quote EUR/USD 1.2500/03 the ask price is 1.2503. This means you can buy one USD for 1.2503.
At Best
A broker instruction for the dealer to buy or sell at the best rate that can be obtained.
Aussie
Nickname for the AUD/USD Currency pair.
B
Base Currency
The base currency is the first currency listed in a Forex pair. The value of the base currency is determined against the counter currency pair. For example if the EUR/USD rate is 1.2500 then 1 Euro is worth 1.250 dollars.
Bear Market
A market characterised by declining prices.
Bid price
left of quote display) is the price at which a trader can sell the base currency. For example in the quote EUR/USD 1.2500/03 the ask price is 1.2500. This means you can sell one USD for 1.2500.
Bid/Ask Spread
The difference between the bid and offer price. The bid ask/spread is also known as the ‘dealers commission.
Broker
An intermediary that brings together buyers and sellers of currencies for a fee or commission.
Bull Market
A market characterised by rising prices.
C
Cable
Nickname for the GBP/USD currency pair
Chartist
A trading method that uses the analysis of charts and price data to forecast future price movement. An alternative name for a follower of technical analysis.
Cleared Funds
Deposit funds in a Broker account that are freely available for trade settlement.
Closed Position
A position where no further currency exposure exits.
Commission
The trade execution fee charged by a broker.
Counter Currency
The counter currency is the second currency listed in a Forex pair
Counterparty
One of the participants in a financial transaction.
Cross Rate
A price quote of any currency quoted against a currency that is not the USD. The quote is the result of the two individual currencies against the USD.
Currency
The money issued by a central bank or government. Used as legal tender for transactions and the basis for trade.
Currency Pair
The two currencies that make up an exchange rate quote. One of the currencies is bought and one is sold at the same time.
D
Day Trading
The term refers to a trading style the opening and closing of trading positions occur within the same day.
Dealer
A representative who acts as principal or counterpart to a transaction.
Depreciation
A fall in the value of a currency.
Devaluation
A premeditated downward adjustment of a currency’s valuation.
E
Economic Indicator
A statistic issued by a government that indicates current economic growth in a region. Economic indicators include GDP (Gross Domestic Product), employment rates, Retail Sales and inflation figures.
End of Day Order
An EOD is a buy or sell order at a specific price which remains open until the end of the trading day.
EURO
The single currency of the European Monetary Union (EMU).
F
Forex
Forex or FX stands for the Foreign Exchange. Forex is the simultaneous buying of one currency and selling of another.
FX
The Foreign Exchange Market
G
Good 'Til Cancelled Order
A GTC is a buy or sell order at a specific price that remains open until the order is filled or the client cancels.
Hedging
The practice opening several positions with the intention of reducing the level of risk on your primary position.
I
Interbank Rate
The Foreign Exchange rate set between International banks.
K
Kiwi
Nickname for the NZD/USD currency pair
L
Leading Indicators
News releases or statistics that are believed to predict future price movement.
Leverage
The ratio that of the loan provided by the broker to the amount of capital deposited.
Limit order
A buy or sell order with restrictions on the maximum price to be paid or the minimum price to be received.
Liquidation
Closing of an existing position through the execution of an offsetting transaction.
Liquidity
The ability of a market to accept large transactions with minimal impact on the price stability of the asset.
Long Position
A trading position set to benefit from an appreciation in the valuation of the base currency.
Loonie
Nickname for the USD/CAD currency pair
Lot
The standard unit of trading. A standard lot equals 100,000 units of the base currency, a mini lot equals 10,000 units and a micro lot equals 1,000 units.
M
Margin
The required deposit that a trade must deposit for a transaction.
Margin Call
A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.
Market Maker
A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.
Market Risk
The level of exposure to changes in foreign currency prices.
Maturity
The date for settlement or expiry of a financial instrument.
N
Net Position
The amount of currency bought or sold which have not yet been offset by opposite transactions.
O
Offer Price
(See Ask price)
Open order
An order that will be executed when a market reaches a designated price.
Open position
An active trade order in the market with an unrealised profit or loss.
Over the Counter
Definition of a transaction that has not been conducted through an exchange.
Overnight Position
A trade that remains open until the next business day.
Order
An instruction to make a trade executions at the specified rate.
P
Pips
The smallest price unit of a foreign currency. This is usually the fourth digit after the decimal point.(USD/JPY is an exception)
Pound
Unit of currency of the United Kingdom. Also referred to as the Great British Pound (GBP)
Position
The total of open holdings in a specified currency pair
Profit/Loss
The actual gain or loss realised on closed trading positions together with the unrealised profit or loss on open positions.
Q
Quote
An indicative market price, normally used for information purposes only.
Quote Currency
See counter currency
R
Rally
Price recovery of an asset after a period of decline.
Range
The difference between the highest and lowest price of an instrument over a time period.
Rate
The price of one currency in terms of another, typically used for dealing purposes.
Resistance
A price ceiling in the market identified by technical analysis. This is where sellers are likely to enter the market.
Risk
Exposure to uncertain change. This term is generally used in reference to the potential for loss or gain as the result of a transaction.
Risk Management
The employment of financial analysis and trading techniques such as money management in order to reduce or control the clients exposure to market risk.
Roll Over
The roll forward of a deals settlement to a future value date. The cost of this process is based on the interest rate differential of the two currencies.
S
Short Position
A trading position set to benefit from a decline in the valuation of the base currency.
Spot Price
The current market quote or price.
Spread
The difference between the bid price and the ask price.
Sterling
Nickname for the British Pound
Stop Loss
A trade order type that automatically closes an open order at a predefined price. The order is designed to minimise losses in the event that the market moves against the traders’ position.
Support Level
A price ceiling or floor in the market identified by technical analysis. This is where buyers are likely to enter the market.
Swap
The simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.
Swissie
Nickname for the Swiss Franc
T
Take Profit
A trade order type that automatically closes an open order at a predefined price. The order is designed to realise a profit on an open position that is in profit.
Technical Analysis
A form of currency analysis that focuses on identifying price movement from the study of chart patterns.
Tick
The minimum change in price movement in a price quote.
Transaction Cost
The cost of buying or selling a financial instrument.
Back to topU
Unrealized Gain or Loss
The theoretical gain or loss on an ‘open position’ valued at current market rates. These positions become a ‘realised gain or loss’ when the position is closed.
V
Volatility
A statistical measure of the rate of price change in a market over time.
W
Whipsaw
Term used to describe the condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
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