The total amount of exposure a bank has to forex and forward contracts from a single customer.
Trader who is dealing in the market with an existing price.
Option that can be used during any valid business date during the option’s lifetime.
This is where a currency strengthens due to market demand and not in response to actual market behavior.
A low risk category of trading that involves making profits from the differences in the price of a single currency pair which is traded in two different markets.
Jargon used by dealers in a situation where the forward premium/discount is near the level of parity.
An option which pays off over time in accordance to the average prices of the underlying asset.
The ask price or offer price is the price which sellers are prepared to sell a currency pair.
In the foreign exchange market it is an item with a specific value.
An investment practice where funds are allocated amongst different markets to produce variation for reasons of risk management or expected returns that are constant with the aims of an investor.
Instruction provided to a dealer to either buy or sell at the best current market rate.
At or Better
A specific order to deal at a particular rate or better.
Where an option expires at the same level as the strike (purchasing) price.
At Par Forward Spread
Where the spot price is the same as the forward price.
Commonly used in the foreign exchange market, where the selling of a note is done to the highest bidder. It is commonly used for allocation government bills/paper, such as US Treasury Bills. Both small and large investors have access to the bills. Government auctions are commonplace nowadays.
Abbreviation used to describe the Australian Dollar and US Dollar (AUD/USD). The currency pair is read as how many US Dollars are required to purchase one Australian Dollar.
Slang used by dealers for the AUD/USD currency pair.
Average Rate Option
A particular contract (also known as an Asian option) in which the exercise price is based on the differentiation between the average spot rate and strike (purchase) price over the life of the contract.
The department or office location where the processing/settlement of financial transactions is executed.
Balance of Payments
Economic data that records the transactions for a country during a certain time period. The decline in the value of a currency or capital transfer restrictions are caused by lengthy balance of payment deficits. Balance of payments is often used in the context of the current account balance of payments. In addition, balance of payments is made up of current balance, trade balance, invisible balance and capital balance.
Balance of Trade
This is commonly known as the value of a country’s exports minus its imports.
This is a system used in ERM (Exchange Rate Mechanism), and it is the range in which a currency is permitted to move.
The line of credit is the credit approvedto a customer by a bank.
Paper which is legal tender and issued by the central bank or issuing bank. Many countries allow you to change bank notes into forex, even though they are not generally considered to be a part of the forex market.
The precise rate a country’s central bank is willing to lend money the bank representing the national banking system.
The currency where an investor, bank or institution upholds its book of accounts. In the foreign exchange market the USD or US Dollar is considered the base currency for quotes, and in units of $1. The EUR, AUD, GBP are also used in many cases as the base currency.
Known in the UK as the rate which banks use to calculate the interest rate charged to borrowers.
The difference in value between the cash price and futures price.
Most commonly used when speaking of interest rates. It is one percent of one percent or 0.01%.
Where the basis tends toward zero as the contract expiry time gets closer.
Price expressed in terms of annual return rate or yield maturity.
This is done with the hope of favorable price movements in the basis. It is most commonly done when opposite positions are taken in the futures and cash market.
Where the exchange rate of a currency is managed by a group of currencies.
An individual who feels that the prices in the marker will decline.
The opposite of a bull market, and is notable for falling prices. The wide price declines are due to rife pessimism (low confidence) in the markets.
The price which buyers are prepared to buy a currency pair.
The most commonly used measure of market liquidity, measuring the difference between the bid and offer price.
This is an expression used by dealers describing the first three digits of an exchange rate. These figures are often not used in dealer quotes due to them not usually changing in regular market conditions. For example, the USD/JPY is trading at 124.63/124.67. However, dealers and traders would quote this orally as 63/67 (without the first three digits).
A system employed when there is a limitation of foreign currency. Payments are sent through the central banks, while various central banks require an equal trade balance each year.
An option whose payout is known prior to the purchase of the option. Traders can select Call (higher) or Put (lower), choose the expiry time and receive the payout once the option expires. A trader is in the money if their forecast is correct or out of the money if their forecast is incorrect.
This was made world known by Myron Scholes and Fisher Black, and is a pricing formula for options. The pricing formula is used for both futures options and securities options. It is used in the currency and binary options markets.
A book is the summary of either a trader or desk’s total positions. It is used in forex, stock, commodity and option trading.
Used as slang to describe Russian trading.
An option where the trader decides whether the underlying asset will be located inside or outside a specific range at the time of expiry. The range is made of both upper and lower target prices.
A term used in the option market where the option buyer’s original position is restored by doing a reversal or undoing a conversion.
Break Even Point
The financial instrument’s price level where the buyer of the option recuperates the premium. This is seen with Call options in which the premium is added to the exercise price (the breakeven point).
Bretton Woods Agreement (1944)
The conference that established the post war foreign exchange system for the major currencies until the 1970s. In this agreement the Gold price was pegged to $35 an ounce and led to the formation of the IMF (International Monetary Fund). The system was replaced by a floating exchange rate for the major currencies by US President Richard Nixon in 1971.
A broker, individual or firm that act as intermediaries between banks, bringing buyers and sellers together for a commission or fee which is paid by both parties. Brokers receive commission for their activities, and are used by major banks and investors.
The commission that a broker charges.
Bundesbank (Reserve Bank of Germany).
A person who believes that the prices in the market will rise.
Pound Sterling bonds which are distributed by foreign institutions in the UK.
The Central Bank of Germany.
A market characterized/distinguished by rising prices.
Buy Limit Order
An order well-known in forex where a transaction or trade is executed at a specific price or lower.
Buy On Margin
The margin itself is the funds the trader puts into the trade. To buy on margin is when a trader or client buys a currency pair and pays cash for part of this position’s overall value.
A trading term used by traders in the foreign exchange market for the Pound/US Dollar exchange rate.
The telegraphic transfer of funds from one center to another.
Canadian Dollar, known in the foreign exchange market as the currency of Canada.
Based on the Gregorian calendar, beginning on January 31 and ending on December 31.
A Call is an option that provides the holder or investor the right to buy a specified amount of an underlying security during a fixed time period.
A Call option gives the holder the right to buy stocks, futures or forex at a specified price.
The upper end of an interest rate charged by a lender to a borrower.
The official currency of Canada.
A chart used in technical analysis to analyze open and close prices for trading ranges of specific time periods, such as 1 day, 1 week and 1 month.
