FOREX DICTIONARY

FOREX DICTIONARY
Appreciation: : A currency appreciates when it strengthens in price.

Arbitrage: A trading strategy that takes advantage of two or more securities being mispriced relative to each other.

Asset Allocation:Investment practice that divides funds among different markets to achieve diversification for risk management purposes.

Balance of Trade: The value of a country's exports minus its imports.

Base Currency: The currency which is the base for quotes. For example, the euro is the base currency for EURUSD quotes, while the US dollar is the base currency for USDJPY.

Bear Market A market that is characterized by declining prices

Bid : quoted price where a customer can sell a currency pair. Also known as the “bid price” or “bid rate”.

Bull Market:A market that is characterized by rising prices
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Broker:An individual or a company that acts as an intermediary, handling investors' orders to buy and sell currencies. Some brokers charge commission for this service

Cable: Slang for the GBPUSD dollars exchange rate

Central Bank: FA government or quasi-governmental organization that manages a country's monetary policy. An example is the Federal Reserve, which is the US Central Bank.

Collateral : : Collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.

Commission: A transaction fee charged by a broker.

Cross Rate: An exchange rate between two currencies that does not involve the US dollar, such as EURJPY

Currency:Any form of money issued by a government or central bank and used as legal tender.

Currency Risk: The probability of an adverse change in exchange rates.

Day Trading: Refers to positions that have been opened and closed on the same day.

Deficit: A negative balance of trade or payments

Economic Indicator: : A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), CPI (inflation) and retail sales.

European Central Bank (ECB): The Central Bank of the European Monetary Union

Federal Reserve (Fed): The Central Bank of the United States.

Foreign Exchange/ Forex or FX market: A market where currencies are bought and sold against each other.

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 an instrument at a set price on a future date. The main difference between a future and a forward is that futures are typically traded on an exchange to a fixed settlement date. Forwards are over-the-counter (OTC) contracts and the maturity date can be defined on a bespoke basis.

Hedge: A position or a combination of positions that reduces the risk of the trader's primary position

Inflation:An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Margin: The required equity that an investor must deposit to collateralize a position

Margin call: : A request from a broker or a dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer. Alternatively the client can choose to close one or more positions.

Market Maker : A dealer who supplies prices and is prepared to buy or sell at those stated bid and ask prices.

LIBOR: London Interbank Offer Rate. The rate offered by banks on euro currency deposits(i.e. the rate at which a bank is willing to lend to other banks)

Limit Order : An order to buy at or below a specific price or to sell at or above a specific price.

Liquidity: The ability of a market to accept large transaction with minimal or no impact on price stability

Long position: A market position where the client has bought a currency he did not previously have. Normally expressed in base currency terms, e.g. long Dollars (short Swiss Franc).

Open position: A deal that has not been settled by physical payment or reversed by an equal and opposite deal for the same value.

Pips: The term used in the currency market to characterize the smallest incremental move an Exchange rate can make. The value of a pip depends on the currency pair. One pip/basis point equals for instance 0.0001 for Eur/Usd, Gbp/Usd , and 0.01 Usd/Jpy.

Premium : The price of an option

Resistance level: A price level at which you would expect selling to take place.

Revaluation : A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. central bank) can alter the official value of the currency.

Short Position: An investment position that benefits from a decline in market price.

Support Level: A price level at which you would expect buying to take place.

Spot Price: The current market price. Settlement of spot transactions usually occurs within two business days.

Stop loss: An order to close a position when a particular price is reached in order to minimize loss.

Stop order: An order to sell at or below a specific price or to buy at or above a specific price.

Take profit: An order to close a position when a particular price is reached to ensure a profit.

Technical Analysis: An effort to forecast future market activity by analyzing market data through the use of charts, price trends, and volume.

Over the Counter (OTC): Used to describe any transaction that is not conducted over a regulated exchange.