Forex Glossary

A comprehensive online Forex Glossary, searchable by keyword or alphabetically!

Term	Description
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.
Adjustment	Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or. Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.
Ask (Offer) Price	The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.
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.
Aggressor	A trader dealing on an existing price in the market.
Appreciation	The increase in the value of an asset.
Arbitrage	Profiting from differences in the price of a single currency pair that is traded on more than one market.
Asset	An item having commercial or exchange value.
Balance of Trade	The value of a country's exports minus its imports.
Bar Chart	A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.
Book	In a professional trading environment, a 'book' is the summary of a trader's or desk's total positions.
Bank Rate	The rate at which a central bank is prepared to lend money to its domestic banking system.
Back Office	The office location, or department, where the processing of financial transactions takes place.
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	The price at which an investor can place an order to buy a currency pair; the quoted price where an investor can sell a currency pair. This is also known as the 'bid price' and 'bid rate'.
Bid/Ask Spread	The point difference between the bid and offer (ask) price.
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.
Buy Limit Order	An order to execute a transaction at a specified price (the limit) or lower.
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.
Bundesbank	Central Bank of Germany.
Cable	The British pound/US Dollar exchange rate GBP/USD.
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).
Carry (Interest-Rate Carry)	The income or cost associated with keeping a foreign exchange position overnight. This is derived when the currency pairs in the position have different interest rates for the same period of time.
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.
Closing Market Rate	The rate at which a position can be closed based on the market price at end of the day.
Commission	The fee that a broker may charge clients for dealing on their behalf.
Confirmation	Written acknowledgment of a trade, listing important details such as the date, the size of the transaction, the price, the commission, and the amount of money involved.
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.
Counterpart	A participant in a financial transaction.
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.
Cross-Rate	The exchange rate between 2 currencies where neither of the currencies are USD.
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	The two currencies in a foreign exchange transaction. The “EUR/USD” is an example of a currency pair.
Currency Risk	The risk that shifts in foreign exchange rates may undermine the dollar or any other foreign currency value of overseas investments.
Day Order	A buy or sell order that will expire automatically at the end of the trading day on which it is entered.
Day Trade	A trade opened and closed on the same trading day.
Day Trader	A trader who buys and sells on the basis of small short-term price movements.
Day Trading	Refers to a style or type of trading where trade positions are opened and closed during the same day.
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.
Devaluation	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.
Euro	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 (ECB)	The Central Bank for the new European Monetary Union.
Execution	The Process of completing an order or deal.
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.
Federal Deposit Insurance Corporation (FDIC)	The regulatory agency responsible for administering bank depository insurance in the United States.
Federal Reserve (Fed)	The Central Bank of the United States.
Federal Reserve System	The central banking system in the United States.
Fill	The process of completing a customer's order to buy or sell a currency pair.
Fill Price	The price at which a buy or sell order was executed.
Financial Risk	The risk that a firm will be unable to meet its financial obligations.
Flat	Term describing a trading book with no market exposure.
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	Term commonly used when referring to the foreign exchange market.
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.
Forward	A transaction that settles at a future date.
Forward Points	The points that are added to or subtracted from the spot rate to calculate the forward rates for a forward foreign exchange transaction. These points are based on the differential between the interest rates of the two currency pairs.
Forward Price	(See forward rates)
Forward Rates	The net price resulting from calculating the forward points and subtracting them from the existing spot rate. This is the rate at which a currency can be purchased or sold for delivery in the future.
Fundamental Analysis	Analysis of economic and political information with the objective of determining future movements in a financial market.
FX	Foreign Exchange.
Good Till Cancelled Order (GTC)	A buy or sell order which remains open until it is filled or canceled.
G7	The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.
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.
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 income earned from investment or work abroad.
Hedge	A position or combination of positions that reduces the risk of your primary position.
Hit the bid	Acceptance of purchasing at the offer or selling at the bid.
Initial Margin Requirement	The minimum portion of a new security purchase that an investor must pay for in cash.
Inflation	An economic condition whereby prices for consumer goods rise, eroding purchasing power.
Initial Margin	The initial deposit of collateral required to enter into a position as a guarantee on future performance.
Interbank Rates	The Foreign Exchange rates at which large international banks quote other large international banks.
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.
Introducing Broker	A person or corporate entity which introduces accounts to FOREX.com for a fee.
Jobber	A trader who trades for small, short-term profits during the course of a trading session, rarely carrying a position overnight.
K	A Nasdaq stock symbol specifying that the stock has no voting rights.
Leading Indicators	Statistics that are considered to predict future economic activity.
LIBOR	The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.
