Global Currency Index
Represents Single global currency based on 10 major convertible currency

Forex Signals
Forex Signals are based on Trading Strategy based on Fundamental, Technical and Global Currency Index Analysis.

ForexOnomics
ForexOnomics is the fundamental economics impacting currency rates of an organized and unorganized economy.

Accrual
The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.

Actualize
The underlying assets or instruments which are traded in the cash market.

Adjustable Peg
Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency , often the dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg, and crawling peg.

Adjustment
Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate

Agent Bank
(1) A bank acting for a foreign bank. (2) In the Euro market - the agent bank is
the one appointed by the other banks in the syndicate to handle the administration of the loan.

Aggregate Demand
Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and and firms in other countries for good and services.

Aggregate Risk
Size of exposure of a bank to a single customer for both spot and forward contracts.

Aggregate Supply
Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.

Agio
Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency.

Appreciation
Describes a currency strengthening in response to market demand rather than by official action.

Arbitrage
Dealing in two or more markets at the same time (or in similar products in the same market) to take advantage of temporary mispricing in order to make a profit.

Arbitrage Channel
The range of prices within which there will be no possibility to arbitrage between the cash and futures market.

Around
Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.

Asset Allocation
Dividing instrument funds among markets to achieve diversification or a maximum return.

Ask
The price at which the currency or instrument is offered.

Asset
In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward or spot deal.

At Best
An instruction given to a dealer to buy or sell at the best rate that can be obtained.

At or Better
An order to deal at a specific rate or better.

At-The-Money
In options, when the strike price equals the price of the underlying contract.

Authorized Dealer
A financial institution or bank authorized to deal in foreign exchange

Back Office
Settlement and related processes.

Backwardation
Term referring to the amount that the spot price exceeds the forward price.

Balance of Payments
A systematic record of the economic transactions during a given period for a country. (1) The term is often used to mean either: (i) balance of payments on "current account"; or (ii) the current account plus certain long term capital movements. (2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and or decline in currency values.

Band
The range in which a currency is permitted to move. A system used in the ERM.

Bank Line
Line of credit granted by a bank to a customer, also known as a " line".

Bank Rate
The rate at which a central bank is prepared to lend money to its domestic banking system.

Base currency
United States Dollars. The currency to which each transaction shall be converted at the close of each position.

Basis
The difference between the cash price and futures price.

Basis Point
For most currencies, denotes the fourth decimal place in exchange rate and represents 1/100 of one percent (.01%). For such currencies as the Japanese Yen, a basis point is the second decimal place when quoted in currency terms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms.

Basis Trading
Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.

Basket
A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.

Bear
A person who believes that prices will decline.

Bear Market
A market characterized by declining prices.

Bid
The rate at which a dealer is willing to buy the base currency.

Big Figure
The first three digits of an exchange rate, e.g. USD 1.62 per pound or DEM 1.49 per dollar.

Book
The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities. If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book. Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York.

Bretton Woods
The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.

Broker
Brings buyers and sellers together for a commission paid by the initiator of the transaction. Brokers do not take market positions.

Bull
A person who believes that prices will rise.

Bull Market
A market characterized by rising prices.

Bundesbank
Central Bank of Germany.

Buying Rate
Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.

Cable
Dealers' slang for the UK sterling/US dollar exchange rate.

Call
An option that gives the buyer the right to long a position in the underlying contract at a specific price; the call writer (seller) may be assigned a short position in the underlying contract if the buyer exercises his call.

Call Rate
The overnight interest rate.

Capital Risk
The risk arising from a bank having to pay to the counter party with out knowing whether the other party will or is able to meet its side of the bargain. see Herstatt.

Carry
The interest cost of financing securities or other financial instruments held.

Cash Delivery
Same day settlement.

Cash Market
The market for the purchase and sale of physical currencies.

Cash
Normally refers to an exchange transaction contracted for settlement on the day the deal is struck. This term is mainly used in the North American markets and those countries which rely for foreign exchange services on these markets because of time zone preference i.e. Latin America. In Europe and Asia, cash transactions are often referred to as value same day deals.