The collection of the short and long term imports and exports of a particular country.
The profit made from the exchange, sale or trade of a capital asset.
The growth or increase in the market price of a specific asset.
The exchange center for securities, including bonds, stocks and mortgages.
This is the cost of interest for the financing of securities.
The money charged for holding foreign exchange or commodities contracts from one delivery date to the next.
Traders buy currencies with high interest and sell low interest currencies. This strategy is popularly used by experienced investors in the foreign exchange market.
Cash transactions or same day deals are carried out in currencies, checks and money orders.
Cash and Carry Trade
It is an arbitrage strategy, where a security is bought and there is the selling of a corresponding futures contract.
This measures the financial health of a company.
Where futures contracts are settled in which the difference in cash between the market price and future is paid to the holder rather than the physical delivery of the future contract. For example, options/futures contracts for stocks and indices.
The acronym for the Chicago Board Options Exchange.
The Chicago Board of Trade.
Acronym for Certificate of Deposit.
In charge of a country’s monetary policy, such as a country’s interest rates. Examples of central banks include the US Federal Reserve and the Bank of England.
Acronym for the Commodity Futures Trading Commission. The federal regulatory agency established by Congress in 1975 to regulate futures trading.
Clearing House Automated Trading System.
A cost or expense.
A chart tracks the change in price, and is composed of a y-axis and x-axis. Charts are primarily used in technical analysis to analyze historical prices in order to forecast potential future prices.
A technical trader who uses charts and graphs as primary tools that interprets past trends to predict future price movements in technical analysis.
Clearing House Interbank Payment System. This is also known as the New York clearing house system. This system clears and settles the majority of Euro transactions.
Market without a spread.All Buy and Sell trades occur at the same price (one price).
The official currency of Switzerland. It is abbreviated as the Swiss Franc.
Chicago Board of Trade
The abbreviation is CBOT, and it is the exchange where options, gold, grain and Treasury Bond futures are traded.
Chicago Board Options Exchange
The abbreviation is CBOE, and it is where index options, interest rate options and equity LEAPS are traded.
Chicago Mercantile Exchange
The abbreviation is CME, and it is where currency futures, commodity futures, futures options and other financial instruments are traded.
The Copenhagen Interbank Rate. This is the rate at which banks lend the Danish Krone to borrowers. The rate is calculated by the Danish Central Bank (DanmarksNationalbank) on a daily basis.
The settling of a trade.
Refers to a transaction which closes an open position, effectively ending a trader’s exposure to market price movements for a specific currency pair.
The given price at the end of the trading day for a specific security.
Closing Purchase Transaction
The purchase of an identical option to one that is already sold in order to settle a position.
Acronym for Chicago Mercantile Exchange.
The fee charged by a broker to its clients.
The terms of a particular transaction described in a memorandum exchanged between two parties.
The customary unit of trading. It is the agreement to either buy or sell a specified quantity of currency, option or security at a specific date in the future.
Contract Expiration Date
The date when a currency or option is delivered to fulfill the contract terms.
The month when a futures contract matures or is delivered if it didn’t expire or get settled prior to this date.
Consumer Price Index. A monthly measurement of the change in price of a specific basket of consumer goods limited to transport, clothing and food.
Cost of Carry
The cost of carry or interest rate parity is where the cost of borrowing money to hold a specific position determines the forward price. For example, dividends which are paid on short positions.
A participant (customer or bank) of a financial transaction, such as a foreign exchange deal.
The danger that one side of the agreement (client or bank)will not live up to their fulfillment of a position (Buys or Sells).
The risks that are associated with foreign currency trading/transactions, including legal, political, and regulatory factors.
An offer which is made in response to a corresponding offer. For example, the interest rate collar.
A bond’s annual interest rate.
To rebuy a contract which was previously sold.
The arbitrage present while trading in different currencies, where forward cover is used to minimize or eliminate any risk.
Committee on Payment and Settlement Systems.
A crawling or adjustable peg is a particular exchange rate system where the exchange rate of a country is fixed/pegged to another currency.
The risk that the counterparty (debtor) will default (not repay/deliver the pledged currency).
A deal on the foreign exchange market involving two currencies (both are not the base currencies).
When financial futures are used to hedge related cash instruments, with the intention that the price movement will be similar. This is done in volatile markets and the contract of the derivative must be equal to or longer than the hedge, so there is no time period exposure.
The exchange rate between two currencies which are not standard in the country where the quote is taking place. For example, in the US, the EUR/JPY quote would be called a cross rate. However, in the Euro-Zone or Japan this would be quoted as a primary currency pair.
A transaction in which the buy and sell brokers are identical. This often occurs when the buy and sell brokers are from the same company.
A category of money used by a country. A currency is traded with another currency on the foreign exchange market. Currency is usually issued by the central bank, and used as legal tender and for trading purposes.
The two currencies which make up a currency pair, such as the EUR/USD. The first currency in the pair (EUR) is the base currency, and the second currency in the pair (USD) is the counter currency.
The likelihood of an undesirable change in the exchange rates.
The net balance of payments of combined export and imports, and the unilateral transfers of a specified country, excluding capital flows.
The total value of exports minus the imports of a country.
A complete up/down movement in economic conditions.
Highest price reached by an asset (currency, commodity, index, stock) or security during a specified trading day.
Lowest price reached by an asset (currency, commodity, index, stock) or security during a specified trading day.
A trader who generally speaking holds a trade for a very short period. Several trades are made each trading day. Up to several dozen positions are bought and sold each day. Day traders make a living by buying and selling securities very quickly.
Trades that are both opened and closed on the same trading day.
A date that a particular transaction is agreed.
The maintechnique of recording the basic information of a transaction.
An individual or entity which acts as a principal in the buying and selling of securities. Brokers put together buyers and sellers by acting as intermediaries, and earning a commission in the process. On the other hand, dealers trade at their own risk, holds inventory and sells securities.
A desk where the buying and selling of securities takes place. They are most commonly found in banks and finance companies.
Measurement of the financial leverage of a company.
A company/individual who owes money to another company/individual.
The latest time or date that a buyer of an option must inform the seller if they do or do not want to exercise the option.
The failure to pay the required debt payments on time.
Refers to a negative balance of trade or payments. This is also referred to as a budget deficit, whereas a budget surplus is where there is a positive balance of payments.
