This a record of all transactions.
An individual or entity engaged to legally act on behalf of another (the principal).
The total of government spending, personal consumption expenditures and business expenditures.
All or None
A limit price order that instructs the FCM (see Futures Commission Merchant) to fill the whole order at the stated price or not at all.
An increase in the value of an asset; the rising of a price in response to market demand.
The use of countervailing prices in different markets to profit from small price differentials via the purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market.
The amount of shares being offered for sale at the ask rate.
The lowest price at which a financial instrument is offered for sale.
The distribution of funds among different markets (such as Forex, stocks, bonds, commodities and real estate) to achieve diversification for risk management purposes and/or expected returns.
Attorney in Fact
A person who, by virtue of having power of attorney, is allowed to transact business and execute documents on behalf of another person or entity.
The departments and processes related to the settlement of financial transactions.
The amount of money currently remaining in an account.
Balance of Payments
The payments that flow between any one country and all other countries.
1. The currency in which an investor or issuer maintains his/her book of accounts; the currency against which other currencies are quoted. In the Forex market, the US Dollar is normally considered the “base” currency for quotes, meaning that quotes are expressed as a unit of one USD per the other currency quoted in the pair.
2. The first currency quoted in a pair.
The difference between the spot price and the futures price.
One hundredth of a percent.
An investor who believes that market prices will decline.
A trend distinguished by a prolonged period of declining prices accompanied with widespread pessimism.
The price at which a buyer is prepared to purchase; the price offered for a currency.
A dealer phrase referring to the first few digits of an exchange rate. These digits rarely change in normal market fluctuations, and therefore are omitted in dealer quotes, especially in times of high market activity. For example, a USD/JPY rate might be 107.30/107.35, but would be quoted verbally without the first three digits as, “30/35”.
Tradable instruments (debt securities) issued by a borrower to raise capital. They pay either fixed or floating interest, known as the coupon. As interest rates fall, bond prices rise and vice versa.
Bretton Woods Accord of 1944
An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets and set the price of gold at USD 35 per ounce. The agreement lasted until 1971.
An individual or firm that acts as an intermediary between buyers and sellers, usually for a fee or commission. A dealer, by contrast, performs the same service but commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
An investor who believes that market prices will rise.
A trend distinguished by a prolonged period of rising prices; the opposite of bear market.
The central bank of Germany.
A chart that indicates the trading ranges for the day as well as the opening and closing price. If the close price is lower than the open price, the rectangle is shaded or filled. If the open price is higher than the close price, the rectangle is not filled.
Markets intended for medium- to long-term investment, such as US government bonds and Eurobonds.
A central bank, reserve bank, or monetary authority is a banking institution which has been granted the exclusive monopoly to a lend a government its currency.
An individual who interprets historical data to find trends, predicts future movements and aids in technical analysis.
The process of settling a trade.
Close a Position (Position Squaring)
To move out of a trading position. Stop trading.
The fee a broker charges for a transaction.
A document exchanged by participants in a transaction that confirms the terms of said transaction.
Financial contagion refers to the transmission of a financial shock in one entity to other interdependent entities.
Contract (Unit or Lot)
The standard unit of trading on certain exchanges.
A currency which can be exchanged freely for other currencies at market rates, or gold.
Cost of Carry
The cost of borrowing money in order to maintain a position. It is based on the interest parity, which determines the forward price.
The opposite party in a given transaction; e.g., the buyer as opposed to the seller or vice versa.
A collection of risks associated with investing in a foreign country. These risks can include political risk, exchange rate risk, economic risk, sovereign risk and transfer risk.
A check performed to be sure both parties have the credit to cover their trading.
An arrangement that maximizes free credit and speeds the dealing process by reducing the need to constantly re-check credit. Large banks and trading institutions may have agreements to net outstanding deals.
An exchange rate between two currencies. The cross rate is said to be non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/CHF quote would be considered a non-standard rate; whereas in the UK or Switzerland, GBP/CHF would be one of the primary currency pairs traded.
The medium of exchange and trading vehicle of a country. Money in any form when in actual use as a medium of exchange, especially circulating paper money.
The risk of incurring loss due to an adverse change in exchange rates.
The opening and closing of a position within the same trading session.
One who acts as a principal or counterpart to a transaction; places the order to buy or sell.
A negative balance of trade or payments.
The process by which both sides transfer possession of the currencies traded.
1. Money given in advance to show intention to complete a transaction.
2. Funds held in an account.
A decline in the value of a currency due to market forces.
A contract between two or more parties that establishes the value of underlying assets. Examples of derivative instruments include Options, Interest Rate Swaps, Forward Rate Agreements, Caps, Floors and Swap options.