Cash and Carry
The buying of an asset today and selling a future contract on the asset. A reverse cash and carry is possible by selling an asset and buying a future.

Cash Settlement
A procedure for settling futures contract where the cash difference between the future and the market price is paid instead of physical delivery.

Central Bank
A nations main regulatory bank. Traditionally, its primary responsibility is development and implementation of monetary policy.

Central Rate
Exchange rates against the ECU adopted for each currency within the EMS.Currencies have limited movement from the central rate according to the relevant band.

Chartist
An individual who studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.

Clean Float
An exchange rate that is not materially effected by official intervention.

Closed Position
A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.

Commission
The fee that a broker may charge clients for dealing on their behalf.

Confirmation
A memorandum to the other party describing all the relevant details of the transaction.

Contract
An agreement to buy or sell a specified amount of a particular currency or option for a specified month in the future (See Futures contract).

Conversion Account
A general ledger account representing the uncovered position in a particular currency. Such accounts are referred to as Position Accounts.

Conversion
The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.

Conversion Arbitrage
A transaction where the asset is purchased and buys a put option and sells a call option on the asset purchased, each option having the same exercise price and expiry.

Convertible Currency
Currency which can be exchanged for other currencies or gold without authorization from the central bank.

Copey
Slang for the Danish krone.

Correspondent Bank
The foreign banks representative who regularly performs services for a bank which has no branch in the relevant centre, e.g. to facilitate the transfer of funds. In the US this often occurs domestically due to inter state banking restrictions.

Counterparties
The parties on either side of a transaction.

Countervalue
Where a person buys a currency against the dollar it is the dollar value of the transaction.

Country Risk
The risk attached to a borrower by virtue of its location in a particular country. This involves examination of economic, political and geographical factors. Various organizations generate country risk tables.

Cover
(1) To take out a forward foreign exchange contract. (2) To close out a short position by buying currency or securities which have been sold.

Covered Arbitrage
Arbitrage between financial instruments denominated in different currencies, using forward cover to eliminate exchange risk.

Covered Margin
The interest rate margin between two instruments denominated in different currencies after taking account of the cost of forward cover.

Crawling Peg
A method of exchange rate adjustment; the rate is fixed/ pegged, but adjusted at certain intervals in line with certain economic or market indicators.

Credit Risk
Risk of loss that may arise on outstanding contracts should a counter party default on its obligations.

Cross Deal
A foreign exchange deal entered into involving two currencies, neither of which is the base currency.

Cross Rate
Exchange rate that does not involve the US dollar.

Currency Clause
A clause in an export contract in which the sum payable is denominated in the buyer's currency; but the amount payable will vary with the exchange rate for the buyer's currency against the seller's currency.

Current Account
The net balance of a country's international payment arising from exports and imports together with unilateral transfers such as aid and migrant remittances. It excludes capital flows.

Day Trader
Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.

Day Trading
Refers to opening and closing the same position or positions within one day's trading.

Deal Date
The date on which a transaction is agreed upon.

Deal Ticket
The primary method of recording the basic information relating to a transaction.

Dealer
One who, as opposed to a broker, acts as a principle in all transactions, buying and selling for its own accounts.

Deflator
Difference between real and nominal Gross National Product, which is equivalent to the overall inflation rate.

Delivery Date
The date of maturity of the contract, when the exchange of the currencies is made This date is more commonly known as the value date in the FX or Money markets.

Delivery Risk
A term to describe when a counterparty will not be able to complete his side of the deal, although willing to do so.

Delta
For options, also called the neutral hedge ratio. Expresses the expected change in the option price, given a one-unit change in the price of the underlying contract.

Depreciation
A fall in the value of a currency due to market forces rather than due to official action.

Derivative
Financial instruments, such as futures and options, which derive their value from underlying securities including bonds, bills, currencies, and equities.

Desk
Term referring to a group dealing with a specific currency or currencies.

Details
All the information required to finalize a foreign exchange transaction, i.e. name, rate, dates, and point of delivery.

Devaluation
Deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.

Direct Quotation
Quoting in fixed units of foreign currency against variable amounts of the domestic currency.