The general decline in prices in the economy of a country. This may be caused by a decrease in the money supply, lack of credit and high interest rates. Deflation may also be caused by personal spending, government spending and other important factors.
The receipt and transfer of ownership of a currency or financial instrument.
The delay of the start of the trading day. This may occur due to a number of reasons, such as an imbalance of buy and sell orders, or important corporate news.
The delivery date or value date is the maturity date of a contract, where the exchanging of currencies produces the final settlement of a transaction.
Where one side of the deal cannot be completed by the counterparty. In OTC (over the counter) there this can be quite risky, which usually acts as a guarantee between both of the parties in a deal.
The hedge ratio which compare the change in price of the asset to the corresponding change in the derivative’s price.
A strategy in option trading aimed at reducing the risks linked with price movements.
A person’s readiness to consume goods and services at a certain price. Demand is also dependent on the income level, tastes and other various factors.
The fall in value of a currency or other asset due to various market forces.
A contract whose value and characteristics changes in relation to the movement in price of a related financial security, future or currency. The most widely traded derivative is an option.
Refers to a group which deals with a currency or currencies.
The entire information needed to complete a foreign exchange transaction, such as the date, rate and name.
The deliberate downward adjustment of the price or value of a currency that is usually accompanied by an official announcement.
To quote in fixed volumes of a foreign currency against the national currency.
Lower than the spot price.
The rate which central banks discount specified bills for financial firms, which in effect eases their liquidity level.
The short name for the Dow Jones Industrial Average.
Dow Jones Industrial Average
The abbreviation is the DJIA.
A negative turn ofan economy, such as a recession (two or more negative consecutive quarters).
The European Central Bank, which is in charge of the Euro-Zone’s monetary policy.
Abbreviation for the Economic Communication Network, where both buyers and sellers come together via an electronic system which executes trades electronically.
How fluctuations in the foreign exchange rate impact the future competitiveness of a company. Depending on which way the exchange rate moves, this may impact the cash flow positively or negatively.
Economic Growth Rate
The rate of increase of economic growth during a specific time interval.
Statistical data issued by the government that indicates the current economic growth rates within the economy. The most well-known indicators are the following: GDP (Gross Domestic Product),retail sale, unemployment rate and inflation.
The abbreviation for the European Currency Unit. This is a monetary unit composite made up all of the European Community currencies. It is the predecessor of the Euro.
The yield on date that is calculated from the purchase price.
Electronic Funds Transfer. This is any transfer of money which is initiated electronically, including telephone, computer, ATM or electronic terminal.
Either Way Market
Where the bid and offer rates for a specified time period are identical within the Euro Interbank Deposit market.
Electronic Communication Network
The abbreviation is ECN.
Refers to the economy/financial market ofa developing country. These usually have high risk, high potential and potentially high growth rates.
European Monetary System.
European Monetary Union.
European Options Exchange
End of Day Orderis an order to either buy or sell a security ata specific price. The order remains open until the conclusion of the trading day.
Other name for the stock market.
Exchange Rate Mechanism.
The abbreviation of the European Union.
Refers to the Euro, the official currency of the Euro-Zone.
Currency of the European Monetary Union(EMU). It is the official currency of the Euro-Zone.
A depository and electronic settlement system used for the safe delivery and payments of Eurobonds.
European Central Bank (ECB)
The central bank in charge of the monetary policy of the Euro-Zone (the countries that make up the Euro currency).
European Union (EU)
The group of nations formerly known as the European Community.
The rate which one specific currency may be converted against another currency.
Exchange Rate Risk
The potential risk to a business or investment from an unfavorable movement in the exchange rates.
The exercise or strike price is the price where an option may be exercised.
The completion of a buy or sell securities order.
A less commonly traded currency on the foreignexchange market.
The date at which the option expires.
The time on the specific date that the option expires.
Being exposed to risk. Traders face exposure when they buy or sell securities. Banks work heard to reduce their exposure to assets and loans.
Exchange traded fund is an investment fund which is traded on national and international stock exchanges.
The nominal Dollar amount allotted by the issuer to the security.
A rapid market movement caused by many buyers and sellers in the market. In this scenario prices may change too quickly for offer and bid quotations to be fully stated.
The Fed or the Federal Reserve Board is in charge of US monetary policy, made up of a 7 member Board of Governors. They also oversee Federal Reserve Banks, and in doing so are in charge of credit, interest rates and the health of the economy. Each member is appointed by the President, needing Senate confirmation and serving 14 yearterms.
The head of the Fed, and is appointed by the US President. He needs Senate confirmation.
The amount that the government’s tax revenues are exceeded by its expenditures.
The amount that the government’s tax revenues are exceeded by its expenditures.
Federal Deposit Insurance Corporation (FDIC)
Regulatory agency in charge of the managing bank deposit insurance in the US.
Federal National Mortgage Association (FNMA)
It is also known as Fannie Mae, and is the assurer of the financing for both current and potential home owners.It sales mortgages on the open market after purchasing them on the secondary market.
The funds that commercial banks deposit at Federal Reserve Banks. US banks are somewhat protected by a safety cushion (holding the funds that are not lent to borrowers) in the event that depositors demand very high withdraws.
Federal Fund Rate
Also known as the Fed Funds Rate, and is the interest rate that banks lend to other banks. This is done so financial institutions meet the preconditions set out by the Fed.
The central bank of the United States.
Federal Reserve Bank
One out of the twelve regional banks which represent the Federal Reserve System.
Federal Reserve Board
The US President appoints members who serve as the board of the FederalReserve System. One of these members is appointed as Chairman of the board. They are appointed on a term lasting 4 years. The Federal Reserve Board is given power by the US government to setkey policies on the nation’s money supply and general banking policy.
Federal Reserve Note
Paper currency which is issued by the Federal Reserve Banks.
Federal Reserve System
The central banking system that is in charge of the financial stability of the US economic system. One of their main roles is setting the country’s monetary policy. It is made up of 12 Federal Reserve Banks under the Federal Reserve Board in 12 districts.
This is the budget surplus of the federal government, and how much governmentspending is exceeded by governmentrevenue.
Finalizing a trader’s order of either buying or selling a currency pair.
Market involved in the exchange of credit and capital, incorporating boththe capital markets and money markets.
The risk that a company will not be able to meet its financial commitments.