A reduction in the value of a currency.
A statistic that measures economic growth and stability; e.g., Gross Domestic Product (GDP), employment rates, trade deficits, industrial production and business inventories.
A market in which the current price reflects all available information from past prices and volumes.
End Of Day
The close of business. Does not really apply in forex trading as it is a 24 hour activity around the world.
Estimated Annual Income
Projected yearly earnings.
The currency of the European Monetary Union (EMU), which replaced the European Currency Unit (ECU).
European Central Bank
The Central Bank for the European Monetary Union.
Exchange Rate Risk
See Currency Risk.
1. Exposure to fluctuating exchange rates affecting a company’s earnings, cash flow and foreign investments
2. The extent to which a company is affected by economic exposure depends on the specific characteristics of the company and its industry.
Federal Deposit Insurance Corporation (FDIC)
The regulatory agency responsible for administering bank depository insurance in the US.
Federal Reserve (Fed)
The Central Bank of the United States.
Fixed Exchange Rate
An official exchange rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates fluctuate between definite upper and lower bands, leading to intervention.
An interest rate that remains constant for the term of the deal, as in bonds or fixed-rate mortgages.
Flat (or Square)
The state of being neither short nor long. A “flat book” would contain no positions, or positions that cancel one another out.
Floating Rate Interest
An interest rate that changes with market or benchmark rates, as in a standard mortgage.
Foreign Exchange (or Forex or FX)
The simultaneous buying of one currency type and selling of another in an over-the-counter market.
Foreign Exchange Risk
The Probability of loss that can occur from an adverse movement in foreign exchange rates.
A deal that will commence at an agreed-upon date in the future. Unlike in the futures market, forward trading can be customized according to the needs of the two parties and involves more flexibility. Also, there is no centralized exchange.
The pips added to or subtracted from the current exchange rate to calculate a forward price. Transactions that allow one to borrow/lend at a stated interest rate over a specific time period in the future.
Sales and corporate finance personnel at a financial institution.
A method of trading financial instruments, currencies or commodities for a specific price at a specific date in the future. Unlike options, futures entail the obligation (not the option) to buy or sell instruments at a later date. They can be used to both protect and speculate against the future value of the underlying product.
An abbreviation for “Foreign Exchange.” Common misspellings include FORX, 4X and FourX.
A person or company who buys and sells currency to make a profit.
Futures Commission Merchant – FCM
A merchant involved in the solicitation or acceptance of commodity orders for future delivery of commodities related to the futures contract market.
Good till Cancelled (GTC)
An acronym for “Good Til Cancelled,” which is an order left with a dealer to buy or sell at a fixed price. The GTC will remain in place until executed or cancelled.
An investment to reduce the risk of adverse price movements in an asset. usually, a hedge consists of taking an offsetting position in a related security, such as a futures contract.
The highest traded price and the lowest traded price for a given period.
An increase in the price of consumer goods that erodes purchasing power.
The required initial deposit to enter into a trade position.
The Foreign Exchange rates at which large international banks quote other large international banks.
Interest Rate Swaps (IRS)
The transaction usually exchanges two parallel loans; one fixed and the other floating.
Introducing Broker (IB)
A person or organization that solicits or accepts clients to trade in the forex market, but does not directly accept money or other assets from customers for trading.
An acronym for “International Swaps and Derivatives Association,” which is the body that sets terms and conditions for derivative trades.
Economic variables that are considered to predict future economic activity; e.g., unemployment, Consumer Price Index, Producer Price Index, retail sales, personal income, Prime Rate, Discount Rate and Federal Funds Rate.
An acronym for the “London Interbank Offer Rate,” which is an interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market.
An Acronym for the “London International Financial Futures and Options Exchange”.
An order to buy at or below a specified price, or to sell at or above a specified price.
To close an open position by executing an offsetting transaction.
Assets that can be easily converted into cash. Examples: money market fund shares, US Treasury Bills, bank deposits, etc.
A position characterized by purchasing more of an instrument than is sold in hopes that the value will appreciate.
Funds deposited as collateral to cover any potential losses from adverse movements in prices.
A request by a broker or dealer for additional funds or other collateral in order to guarantee performance on a position that has moved against the trader.
Mark to Market
See “End of Day.”
A dealer who supplies prices and is prepared to buy or sell at those prices. A market maker runs a trading book.
An order to buy/sell at the best price available when the order reaches the market.
Risk relating to the market in general that cannot be extinguished by hedging or holding a variety of securities.
The date a debt becomes due for payment.
Jargon used in buying and selling. A prospective buyer might say or type, “Mine.” The seller might then reply, “Yours” to confirm the sale.