Dirty Float
Floating a currency when the rate is controlled by intervention by the monetary authorities.

Discount
Cheaper than the spot price, e.g., forward discount.

Dollar Rate
When a variable amount of a foreign currency is quoted against one unit of the US dollar, regardless of where the dealer is located or in what currency he is requesting a quote. The major exception is the UK sterling/US dollar rate cable which is quoted as units of the US dollar to UK sterling.

Easing
Modest decline in price.

Economic Indicator
A statistics which indicates current economic growth rates and trends such as retail sales and employment.

EDI
Electronic Data Interchange.

Effective Exchange Rate
An attempt to summarize the effects on a country's trade balance of its currency's changes against other currencies.

EFT
Electronic Fund Transfer.

EMS
European Monetary System.

ERM
Exchange Rate Mechanism.

Eurobond
Marketable debt security issued outside the country in whose currency the debt is denominated.

Eurodollar
A dollar deposit acquired by a person or bank not residing in the United States and held outside the United States and therefore not subject to US reserve restrictions.

European Currency Unit
The currency unit in the EMS, where the unit is defined by the sum of quantities of each of the national currencies of the members of the EMS, so the value of the ECU changes in terms of third currencies, such as e.g. the US dollar.

Exchange Control
Government regulations restricting or forbidding certain types of foreign currency transactions including purchases from abroad, payment abroad of interest or dividends, and investing abroad.

Exchange Rate Depreciation
Currency which loses in value against one or more other currencies, especially if this happens in response to natural supply rather than by an official devaluation.

Exchange Rate Risk
The potential loss that could be incurred from a movement in exchange rates.

Exotic
A less broadly traded currency.

Exposure
A financial risk facing a business, which can be categorized according to its cause or source. Currency exposures are exposures to exchange rate risk.

Fast Market
Rapid movement in a market caused by strong interest by buyers and/or sellers. In such circumstances price levels may be omitted and bid and offer quotations may occur too rapidly to be fully reported.

Fed Fund Rate
The interest rate on Fed funds. This is a closely watched short term interest rate as it signals the Feds view as to the state of the money supply.

Fed
Abbreviation for Federal Reserve System of the United States. In the domestic context Fed usually refers to its board of governors or to the Federal Reserve Bank of New York; in the foreign exchange context it usually refers to the latter.

Federal Open Market Committee (FOMC)
Key decision making committee of the Federal Reserve System. The minutes of its meetings are published about a month later, and show the current stance of US monetary policy.

Federal Reserve System
The central banking system in the United States.

Figure
Dealers' slang meaning "00" and denoting an exchange rate level. If the D-mark is quoted at 1.7300/1.7310 per dollar the rate may be quoted "figure/ten" (leaving 1.73 understood).

Fill or Kill
An order which must be entered for trading, normally in a pit three times, if not filled is immediately canceled.

Fisher Effect
The relationship that exists between interest rates and exchange rate movements, so that in an ideal situation interest rate differentials would be exactly off set by exchange rate movements. See interest rate parity.

Fixed Exchange Rate
Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower intervention points.

Flat / Square
Where a client has not traded in that currency or where an earlier deal is reversed thereby creating a neutral (flat) position.

Flexible Exchange Rate
Exchange rates with a fixed parity against one or more currencies with frequent revaluation's. A form of managed float.

Floating Exchange Rate
When the value of a currency is decided by supply and demand.

FOMC
Federal Open Market Committee, the committee that sets money supply targets in the US which tend to be implemented through Fed Fund interest rates etc.

Foreign Exchange
The purchase or sale of a currency against sale or purchase of another.

Forex
An abbreviation for foreign exchange, also FX.

Forex Club
Groups formed in the major financial centers to encourage educational and social contacts between foreign exchange dealers, under the umbrella of Association Cambiste International.

ForexOnomics

ForexOnomics is the fundamental economics impacting currency rates of an organized and unorganized economy.

Forex Trading Strategy
Forex Trading Strategy refers to a plan of action designed to achieve a particular goal in forex trading.
Strategies are made of various options to archive a goal.

Forward Margins
Discounts or premiums between spot rate and the forward rate for a currency. Normally quoted in points.