Relating to money, such as government spending policies and government taxation.
Use by the government of taxation, spending and borrowing to implement monetary policy.
Set and not changeable.
Fixed Exchange Rate
The official rate set for a single or multiple numbers of currencies by the monetary authorities. In practice, fixed exchange rates may fluctuate by a certain amount. If it gets out of control, then the central bank of the related currency will intervene.
Referring to a loan where the interest rate stays constant using the whole life or time period of the loan.
The system used in a number of markets such as the London Bullion Market. It involves a technique of establishing rates that balances buyers with sellers. This is used by some currencies, such especially a tourist rate. This method occurs twice daily at a specified time.
A price which is neither going up or down (it is staying the same).
The quantity of shares for a particular security which is remaining and available to trade on the open market for traders.
Floating Exchange Rate
When the currency’s value is determined by free market forces, such as demand and supply on the foreign exchange market.
The floating rate or adjustable rate is an interest rate that changes periodically. It is usually tied to the prime interest rate in the economy.
The minimum price limit set by regulators, market makers and other related bodies.
The abbreviation for the Federal Open Market Committee. This 12 member committee sets both interest and credit rates for the Federal Reserve System.
The exchange of one currency for another currency.
The position that a party buys or sells to the other party a predetermined amount of foreign currency.
Abbreviation of foreign exchange.
Made up of the buying or selling of one currency against the buying or selling of another currency. The time for the deal is known from the opening date and it canbe closed any time prior to the expiry time. Deals may be only closed after 3 minutes.
Contract requiring one party to purchase and the other to sell a currency, equity, commodity or financial instrument at a specified date in the future.
Where a future contract is covered by the purchase of a cash commodity.
Forward Cover Taking
One or more forward contracts to safeguard against exchange rate movements.
A deal which is comprised of the buying or selling of an asset, such as a foreign currency, where the settlement occurs at a specified date in the future.
The annual percentage of difference between both forward and spot rates.
The differential in interest rates between two currencies, which is conveyed in exchange rate points. With forward points in order to calculate a forward price,pips are added to or subtracted from the current exchange rate.
The stated price fora specific commodity in a forward contract.
A trade whose settlement happens at a future price and date.
The total reserves which are held by a bank minus the reserves that are required by the authorities.
The trading of goods, services and other products internationally without regulations, duties or government intervention.
Regular trading activities carried out by the dealer, or the regular trading activities.
The abbreviation for the Financial Times Stock Exchange 100. The FTSE is traded on the London Stock Exchange.
To either finance or underwrite.
The analysis of both economic and political information to determine future price movements in the financial markets. Fundamental analysis is mostly used in the forex market by using a number of different fundamental indicators to forecast the future movement of a currency.
This term is known as the macroeconomic dynamics which form a currency’s comparative value. The following are examples of fundamentals: earnings, interest rates, capital structure, management, revenues, growth, inflation, trade balance and a country’s deficits.
The action of providing funds.
Money or in certain circumstances money plus assets which may be converted into money.
Contract which requires the delivery of a specific currency, commodity, bond or stock index at a specific future date. Futures bear the obligation to buy, as opposed to options. The risk to both the holder and the seller is unlimited.
The acronym for Forex of Foreign Exchange.
FX Market Hours
On the fx market trading occurs 24 hours a day. The three major trading sessions are the Tokyo, London and New York trading sessions.
The abbreviation for the seven leading industrialized countries. These include the United States, Japan, Germany, Britain, France, Canada and Italy.
The G-7 group plus Russia.
The G-7 group plus Sweden, Belgium and the Netherlands. This group meets to discuss IMF related issues.
The increase in value of a financial asset.
Engaging in an action where money is risked in order to make a profit.
The measure at which delta changesover a time period for a unit change in price of an asset.
A specific bond which is issued by the UK government.
A global electronic trading system which is used/traded after regular trading hours.
The acronym for Gross National Product.
The GNP figure minus inflation. The figures in most cases is represented in percentage terms.
The difference in value between the potential and actual GNP.
A bond which is backed by Gold.
This is where a government or monetary system backs up the value of its currency with Gold. The US left the Gold Standard in 1971.
The slang term commonly used for the US Dollar. The US paper currency is issues by the US Treasury Department.
Gross Domestic Product
The measurement in the value of both goods and services in an economy. The GDP is the primary measure of a country’s economic output.
Gross National Debt
The overall amount of unsettled private and public debt in a country.
Gross National Product
The abbreviation is GNP, and it is the GDP (Gross Domestic Product) plus the income which is earned for work and investments abroad.
The abbreviation is Good Till Cancelled.An order to buy or sell at a specific price. The order stays in effect until the client either executes or cancels the order.
Hang Seng Index
The Hang Seng Index(HIS) is the index of the leading stocks on the stock market of Hong Kong.
A currency where investors have confidence that its value will be stable or increase in value against other currencies.
Refers to materials traded on the commodities markets, such as oil, metals and chemicals.
Head and Shoulders
A term used in technical analysiswhich refers to a chart formation, where the price shows 3 successive rallies (the second rally being the highest). The name comes from the fact that on the chart the first and third rallies are the highest (resembling shoulders), while the second rally resembles a head.
A protective investment/position intended to counter undesired/high risk price movements within a specific asset. A hedge typically involves taking an opposing position with a related security on the financial markets.
The hedge ratio is also known as delta. It refers to a Call option’s price change for each one point movement for a particular underlying asset.
A transaction used with the intention of protecting an asset from a fluctuation in the exchange rate.
Investments with high return rates.
A time period of intense inflation which results in a country’s currency becoming almost worthless. An example of this is in Weimar Germany in the early 1920s.
International Commodities Clearing House Limited. This is a clearing house headquartered in London, which operates globally for many futures markets.
International Foreign Exchange Master Agreement.
International Monetary Fund – founded after World War Two in 1946. It oversees international monetary policies, promotes free trade and workis in stabilizing exchange rates. The IMF helps member countries with international balance of payment problemsby supplying them with loans to meet their necessary global net payments.
The International Monetary Market is part of the Chicago Mercantile Exchange, where numerous currencies and financial futures are listed.
The meaning or consequence meant by a statement or action.
Interest rate which is formed by calculating the differentiation of the forward and spot rates.
A generally adverse action or condition, including tax, excise duty or a charge on a product.
