Forex Glossary

Forex Glossary You can find almost all terms related to Forex, Forex Market and Forex Trading on this page.

Aggressor
A trader dealing on an existing price in the market.
Arbitrage
Profiting from differences in the price of a single currency pair that is traded on more than one market.
Ask Price
Sometimes called the Offer Price, this is the market price for traders to buy currencies. Ask Prices are shown on the right side of a quote - e.g. EUR/USD 1.1965 / 68 - means that one euro can be bought for 1.1968 US dollars.
Asset
An item having commercial or exchange value.
Back Office
The office location, or department, where the processing of financial transactions takes place.
Bank Rate
The rate at which a central bank is prepared to lend money to its domestic banking system.
Bar Chart
A type of chart used in Technical Analysis. Each time division on the chart is displayed as a vertical bar which show the following information - the top of the bar is the high price, the bottom of the bar is the low price, the horizontal line on the left of the bar shows the opening price and the horizontal line on the right of bar shows the closing price.
Base Currency
In terms of foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. The base currency is the currency against which exchange rates are generally quoted in a given country. Examples: USD/JPY, the US Dollar is the base currency; EUR/USD, the EURO is the base currency.
Bear Market
An extended period of general price decline in an individual security, an asset, or a market.
Bid Price
is the price a trader can sell currencies. The Bid Price is shown on the left side of a quote - e.g. EUR/USD 1.1923 / 68 - means that one euro can be sold for 1.1923 US dollars.
Bid/Ask Spread
is the difference between the bid price and the ask price in any currency quotation. The spread represents the broker's fee, and varies from broker to broker.
Big Figure
The first two or three digits of a foreign exchange price or rate. Examples: USD/JPY rate of 108.05/10 the big figure is 108. EUR/USD price of .8325/28 the big figure is .83
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
An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries.
Bull Market
A market which is on a consistent upward trend.
Bundesbank
Central Bank of Germany.
Buy On Margin
The process of buying a currency pair where a client pays cash for part of the overall value of the position. The word margin refers to the portion the investor puts up rather than the portion that is borrowed.
Buy Limit Order
An order to execute a transaction at a specified price (the limit) or lower.
Candlestick Chart
A chart that displays the daily trading price range (open, high, low and close). A form of Japanese charting that has become popular in the West. A narrow line (shadow) shows the day's price range. A wider body marks the area between the open and the close. If the close is above the open, the body is white (not filled); if the close is below the open, the body is black (filled).
Central Bank
A bank, administered by a national government, which regulates the behavior of financial institutions within its borders and carries out monetary policy.
Chartist
A person who attempts to predict prices by analyzing past price movements as recorded on a chart.
Closing a Position
The process of selling or buying a foreign exchange position resulting in the liquidation (squaring up) of the position.
Commission
The fee that a broker may charge clients for dealing on their behalf.
Cross Currency
A currency pair that does not include US dollars - e.g. EUR/GBP.
Currency
Money issued by a government. Coins and paper money. It is a form of money used as a unit of exchange within a country.
Currency Pair
Two currencies involved in a Forex transaction - e.g. EUR/USD.
Currency Risk
The risk that shifts in foreign exchange rates may undermine the dollar or any other foreign currency value of overseas investments.
Day Trade
A trade opened and closed on the same trading day.
Day Trading
Refers to a style or type of trading where trade positions are opened and closed during the same day.
Day Trader
A trader who buys and sells on the basis of small short-term price movements.
Dealer
An individual or firm that buys and sells assets from their portfolio, acting as a principal or counterpart to a transaction.
Depreciation
A fall in the value of a currency due to market forces.
Desk
Term referring to a group dealing with a specific currency or currencies.
Devalution
The act by a government to reduce the external value of its currency.
Direct Quotation
Quoting in fixed units of foreign currency against variable amounts of the domestic currency.
Discretionary Account
An account in which the customer permits a trading institution to act on the customer's behalf in buying and selling currency pairs. The institution has discretion as to the choice of currency pairs, prices, and timing-subject to any limitations specified in the agreement.
Economic Indicator
A statistical report issued by governments or academic institutions indicating economic conditions within a country.
Euro (EUR)
The single currency of the European Economic and Monetary Union (EMU) introduced in January 1999. This is the amalgamation of the following currencies, after Jan. 1, 2002 these currencies will be considered legacy currencies. Germany Deutsche Marks, Italy Lira, Austria Schillings, France Franc, Belgium Francs, Netherlands (Dutch) Guilders, Finland Markka, Portugal Escudo, Greece Drachmas, Ireland Punt, Luxembourg Francs, Spanish Pesetas.