Limit Order	An order to execute a transaction at a specified price (the limit) or better. A limit order to buy would be at the limit or lower, and a limit order to sell would be at the limit or higher.
Liquidity	Refers to the relationship between transaction size and price movements. For example, a market is "liquid" if large transactions can occur with only minimal price changes.
Liquidation	The closing of an existing position through the execution of an offsetting transaction.
Long	See long position.
Long Position	In foreign exchange, when a currency pair is bought, it is understood that the primary currency in the pair is 'long', and the secondary currency is 'short'.
Maintenance	A set minimum margin that a customer must maintain in his margin account.
Margin	The amount of money needed to maintain a position.
Margin Account	An account that allows leverage buying on credit and borrowing on currencies already in the account. Buying on credit and borrowing are subject to standards established by the firm carrying the account. Interest is charged on any borrowed funds and only for the period of time that the loan is outstanding.
Margin Call	A call for additional funds in a margin account either because the value of equity in the account has fallen below a required minimum (also termed a maintenance call) or because additional currencies have been purchased (or sold short).
Mark-to-Market	The theoretical value of an open position at the current market price.
Market Close	This refers to the time of day that a market closes. In the 24 hour-a-day foreign exchange market, there is no official market close. 5:00 PM EST is often referred to and understood as the market close because value dates for spot transactions change to the next new value date at that time.
Market-Maker	A person or firm that provides liquidity making two-sided prices (bids and offers) in the market.
Market Order	A customer order for immediate execution at the best price available when the order reaches the marketplace.
Market Rate	The current quote of a currency pair.
Market Risk	The risks that occur when general market pressures cause the value of an investment to fluctuate.
Maturity	The date on which payment of a financial obligation is due.
Momentum	The tendency of a currency pair to continue movement in a single direction.
Non-Client Order	An order on an exchange that is made by a participant firm or on behalf of a partner, officer, director, or employee of the participant firm. Where a participant firm is a firm that is entitled to trade on the exchange, also known as a member firm. While these orders are allowed, priority must be given to client orders for the same securities.
Net Position	The amount of currency bought or sold which have not yet been offset by opposite transactions.
OCO-One Cancels the Other Order	A combination of two orders in which the execution of either one automatically cancels the other.
Offer	The price at which a currency pair or security is for sale; the quoted price at which an investor can buy a currency pair. This is also known as the 'ask', 'ask price', and 'ask rate'.
Open Order	Buy or sell order that remains in force until executed or cancelled by the customer.
Open Position	Any position (long or short) that is subject to market fluctuations and has not been closed out by a corresponding opposite transaction.
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.
Pip	The smallest increment of change in a foreign currency price, either up or down.
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.
Principal Value	The original amount invested by the client.
Quote	A simultaneous bid and offer in a currency pair.
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 (Foreign Exchange 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.
Roll-Over	The process of extending the settlement value date on an open position forward to the next valid value date.
Sell Limit Order	An order to execute a transaction only at a specified price (the limit) or higher.
Selling Short	A situation where a currency has been sold with the intent of buying back the position at a lower price to make a profit.
Settlement	The actual delivery of currencies made on the maturity date of a trade.
Short position	In foreign exchange, when a currency pair is sold, the position is said to be short. It is understood that the primary currency in the pair is 'short', and the secondary currency is 'long'.
Short Squeeze	The pressure on short sellers to cover their positions as a result of sharp price increases.
Short	See short position.
Slippage	It's the experience of not getting filled at (or even very close to…) your expected price when you place a market order or stop loss. This can happen because either: market price is simply moving too fast, the market is not liquid or you're talking to an unmotivated broker.
Spot Market	Market where people buy and sell actual financial instruments (currencies) for two-day delivery.
Spot/Next or S/N roll	The process of moving the spot settlement value date on an open position forward to the next valid value date. This process will affect the profit or loss on the overnight position. The forward points reflect the difference in interest rates between the currencies being rolled over.
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	Another term for the British currency, 'The Pound'.
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.
Stop Order (or stop)	An order to buy or to sell a currency when the currency's price reaches or passes a specified level.
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	An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.
Tick	The smallest possible change in a price, either up or down.
Tomorrow Next (Tom/Next), (T/N), T/N Roll	The process of moving the settlement value date on an open position forward from one business day after the trade date (tomorrow), to the next valid value date (next), the spot value date.
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.
U.S. Treasury	The United States Department of the Treasury is the government department responsible for issuing all Treasury bonds, notes, and bills.
Value Date	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.
Whipsaw	slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
X	A Nasdaq stock symbol specifying that it is a mutual fund.
Yard	A slang word used in the currency industry meaning 'billion'.
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.

Forex Glossary - financial and investment terms

Forex Glossary

A comprehensive online Forex Glossary, searchable by keyword or alphabetically!

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