A company that has gone through all the legal procedures to become a legal corporation.
A currency which may not be converted to other currencies due to high volatility in the currency market or a legality preventing this exchange by the foreign exchange regulations.
A member of the NYSE that executes orders on behalf of other brokers who in the short term have an overflow of orders.
An indicator that represents the value of the securities it consists of.
The price of a market maker that is not stable.
Economic data that offers information or predicts the health of the financial markets or the economy. The following are just a few examples: interest rates, inflation, volume and employment.
A situation where the domestic currency unit is fixed at one single unit and the amount of the foreign currency is a variable amount.
A sustained rise in the general prices of goods and services, which results in a decline in purchasing power.
Investment used to protect against the risk of inflation.
Rate at which prices for goods and services rise, resulting in a fall in purchasing power.
The rate provided only for information purposes.
The required deposit for a broker prior to the trader being able to enter into a trade, so as to guarantee against the possibility of default in the future.
A stockholder who owns more than 10% of the stocks of a corporation.
The trading or better known as the illegal trading by insiders based on insider information.
A brokerage firm whose clients are institutions only.
The market for forex, foreign exchange or the international market for currencies. The foreign exchange market allows trading 24 hours a day.
The foreign exchange rates large global banks quote to other large global banks.
The interest measures how much it costs to borrow money from a lender, such as a bank.
The rate on money which is borrowed. Interest rates are calculated as a percent of the amount lent. For example, if $100 is owed yearly on a $1000 loan, the interest rate per month would be 10%.
Interest Rate Risk
The possibility of losses which may arise due to a change in the interest rates.
Interest Rate Swaps
The exchange of interest payments on a specified principal amount. In most cases an interest rate swap is between 2 parties. However, there are sometimes more than 2 parties involved. In many cases an interest rate swap consists of the exchanging of a fixed amount per payment period for a payment which is not fixed. In this case a different interest rate, such as the LIBOR would be linked to the floating side of the swap.
Third party which enables a deal between two parties.
International Monetary Fund
Also known as the IMF, established in December 1946. It is involved in promoting international monetary policy and promoting free trade. In recent years the IMF has provided loans to countries to inject stability in the international economic system.
The transaction of a commodity, service or a security across national borders.
An act or policy taken by the central bank, such as the Bank of England or the Federal Reserve to change the value of a currency or boost a country’s economy by entering the market.
In the Money
A Call option would be in the money if the price of the underlying asset is higher than the strike price. A Put option would be in the money if the price of the underlying asset is lower than the strike price.
The limit which is set by a bank’s management on the size of the each specific dealer’s intraday position.
The open trades/positions run by the dealer during the trading day.
To participate in the activity whereby money is invested with the goal of earning a profit. This activity usually involved a lot of research.
The investment of money to make more money. The aim of an investment is to make a profit. In finance, investors often invest in underlying assets, such as stocks, forex, commodities, indices or bonds. In economic terms, an investment is made by purchasing goods or services to make revenue, and assist in future business operations, such as purchasing software or machinery.
A person who puts funds into investment products in order to make high returns. In the process, the investor hopes to earn high returns while putting the risks at a minimum.
Index and Open Market, which is part of the Chicago Mercantile Exchange.
Industrial Production Index. This is an indicator which measure the total output of mining, manufacturing and utilities.
The acronym for Initial Public Offering, referring to the first sale of stock to the public by a company.
International Securities DealersAssociation. The body regulates interbank exchanges and markets.
The official currency of Japan.
Known as a trader that trades for minor short-term profits during the trading day, rather than holding long-term positions.
An order which is placed, but not filed on the market.
A term referring to the New Zealand Dollar.
Last Trading Day
The last day in which trading for a particular option is allowed.
Law of Demand
A principle in economics whereby if demand increases and supply stays constant, then there will be an increase in the market price.
Law of Supply
A principle in economics whereby if supply increases and demand stays constant, then there would be a decrease in the market price. If the demand remains constant and the supply decreases, there would be an increase in the market price.
This is a cutback in jobs or sacking an employee. This often occurs when companies are in a difficult financial state.
Acronym for Less Developed Countries.
The most important indicators which are in effect an economic gauge used to forecast future economic and business activity.
The currency of a specific country which is accepted as payment for goods, services and debt.
This refers to a situation which often occurs in financial trading where a trader opens a trade which is larger than the amountof money necessary to open it. Therefore, in order to open this position the trader puts down margin. Leverage is mostly used in forex and options trading, and refers to the money a trader can control in relation to his margin.
When an individual or firm is legally boundedto settle a debt.By being liable for this, then one is obligated and is held for responsible to settle the debt in question.
London Inter-Bank Offer Rate. LIBOR is the interest rates the banks charge one another for loans. The short-term interbank market rate applies to large loans borrowed for one day to as high as five years.
London International Financial Futures and Options Exchange.
An order to close an open trade when the market reaches a specific number of pips which is advantageous to the position. The whole point of a limit order is to close an existing position with a limited but desired amount of profit that is advantageous to the trader. Professional traders mostly trade with limits to protect potential gains.
An order to close an open trade when the market reaches a specific number of pips which is advantageous to the position. The whole point of a limit order is to close an existing position which a limited but desired amount of profit that is advantageous to the trader. Professional traders mostly trade with limits to protect potential gains.
The specified price in a limit order.
When a country’s residents are not allowed to buy/sell other currencies. This is in spite of non-residents being able to freely buy/sell these currencies.In addition, large institutional investors may buy/sell equities on the stock exchange of the country in question.
An investment type where the investor cannot lose more than the invested amount.
To convert assets, such as securities or commodities into cash.
A transaction which closes or offsets an existing position.
A market having the ability to accept large transactions with marginal impact on the price stability.
An investor goes long on a position when they buy an asset, such as a currency pair, stock, index or commodity.
When an investment declines in value.
The Cash in Circulation. This only refers to the UK.
The money supply (cash in circulation) plus demand deposits made at commercial banks.
This consists of time deposits, demand deposits and money market mutual funds (excluding the ones which are limited to institutional investors).
In the US this is M2 plus large time deposits, short-term repurchase agreements, institutional money-market funds and additional large liquid assets.
In the US this is M2 plus negotiable credit default swaps (CDS).
Meaning either large or referring to the other systems, such as in macroeconomics. Macroeconomics covers the working and overall aspects of a specific economy, such as inflation, unemployment rate, economic growth, total output (GDP),the relationship between different sectors of the economy.