Forward Operations
Foreign exchange transactions, on which the fulfillment of the mutual delivery obligations is made on a date later than the second business day after the transaction was concluded.

Forward Outright
A commitment to buy or sell a currency for delivery on a specified future date or period. The price is quoted as the Spot rate minus or plus the forward points for the chosen period.

Forward Points
The interest rate differential between two currencies expressed in exchange rate points. These forward points are added to or subtracted from the spot rate to give the forward or outright rate.

Forward Rate
The rate at which a foreign exchange contract is struck today for settlement at a specified future date.

Free Reserves
Total reserves held by a bank less the reserves required by the authority.

Front Office
The activities carried out by the dealer , normal trading activities.

Fundamental Analysis
Analysis based on economic factors

Fundamentals
The macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.

Futures
Contracts giving the obligation to buy or sell an asset at a set date in the future.

FX
Foreign Exchange.

G7
The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.

G10
G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.

Gap
A mismatch between maturities and cash flows in a bank or individual dealers position book. Gap exposure is effectively interest rate exposure.

Global Currency Index
Global Currency Index is a currency index represents single Global currency. Index is composed of 10 indexes of 10 major tradable currencies. Index explains the global economic cycle and generates currency trading signals.

Globalization
Globalization signifies the process of integration of regional economies, societies, and cultures have become integrated through a global network of communication, transportation, and trade.

Economic globalization refers to the integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and the spread of technology. globalization is also recognized as being driven by a combination of economic, technological, sociocultural, political, and biological factors.

Going Long
The purchase of a stock, commodity, or currency for investment or speculation.

Going Short
The selling of a currency or instrument not owned by the seller.

Gold Standard
The original system for supporting the value of currency issued. The was that where the price of gold is fixed against the currency it means that the increased supply of gold does not lower the price of gold but causes prices to increase.

GTC "Good Till Cancelled"
An order left with a dealer to buy or sell at a fixed price. It holds until cancelled.

Grid
Fixed margin within which exchange rates are allowed to fluctuate.

Gross Domestic Product
Total value of a country's output, income or expenditure produced within the country's physical borders.

Gross National Product
Gross domestic product plus " factor income from abroad" - income earned from investment or work abroad.

Hard Currency
A currency whose value is expected to remain stable or increase in terms of other currencies.

Head and Shoulders
A pattern in price trends which chartist consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder, profit taking has caused the price to drop or level. The price then rises steeply again to the head before more profit taking causes the price to drop to around the same level as the shoulder. A further modest rise or level will indicate a that a further major fall is imminent. The breach of the neckline is the indication to sell.

Hedged Position
One open buy position and one open sell position in the same currency.

Hedging
A hedging transaction is one which protects an asset or liability against a fluctuation in the foreign exchange rate.

Hit The Bid
Acceptance of purchasing at the offer or selling at the bid.

IMF
International Monetary Fund.

IMF
International Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates. The IMF supports countries with balance of payments problems with the provision of loans.

IMM
International Monetary Market, part of the Chicago Mercantile Exchange that lists a number of currency and financial futures implied volatility. A measurement of the market's expected price range of the underlying currency futures based on the traded option premiums.

Implied Rates
The interest rate determined by calculating the difference between spot and forward rates.

Indicative Quote
A market-maker's price which is not firm.

Inflation
Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.

Initial Margin
The deposit required before a client can transact a deal.

Inter-Bank Rates
The bid and offer rates at which international banks place deposits with each other. The basis of the Interbank market.

Interest Arbitrage
Switching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, i.e. from foreign currency into the local one or outward, i.e. from the local currency to the foreign one. Sometimes better results can be obtained by not selling the forward interest amount. In that case some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.

Interest Parity
The interest parity theory is if there are two financial instruments in different currencies but identical in risk and maturity (e.g. three month UK gilts and US Treasury bills), then a difference in the interest rate on the instruments will be reflected in the premium or discount for the forward exchange rate.

Interest Rate Swaps
An agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. It is the interest cash flows be they payments or receipts that are exchanged.

Internationalization
Referring to a currency that is widely used to denominate trade and credit transactions by non residents of the country of issue. US dollar and Swiss Franc are examples.