European Central Bank (ECU
The Central Bank for the new European Monetary Union.
Execution
The Process of completing an order or deal.
First In First Out (FIFO)
refers to the order open orders are liquidated. The first orders to be liquidated are the first that were opened.
Foreign Exchange (Forex, FX)
Simultaneously buying one currency and selling another.
Fundamental Analysis
Analysis of political and economic conditions that can affect currency prices.
Leverage or Margin
The ratio of the value of a transaction to the required deposit. A common margin for Forex trading is 100:1 - you can trade currency worth 100 times the amount of your deposit.
Limit Order
An order to buy or sell when the price reaches a specified level.
Lot
The size of a Forex transaction. Standard lots are worth about 100,000 US dollars.
Major Currency
The euro, German mark, Swiss franc, British pound, and the Japanese yen are the major currencies.
Minor Currency
The Canadian dollar, the Australian dollar, and the New Zealand dollar are the minor currencies.
One Cancels the Other (OCO)
Two orders placed simultaneously with instructions to cancel the second order on execution of the first.
Open Position
An active trade that has not been closed.
Order
A customer's instructions to buy or sell currencies.
Overnight Position
Trader's long or short position in a currency at the end of a trading day.
Pips or Points
The smallest unit a currency can be traded in.
Price
The price at which the underlying currency can be bought or sold.
Price Transparency
The ability of all market participants to "see" or deal at the same price.
Principle Value
The original amount invested by the client.
Quote Currency
The second currency in a currency pair. In the currency pair USD/EUR the euro is the quote currency.
Rate
Price at which a currency can be purchased or sold against another currency.
Resistance
Price level at which technical analysts note persistent selling of a currency.
Revaluation
Daily calculation of potential profits or losses on open positions based on the difference between the settlement price of the previous trading day and the current trading day.
Risk (Forex Risk)
The risk that the exchange rate on a foreign currency will move against the position held by an investor such that the value of the investment is reduced.
Risk Management
The employment of financial analysis and use of trading techniques to reduce and/or control exposure to financial risk.
Rollover (Roll-Over)
The process of extending the settlement value date on an open position forward to the next valid value date.
Spot Market
Market where people buy and sell actual financial instruments (currencies) for two-day delivery.
Spot Price
The current market price of a currency that normally settles in 2 business days (1 day for Dollar/Canada).
Spread
This point or pip difference between the bid and ask price of a currency pair.
Sterling (The Pound - GBP)
Another term for the British currency, "The Pound".
Stop
An order to buy or to sell a currency when the currency's price reaches or passes a specified level.
Stop Loss Order
Order to buy or sell when a given price is reached or passed to liquidate part or all of an existing position.
Support Levels
A price at which a currency or the currency market will receive considerable buying pressure.
Swap
A transaction which moves the maturity date of an open position to a future date.
Take Profit Order
A customer's instructions to buy or sell a currency pair which, when executed, will result in the reduction in the size of the existing position and show a profit on said position.
Technical Analysis
Analysis of historical market data to predict future movements in the market.
Tick
The smallest possible change in a price, either up or down.
Transaction Cost
The cost of a Forex transaction - typically the spread between bid and ask prices.
Transaction Date
The date on which a trade occurs.
Turnover
The total volume of all executed transactions in a given time period.
Two-Way Price
A quote in the foreign exchange market that indicates a bid and an offer.
US Treasury
The United States Department of the Treasury is the government department responsible for issuing all Treasury bonds, notes, and bills.
Value Data
The maturity date of the currency for settlement, usually two business days (one day for Canada) after the trade has occurred.
Variation Margin
Funds, which are required to bring the equity in an account back up to the initial margin level, calculated on a day-to-day basis.
Volatility (VOL)
Statistical measure of the change in price of a financial currency pair over a given time period.
Withholding Tax
Income tax withheld from employees' wages and paid directly to the government by the employer.
Yard
A slang word used in the currency industry meaning "billion".
X
A Nasdaq stock symbol specifying that it is a mutual fund.
Z-Score
A statistical measure that quantifies the distance (measured in standard deviations) a data point is from the mean of a data set. In a more financial sense, Z-score is the output from a credit-strength test that gauges the likelihood of bankruptcy.