Macroeconomics covers the working and overall aspects of a specific economy, such as inflation, total employment, unemployment rate, overall economic growth, Gross Domestic Product (GDP) and the relationship between different sectors of the economy.
Make a Market
When a dealer is willing and able to buy or sell a specific security.
An account where the holder transfers authority to their broker to buy and sell assets/securities.
Managed float or dirty float is when the monetary authorities stabilize or push the exchange rates in a desired direction by regularly intervening in the market.
An illegal trading activity where there is an attempt to influence or control a security’s price.
The deposit that a trader puts up in good faith as collateral to hold a position, such as securities, options, forex or futures. The leverage is determined by the amount of margin a trader puts down on a position.
The agreement which is signed by the trader in order to open a margin account.
A method whereby money is borrowed to by a security.
A call received by the client from the broker in which there is a demand to deposit more funds to maintain existing positions.
Interest rate which a broker charges its clients.
The extra cost of one unit of production.
The risk associated with a forward contract that after it opens the client may go bankrupt. If this does occur then the broker or issue must close the contract, as there is a high risk of paying the contract’s marginal movement.
Recording of the value or price of anaccount or security each trading day.
Analyzing different trends in the market in order to make important forecasts.
An index which is used to measure and represent price changes in the market as a whole, such as the stock market.
A dealer which quotes bid and ask prices on a regular basis, while also being well prepared for a two-sided market for any underlying asset.
Market Maker Spread
The price difference at which a market maker is willing to buy and sell a security.
A trading strategy where whatever the market circumstances the same profit level is produced.
The exposure associated to the changes in market prices.
The latest reported sale price of a given security, or the current ask and bid price of an over-the-counter (OTC) asset, such as a currency pair.
A market without significant economic growth, which has reached a level of equilibrium.
The settlement date for a transaction, which is known from the time the contract was opened.
A category of economics which analyzes the behavior of individuals and firms in order to understand individual households and firms. It applies to the buying and selling of goods and services in particular markets. Microeconomics has an especially strong focus on demand and supply patterns.
An account which contains one or more long positions and one more short positions in assets/securities.
A market where there is no clear direction or trend. There is nearly the same number of advancing and declining assets.
The best known measure of money supply are M1, M2 an M3. Money supply is the total sum of money which is in circulation in an economy at a specified time.
In microeconomics this is a category of competition when one company owns most, or the whole market for a specific good or service. This may arise due to high barriers of entry which allows the company to work with very little competition.
One of the most credible credit rating agencies in the United States.
The fluctuation in the price or value of an asset, such as the GBP/USD.
A company which operates in more than one country.
An open-end investment fund which is run by an investment company.
North American Free Trade Agreement.
Established in 1971, mainly tracking technology orientated stocks. It is the index of all the stocks which are listed on the Nasdaq composite.
The amount of debt owed by the government of a country.
The amount government spending exceeds government income.
National Futures Association
Abbreviation for NFA.The regulatory agency of the futures industry which was established in 1981.
The national income or GDP is the income earned by a country’s population. It includes capital investment and labor.
Procedure of a government acquiring the ownership of a company or an industry.
Being neither bearish or bullish.
New Turkish Lira
National currency of Turkey.
A publication with subscribers that offers market commentary, financial advice and trading recommendations.
The acronym for National Futures Association.
A US term used to describe 5 basis points.
The index containing 225 of the leading stocks which are traded on the Tokyo stock exchange.
An account which an individual holds with an account in a different country. The nostro account pays and receives currency assets plus liabilities in the currency of the foreign country.
The acronym for the New York Stock Exchange. It is based in Wall Street, New York City, and it is the largest and first US stock exchange.
The weighted market value of all the stocks on the New York Stock Exchange.
New Zealand Dollar – the national currency of New Zealand.
The acronym for Options Clearing Corporation. This organization holds responsibility for the listing of new options and the handling of traded options.
The acronym for Organization for Economic Cooperation and Development. The organization has over 30 members and was founded in 1961.
The rate (lowest price) a dealer is willing to sell a given currency.
An offering or public offering is the official process where a new security is offered to the public through underwriting.
The date when an offering becomes available to the public.
A trade which serves to either offset or cancel some/all of the market risk associated with an open position.
A firm which is incorporated in a country with low or little taxes, and minimum government control.
A term commonly used for the Bank of England.
This is a theory relating to microeconomic policy. It occurs when a small number of market participants dominate a particular industry.
One Cancels the Other Order (OCO)
A well-known termfor two orders, where the execution of one part of the two orders automatically cancels the other order.
Brokerage which offers trading services over the Internet to its clients.
The buying and selling of financial securities over the Internet.
The acronym for the Organization of Petroleum Exporting Countries.A cartel of oil producing countries which work together to control the output of member countries.
The initial price of an asset during a given trading session.
An economy which is largely absent of trading restrictions.
A market which is accessible to all investors.
Open Market Operations
Operations where the central bank seeks to influence both the interest rates and the exchange rates.
An order that has not yet been executed or canceled. It will only be executed once the market reaches the selected price.
A deal that has yet to be settled or reversed with a physical payment.
A contract sold from one party to another party, which offers the buyer the right but not the obligation to buy (call) or to sell (put) a specific quantity of an instrument at a specified price, predetermined time period and a specific date.
A type of account used for options trading.
Options contracts of the same type (calls or puts), which cover the same underlying instrument.
A set of options of the same class which have the same expiry date and strike price.
A business, company, association or firm.
Organization of Petroleum Exporting Countries
The abbreviation of OPEC, which was founded in 1960 and manages much of the world’s crude oil supply.
The acronym for Over the Counter – a security not traded on an exchange, but rather over the phone and computer between brokers and dealers.
Out of the Money
A Call option is known to be out of the money if the strike price is higher than the price of the underlying asset. A Put option is known to be out of the money if the strike price is lower than the price of the underlying asset.
A forward deal that has no part in a swap operation.
A transaction on the foreign exchange market which involves the buy or sale of a currency with a future settlement date.
A trade remains open until the next trading/business day.
The net short or long positions in one or more currencies that a dealer may carry over into the next available dealing day.
A term used in technical analysis, referring to an asset which has risen too much and is expensive.