Intervention
Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

In-the-Money
In call options, when the strike price is below the price of the underlying contract. In put options, when the strike price is above the price of the underlying contract. In-the-money options are the most expensive options because the premium includes intrinsic value.

Intrinsic Value
For in-the-money call and put options, the difference between the strike price and the underlying contract price.

Leading Indicators
Statistics that are considered to precede changes in economic growth rates and total business activity, e.g. factory orders.

Leads and Lags
Process of accelerating (leads) or slowing up (lags) foreign exchange payments or receipts when a change in exchange rates is expected.

Leverage
Facility whereby a small margin deposit can control a much larger total contract value, a mechanism which determines the ability to make extraordinary profits at the same time as keeping the risk capital to a minimum.

Liability
In terms of foreign exchange , the obligation to deliver to a counterparty an amount of currency either in respect of a balance sheet holding at a specified future date or in respect of an un-matured forward or spot transaction.

Limit Order
An order given which has restrictions upon its execution. The client specifies a price and the order can be executed only if the market reaches that price.

Liquidation
Any transaction that offsets or closes out a previously established position.

Liquidity
The ability of a market to accept large transactions.

Lombard Rate
German term for the rate of interest charged for loans against the security of pledged paper. Particularly used by Bundesbank, which normally maintains its Lombard rate at about 1/2% above its discount rate.

London Interbank Offered Rate (LIBOR)
The interest rate at which banks in London are prepared to lend funds to first-class banks.

Long Position
A position where the client has bought a currency he does not already own. Normally expressed in base currency terms, e.g. long US dollars (short Swiss Francs).

Maintenance Margin
The minimum margin which an investor must keep on deposit in a margin account at all times in respect of each open contract.

Make A Market
A dealer is said to make a market when he or she quotes bid and offer prices at which he or she stands ready to buy and sell.

Managed Float
When the monetary authorities intervene regularly in the market to stabilize the rates or to aim the exchange rate in a required direction.

Margin Call
A claim by one's broker or dealer for additional good faith performance monies usually issued when an investor's account suffers adverse price movements.

Margin
Cash or guarantee deposited by a client wishing to trade.

Mark To Market
The daily adjustment of an account to reflect accrued profits and losses often required to calculate variations of margins.

Market Maker
A market maker is a person or firm authorized to create and maintain a market in an instrument.

Market Order
An order to buy or sell a financial instrument immediately at the best possible price.

Maturity
Date for settlement

Micro Economics
The study of economic activity as it applies to individual firms or well defined small groups of individuals or economic sectors.

Mid-Price Or Middle Rate
The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers.

Minimum Price Fluctuation
The smallest increment of market price movement possible in a given futures contract.

Monetary Base
Currency in circulation plus banks' required and excess deposits at the central bank.

Monetary Policy
Monetary policy is the process a government, central bank, or monetary authority of a country uses to control often targeting a rate of interest.

Moving Average
A way of smoothing a set of data, widely used in price time series.

Net Position
The amount of currency bought or sold which have not yet been offset by opposite transactions.

Not Held Basis Order
An order whereby the price may trade through or even better than the client's desired level, but the principal is not held responsible if the order is not executed.

Odd Lot
A non standard amount for a transaction.

Offer
The rate at which a dealer is willing to sell the base currency.

Offset
The closing-out or liquidation of a futures position.

Off-shore
The operations of a financial institution which although physically located in a country, has little connection with that country's financial systems. In certain countries a bank is not permitted to do business in the domestic market but only with other foreign banks. This is known as an off shore banking unit.

One Cancels Other (OCO) Order
Where the execution of one order automatically cancels a previous order.

Open Position
Any deal which has not been settled by physical payment or reversed by an equal and opposite deal for the same value date.

Option
The right, but not the obligation, to buy or sell an asset, such as currency, on or before a set future date.

Organized Economies

Organized economies are those economieswhich are:

• Currency of Organized economy is always Convertible
• Economy is regulated market based
  

Out-Of-The-Money
Option calls with strike prices above the price of the underlying contracts, and puts with strike prices below the price of the underlying contracts.