Short-term investment opportunities (e.g. under one year.) Participants include banks and other financial institutions. Examples include Deposits, Certificates of Deposit, Repurchase Agreements, Overnight Index Swaps and Commercial Paper.
The amount by which assets exceed liabilities. This term can be applied to companies and individuals.
The price at which a seller is prepared to sell.
A trade that serves to offset the market risk of an open position.
One Cancels Other Order (OCO Order)
A contingent order in which the execution of one part of the order automatically cancels the other part.
An order to buy or sell when the market moves to a pre-designated price.
A deal, not yet reversed or settled, in which the investor is subject to exchange rate movements.
An agreement that allows the holder to have the option to buy/sell a specific security at a set price within a set time period. Two examples of options are “call” and “put.” A call is the right to buy, while a put is the right to sell.
An instruction from a client to a broker to trade. An order can be placed at a specific price or at the market price. It can be good until filled or until close of business.
A trade that remains open until the next business day.
Over The Counter (OTC)
Any transaction that is not conducted on an exchange.
1. A method of stabilizing a country’s currency by fixing its exchange rate to that of another country.
2. A practice of and investor buying large amounts of an underlying commodity or security close to the expiry date of a derivative held by the investor. This is done to encourage a favorable move in market price.
Pip (Price Interest Point)
The smallest incremental move an exchange rate can make. Depending on context, this is normally one basis point (0.0001 in the case of EUR/USD, GBD/USD and USD/CHF; and .01 in the case of USD/JPY).
A trading viewpoint expressed by buying or selling. Can also refer to the amount of a currency either owned or owed by an investor.
The number of points added to the spot price to determine a forward or futures price.
Condition in which every market participant has equal access to the description of quotes.
Summation that shows the highest bid and/or lowest ask price available on a security at any given time.
The price of one currency in terms of another.
Profit or loss that occurs when an asset is sold.
Re-purchase (or Repo)
Involves the sale of an instrument to be re-purchased at a specified time and date. Occurs in the short-term money market.
A term used in technical analysis indicating a specific price level above which a currency is unable to cross. Recurring failure for the price to move above that point produces a pattern that can usually be shaped by a straight line.
Market rates used when a trader runs an end-of-day to establish profit and loss.
Exposure to uncertain change.
The amount of money that an individual can afford to invest that, if lost, would not affect his/her lifestyle.
The practice with processes, procedures, methods and tools of handling, of controlling risks in a project or activity, function or business with a view to the reduction of those risks to an economically acceptable level.
The interest rate variation between the two currencies when the settlement of a deal is rolled forward to a different date.
The finalizing of a transaction.
To sell an instrument without actually owning it in hopes that the price will decline so it can be bought back in the future at a profit.
An investment position that results from short selling.
A transaction that occurs immediately. The funds will usually change hands within two days after deal is struck.
The current market price.
The difference between the bid and offer (ask) prices, which is used to measure market liquidity. Narrower spreads usually signify high liquidity.
An order to buy/sell at an agreed-upon price.
A term used in technical analysis indicating a specific price level below which a currency is unable to cross. Recurring failure for the price to move below that point produces a pattern that can be displayed using an approximate straight line.
Another term for the Great British Pound.
The temporary holding of a security that is then exchanged after a fixed period of time. To calculate the swap, find the interest rate differential between the two currencies. The value may be used for speculative purposes to exploit anticipated movement in the interest rates.
An effort to forecast future market activity by analyzing market data such as charts, price trends, and volume.
Minimum price move.
An instrument that shows current and/or recent history of a currency in either graph or table format.
Tomorrow Next (Tom/Next)
Simultaneous buying and selling of a currency for delivery the following day.
The cost associated with buying or selling of a financial instrument. A dealer or broker fee for example.
The date on which the trade occurs.
which is the risk of capital being locked up or frozen by government action. Country risk varies from one country to the next. Some countries have high enough risk to discourage much foreign investment.
The volume traded over a specified period.
Two Way Price
Both the bid and offer rates quoted for a Forex transaction.
A new price quote that is higher than the preceding quote for the same currency.
In the U.S., a regulation stating that a security may not be sold short unless the trade prior to the short sale was at a price lower than the price at which the short sale was executed.
U.S. Prime Rate
The interest rate at which US banks will lend to their prime corporate customers.
The date that both parties of a transaction agree to exchange payments.
An additional margin requirement that a broker will need from a client due to market fluctuation.
The speed of change in the price or returns.
The number of assets traded during a specific period.
A form of traded options; rights to purchase shares or bonds issued by a company at a specific price within a specific time span.
A condition in a highly volatile market characterized by a sharp price movement quickly followed by a sharp reversal.
Another term for a billion.