Over the Counter
The abbreviation for OTC, referring to a security not traded on an exchange, but rather between brokers and dealers via phone and computer network.
An overheated economy refers to an economy with a high growth rate, which puts a lot of pressure on inflation. This is caused by the producers in the economy being unable to meet demand, resulting in higher prices. The other product of an overheated economy is higher interest rates.
A term used in technical analysis, referring to an asset which has fallen too much and is cheap/underpriced.
Considered by market participants as too expensive.
Considered by market participants as too cheap.
The acronym for the profit and loss statement.
A situation where there is a high number of deposit or exchangeorders that have to be filled at the same time.
A widely held fear of financial, market or economic collapse.
The official value of a currency or security.
Where 20% of a nation’s population earns 80% of its income. This is also known as the Pareto Principle or the 80-20 rule.
The price of one currency in terms of another.
When the price of one commodity is pegged with another price.
The return expected for an investment for a specific time period.
A stock whose market price trades at below a Dollar per traded share.
A currency that is freely convertible into other internationally traded major currencies on the foreign exchange market.
The pip or percentage in point is 100th of a percent. Movements on the foreign exchange are commonly measured in pips. They are also referred to as points. For example, if the GBP/USD exchange rate increased from 1.6000 to 1.6001, this is a one pip increase.
A widely used technical indicator used by traders. It is calculated by averaging a specific asset’s high, low and close prices.
The sudden decline in an asset’s price in the market.
The exposure to losses that can occur to the investor, possibly arising due to a change in government policy.
The total net exposure in a given currency. The position can either be long, short or flat.
Where the return from an investment is more than the cost of financing it.
Producer Price Index. This index measures the change in the prices charged by producers for goods and services in the economy.
This refers to the following metals: gold, silver, palladium and platinum.
- The rate at which a stock or bond sells above its par value.
- In forex the amount the futures rate exceeds the spot price.
The income received from selling an option.
A substantial price movement of an asset between two trading sessions.
The highest and lowest prices for a particular asset over a given period of time.
The quotes to which each market participant has the same access.
The rates that commercial banks charge their biggest and most reliable borrowers.
A dealer that acts as a buyer and seller of stocks for their own account.
Any debt which is owed by individuals and firms in a specified country.
The part of a country’s economy that is not under government control.
The selling of a trade or trades by an investor to realize profits.
The potential to earn a profit.
A Put is an option which provides the holder or investor the right but not the obligation to sell a specified amount of an underlying security during a fixed time period.
A Put option gives the holder the right to sell stocks, futures or forex at a specified price.
A three month period where the financial year is divided. The year is divided into four quarters. Many financial reports and indicators are conducted on a quarterly basis.
A three month interval on the financial calendar. Many earnings reports and company dividends occur quarterly.
Indicative market price, which is used solely for information purposes.
A significant rise in the price level of an asset or the market as a whole.
The difference between the highest and the lowest price of a stock, commodity, currency or other asset during a trading day, week, month or year.
The price of one currency in terms of another.
Rate of Exchange
The rate where one currency is converted into another currency.
An extended period of a general economic downturn in an economy. Recessions are measured as two or more successive declines in quarterly GDP.
A time period following a recession where there is sustained economic growth, leading to a rise in a nation’s GDP.
The reserve currency is the currency which is held by the country or region’s central bank as a store and safety net for international market liquidity. The most common reserve currencies are US Dollar, Pound Sterling or Euros.
The amount of funds held against future unforeseen events. The funds may include foreign currency, gold and silver. When speaking of large countries, such as the US and China, these reserves may include trillions of Dollars in foreign currencies, government debt and gold.
A technical analysis term, referring to a specified price level where selling is expected to occur.
The price charged to a shop’s customers.
Retail Price Index
An inflation gauge used predominantly in the UK. The RPI measures the monthly change of the average price of goods at the retail level.
The drop in the price level of an asset or the overall market after a rally.
A screen based trading system that was established in the 1980s. Currently, there is Dealing 2000-2, which is a matching optional enhancement of Reuter Dealing.
An increase in the exchange rate of a country’s currency through intervention, such as that of the central bank.
The potential for loss in real terms, or the exposure of potential uncertain/adverse change.
The evaluation of risk by using trading methods and financial analysis to control or reduce the exposure to varying levels of risk.
The compensation received for holding a risk investment.
The ability of an investor to handle declines in their portfolio’s value.
The act of extending the expiry time of an option to a later expiration date.
The process where the settlement of the deal is rolled forward to a different value date, based on the interest rate differential between the two currencies.
A situation attempt to withdraw funds from their bank account at the same time, and where the reserves of the bank are not adequate to cope with this.
The Standard & Poor’s 500 is a market-weighted index basket of 500 of the most widely held US stocks. This index is one of the best measures of the overall performance of US stocks.
Being free from risk.
The act of liquidating a specific asset on the market. This may be done to lock-in profits or cut losses.
The level that a bank is willing to sell a foreign currency.
A trader goes short when they sell a currency pair.
A market that is dominated by sellers and not buyers.
Selling a security when the price is going sideways: neither rising or falling.
A trader finds themselves in a short position when they sell a currency pair.
The sudden drop in the price level in response to swift selling.
A session or trading session is a time period of trading activity from the market open to the market close.
The physical exchange of one currency for another currency.
Specific delivery date for the currencies both bought and sold in a foreign exchange contract.
Price of one single share of a stock.
An individual who owns shares of stock of either a mutual fund or corporation.
A trader finds themselves in a short position when they sell a currency pair.
A certain type of bond with a maturity date of less than a year.
A trader will be in a short position when they sell a currency pair.
A trade which benefits from a fall in the market price.
A technical analysis term which is used in forex, options and stock trading. The signal can be dependent on complex formulas, depending on the signal type used in the trading process.
An unexpected quick rise the price, rate or value.
The price difference that a trader requests his trade to be filled at and the actual price the trade is filled. Slippage often occurs in equities, forex and futures trading.
A limited period of financial weakness.
The Swiss Options and Financial Futures Exchange is a fully automated clearing and trading system that was established in the 1980s.
Referring to a set of commodities, including coffee, cocoa, cotton and sugar.
A market where there exists more sellers than buyers. Therefore, there is an excess supply which may lead to speedy price falls.
The name given to a given set of commodities, such as coffee, cocoa, sugar and cotton.
South African Rand
The national currency of South Africa.