Outright Forward
Foreign exchange transaction involving either the purchase or the sale of a currency for settlement at a future date.

Outright Rate
The forward rate of a foreign exchange deal.

Overnight Limit
Net long or short position in one or more currencies that a dealer can carry over into the next dealing day. Passing the book to other bank dealing rooms in the next trading time zone reduces the need for dealers to maintain these unmonitored exposures.

Overnight Trading
Refers to a purchase or sale between 9.00 pm and 7.00 am.

Over-The-Counter Transaction (OTC)
A transaction arranged by direct negotiation, usually by telephone, rather than on an exchange.

Parity
(1) Foreign exchange dealer's slang for your price is the correct market price.
(2) Official rates in terms of SDR or other pegging currency.

Parities
The value of one currency in terms of another.

Pegged
A system where a currency moves in line with another currency, some pegs are strict while others have bands of movement.

Pip
One unit of price change in the bid/ask price of a currency. For most currencies, it denotes the fourth decimal place in an exchange rate and represents 1/100 of one percent (.01%).

Point
0.0001 of a unit; for instance, if the GBP/USD is 1.6220, then 1.6219 is one point lower.

Political Risk
The potential for losses arising from a change in government policy.

Position
The netted total commitments in a given currency. A position can be either flat or square (no exposure), long, (more currency bought than sold), or short ( more currency sold than bought).

Premium
In options, the price of a call or a put, which the buyer initially pays to the option writer (seller).

Price Risk (Market Risk)
The risk of a fall in the market value of a foreign investment (as measured in the domestic currency of the investor) due to an adverse change in the value of the currency of the investment.

Principal
The counterparty that sells and buys currencies for his own account as opposed to a broker who introduces a buyer to a seller and vice versa.

Profit Taking
The unwinding of a position to realize profits.

Purchasing Power Parity
The proposition that over the long term, changes in the exchange rate between two currencies are the result of differences in the relative rate of inflation in the two countries concerned.

Put
In options, the buyer of a put has the right to acquire a short position in the underlying contract at the strike price until the option expires; the seller (writer) of a put obligates himself to take a long position in the contract at the strike price if the buyer exercises his put

Rally
A recovery in price after a period of decline.

Range
The difference between the highest and lowest price of a future recorded during a given trading session.

Rate
(1) The price of one currency in terms of another, normally against USD.
(2) Assessment of the credit worthiness of an institution.

Reaction
A decline in prices following an advance.

Reciprocal currency
A currency that is normally quoted as dollars per unit of currency rather than the normal quote method of units of currency per dollar. Sterling is the most common example.

Resistance
A price level at which you would expect selling to take place due to technical analysis. The resistance level of one currency is the support level for the other.

Resistance Point Or Level
A price recognized by technical analysts as a price which is likely to result in a rebound but if broken through is likely to result in a significant price movement.

Revaluation
Increase in the exchange rate of a currency as a result of official action.

Revaluation Rate
The rate for any period or currency which is used to revalue a position or book.

Risk Management
The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organization. With respect to foreign exchange involves among others consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.

Risk Neutrality
An attitude that risks should neither be sought nor avoided, but should be accepted whenever they arise.

Risk Position
An asset or liability, which is exposed to fluctuations in value through changes in exchange rates or interest rates.

Rollover
Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies.

Round Trip
Buying and selling of a specified amount of currency

Same Day Transaction
A transaction that matures on the day the transaction takes place.

Selling Rate
Rate at which a bank is willing to sell foreign currency.

Settlement
Actual exchange of base currency and currency between principal and client.

Settlement Date
The date upon which foreign exchange contracts settle.

Settlement Risk
Where a payment is made to a counter party before the counter value payment has been made. The risk is that the counter party's payment will not be received.

Short
A market position where the client has sold a currency he does not already own. Normally expressed in base currency terms, e.g. short US dollars (long Deutsch marks).

Short-Term Interest Rates
Normally the 90 day rate.

Sidelined
A major currency that is lightly traded due to major market interest being in another currency pair.

Slippage
Refers to the negative (or depreciating) pip value between where a stop loss order becomes a market order and where that market order may be filled.

Soft Currency
A currency which is expected to devalue or depreciate against other currencies, or whose exchange rate must be supported by central bank intervention or exchange controls.

Soft Market
More potential sellers than buyers, which creates an environment where rapid price falls are likely.

Speculation
Buying or selling currency in expectation of an exchange rate movement, so as to make a profit, either in the same market or between two different markets, e.g. forex cash markets and derivatives markets.

Spot
Spot means that the settlement date of a deal is two business days forward.

Spot Next
The overnight swap from the spot date to the next business day.

Spot Price / Rate
The price at which the currency is currently trading in the spot market.

Spread
The difference in prices between bid and offer rates.

Square
Purchase and sales are in balance and thus the dealer has no open position.

Squawk Box
A speaker connected to a phone often used in broker trading desks.

Squeeze
Action by a central bank to reduce supply in order to increase the price of money.

Stable Market
An active market which can absorb large sale or purchases of currency without major moves.

Standard
A term referring to certain normal amounts and maturities for dealing.

Sterilization
Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the FX market.

Sterling
British pound, otherwise known as cable.

Stocky
Market slang for Swedish Krona.

Stop Loss Order (or Stop)
An order to buy or sell when a particular price is reached, either above or below the price that prevailed when the order was given.

Strike Price
For call options, the specified price at which the buyer has the right to purchase the underlying contract.

Structural Hedging
The process of reducing or eliminating currency exposure by matching receivables and payables in each currency or currency bloc to minimize the net exposure.

Support
Price level at which you expect buying to take place. See resistance.

Swap Price
A price as a differential between two dates of the swap.

Swap
An agreement between two parties to exchange a series of future payments. In a currency swap, the exchange of payments (cash flows) are in two currencies, one of which is often the US dollar.

Swift
The Society for Worldwide International Fund Transfers is a multinational facility for fund transfers based in Belgium and the Netherlands.

Swissy
Market slang for Swiss Franc.

Technical Analysis
Technical Analysis are based on market action through chart study, moving averages, volume, open interest, oscillators, formations, stochastic and other technical indicators.

Technical Correction
An adjustment to price not based on market sentiment but technical factors such as volume and charting.

Thin Market
A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.

Thin Trading
When the volumes of currency bought and sold are low.

Thursday / Friday Dollars
A US foreign exchange technicality. If a foreign bank buys dollars on Tuesday for Thursday delivery. If the bank leaves the funds overnight and transfers them on Friday by means of a clearing house cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.

Tick
A minimum change in price, up or down.

Time Value
In options, the value of the premium is based on the amount of time left before the contract expires and the volatility of the underlying contract. Time value represents that portion of the premium in excess of intrinsic value. Time value diminishes as the expiration of the option draws near and/or if the underlying contract's price development becomes less volatile.

Today / Tomorrow
Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.

Tomorrow Next (Tom Next)
Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.

Trade Date
The date on which a trade occurs.

Tradeable Amount
Smallest transaction size acceptable.

Transaction
The buying or selling of currencies resulting from the execution of an order.

Transaction Date
The date on which a trade occurs.

Two Tier Market
A dual exchange rate system where normally only one rate is open to market pressure, e.g. South Africa.

Two-Way Price
Rates for which both a bid and offer are quoted.

Uncovered
Another term for an open position.

Under-Valuation
An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.

Up Tick
A transaction executed at a price greater than the previous transaction.

US Prime Rate
The rate at which US banks will lend to their prime corporate customers.

Value Date
Settlement date of a spot or forward deal.

Value Spot
Normally settlement for two working days from today. See value date.

Volatility
A measure of price fluctuation.

Vostro Account
A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction

Wash Trade
A matched deal which produces neither a gain nor a loss.

Whipsaw
Term for where a trader takes a position, then has to move against it triggering stop loss limits and liquidation of positions, then having to move in the original direction. Normally occurs in volatile markets.

Working Day
A day on which the banks in a currency's principal financial center are open for business. For FX transactions, a working day only occurs if the bank in both financial centers are open for business (all relevant currency centers in the case of a cross are open).

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