This refers to a large sudden rise or fall in price.
The most widely used foreign exchange transactions. Spot forex market transactions are the buying/selling of a currency and when the actual settlement date occurs two days forward.
The present market price, i.e.: the current price the currency is being traded on the spot market.
The difference between the Bid (sell) and Ask (buy) price of a security, such as a currency.
A price with the characteristic of having little fluctuation.
A market with the ability to absorb the large buying or selling of currencies without having a significant impact on the interest rates.
The state of low economic growth, recession or depression, resulting from high unemployment and high inflation.
Standard & Poor’s 500
This is a US company which examines the financial situation and debt liabilities of debtors. The Standard & Poor’s 500 also stands for S&P 500, a leading US stock index.
To resign from an existing position.
The process of using open marketmaneuvers in order to reduce the effect of foreign exchange market intervention on the monetary base of a country.
Slang term used for the British Pound.
The exchange where stocks of companies are bought and sold.For example, the Dow Jones, DAX or CAC 40.
Stock Market Crash
A sharp drop in the stock prices on the stock market.
The ticker symbol representing a specific stock.
The middleman who deals predominantly with stock transactions.
An individual who owns shares of stock of either a mutual fund or corporation.
A stop entry order is an order placed to enter the market at a less favorable price than the current market price.
A stop limit order is an order placed to enter the market at a more favorable price than the current market price.
Stop Loss Order
A market order is where an open position is automatically closed once a specific price (which is a specified amount against the open position) is reached. This is popularly used in currency trading, and traders add stop loss orders to their open positions to minimize potential losses.
The purchasing of an equal amount of call and put options for the same asset, expiry date and strike price.
The buy or sell price of an underlying asset exercised by an option holder.
The grouping of one call and two puts.
Intentional inflation caused by a government’s monetary policy.
The unemployment level integral to the economic structure of an economy.
The total amount of a specified good or service which is available to consumers.
A technical analysis term, referring to a specific price level where buying is expected to occur.
The simultaneous buying and selling of the same quantity of a particular currency at a forward exchange rate.
The differential between the spot rate and the forward exchange rate of a specified currency.
Society for Worldwide Interbank Financial Telecommunication.
A popular trading strategy used for holding position for short time periods, such as one to five business days.
The national currency of Switzerland and Lichtenstein. The international currency code is CHF.
Slang Term used for the Swiss Franc.
Treasury bill (which is backed by the US government).
Take profits is also known as profit taking, and involves traders selling assets while the price is still rising. This consequently results in a fall in value of the assets.
A tax imposed on a good or service that is imported into a country.
The study and forecasting of price movements by analyzing market information, such as historical price patterns, open interest, volume, gaps, spikes, sentiment readings and indicator signals.
An individual who trades based on technical analysis.
A price adjustment based on technical factors, such as trends, charts and volume.
Terms of Trade
The ratio of an export to the price of an import.
The degree in change of the price of an option to the change of its time until the expiry time.
A market where there is low trading volume. There are few bids, asks and there is low market liquidity, very volatile and high spreads.
Referring to a security which is traded on low volume.
The minimum possible price change.
Tokyo International financial Futures Exchange.
A market categorized by small low spreads and high volume.
Tomorrow Next (Tom Next)
The simultaneous buying and selling of a currency for delivery on the following trading day.
All the short-term and long-term assets that are owned by an individual, firm, entity or other body.
Measures the difference between a country’s imports and exports of goods and services.
A regulation or policy implemented by the government to restrict international trade, such as a tariff or import quota.
The date when a trade occurs.
An individual known for buying and selling assets, goods or services.
To buy and sell assets with the intention to make profit.
The range between the high and low prices of a given currency pair during a specified period of time.
A deal or portion of structured financing, which is particularly used for borrowing.
The buying or selling of securities as a result of the execution on an order.
The cost incurred from buying or selling a financial asset.
The date that a transaction occurs.
The possible profit or loss from current forex transactions.
The national currency of Turkey.
An occasion where the bid and offer priceare quoted for a forex transaction.
With option contracts this refers to the asset which is delivered once the contract is exercised.
United States Dollar
Also known as the USD, greenback or $. It is the official currency of the United States.
An upswing or rebound is the rebound in price following a decrease in price.
A new price which is higher than the preceding price quote.
The upward movement in price of a security or the overall market itself.
The United States Dollar, greenback or $. This is the official currency of the United States.
The day on which two contracting counterparts agree to exchange the currencies which are being bought or sold. For spot transactions, the maturity or value date is two business days forward.
A specified mutual fund which invests in companies that are known to be fundamentally underpriced.
A basic option which is only conditioned on strike price, expiry time and exercise style.
The funds a broker is required to have from the client in order to have the required deposited margin. This is due to the negative price movement which has taken place.
The change in price of an option which corresponds to the one percent change in the volatility.
The speed at which money circulates in an economy. High circulation means there is high GDP growth.
The measure of a price movement of an asset over a given period of time.
A Dollar which is weak when paired against other currencies on the foreign exchange.
A market that has a higher number of seller than buyers.
A term used when a market is highly volatile in which a sharp price movement upwards is followed by a sharp price reversal in the opposite direction.
Referring to banking services for financial societies.
Money that is borrowed in large quantities from institutions and banks.
The term refers to a market that is characterized by having a wide spread.
Made up of five international organizations that make loans to developing nations, with the goal in developing these nations economically.
World Trade Organization
The WTO helps resolve international trade disputes, pushes forward trade between countries and oversees global trade agreements.
Selling an option.
A writer is a seller of a trade or position. An option writer is the seller of an option contract and when one is writing a currency this is known as selling the currency.
World Trade Organization – an organization which administers global trade agreements and advances trade between member states.
Comparison used in reports and economic indicators of the same time period of the previous year.
The annual return rate represented in percent that an investor expects to earn from an investment.
A yield curve on a graph describes the relationship between the interest rate and the maturity on debt instruments for a given currency. Yield curves are used both in the bond market and in financial securities.
The national currency of China, whose international currency code is CNY.
The international currency code for the South African Rand.
Zero Coupon Bond
A bond which offers no interest. The bond is offered initially at a discount to its face value, and offers high potential for returns when it matures.
Describing the division of a specific area. In the world of forex trading the Euro-Zone is the most famous zone, which uses the Euro as their officialcurrency.