B

• Bid Price/BidThe price at which a buyer has offered to purchase the currency or instrument.
• Base CurrencyThe first currency listed in a forex pair, which determines the value of the pair.
• Bear MarketA market condition characterized by declining prices.
• BearAn investor who believes that prices are going to fall.
• Bull marketA prolonged period of generally rising prices.
• BullAn investor who believes that prices are going to rise.
• BrokerA firm or individual that executes buy and sell orders for traders in exchange for a commission or spread.
• BandThe range in which a currency is permitted to move. A system used in the ERM.
• Bank lineLine of credit granted by a bank to a customer, also known as a 'line'.
• Bank RateThe rate at which a central bank is prepared to lend money to its domestic banking system.
• Base currencyUnited States Dollars. The currency to which each transaction shall be converted at the close of each position.
• Basis tradingTaking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
• Bretton WoodsThe 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.
• BundesbankCentral Bank of Germany.
• Buying RateRate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.

C

• Bid Price/BidThe price at which a buyer has offered to purchase the currency or instrument.
• Base CurrencyThe first currency listed in a forex pair, which determines the value of the pair.
• Bear MarketA market condition characterized by declining prices.
• BearAn investor who believes that prices are going to fall.
• Bull marketA prolonged period of generally rising prices.
• BullAn investor who believes that prices are going to rise.
• BrokerA firm or individual that executes buy and sell orders for traders in exchange for a commission or spread.
• BandThe range in which a currency is permitted to move. A system used in the ERM.
• Bank lineLine of credit granted by a bank to a customer, also known as a 'line'.
• Bank RateThe rate at which a central bank is prepared to lend money to its domestic banking system.
• Base currencyUnited States Dollars. The currency to which each transaction shall be converted at the close of each position.
• Basis tradingTaking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
• Bretton WoodsThe 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.
• BundesbankCentral Bank of Germany.
• Buying RateRate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.

D

• Day TradingOpening and closing the same position or positions within the same trading session.
• DepositThe borrowing and lending of cash. The rate that money is borrowed/lent at is known as the deposit rate (or depo rate). Certificates of Deposit (CD's) are also tradable instruments.
• DerivativesTrades that are constructed or derived from another security (stock, bond, currency, or commodity). Derivatives can be both exchange and non-exchange traded (known as Over the Counter or OTC). Examples of derivative instruments include Options, Interest Rate Swaps, Forward Rate Agreements, Caps, Floors and Swap options.
• Deal TicketThe primary method of recording the basic information relating to a transaction.
• DeflatorDifference between real and nominal Gross National Product, which is equivalent to the overall inflation rate.
• Delivery dateThe date of maturity of the contract, when the exchange of the currencies is made. This date is more commonly known as the value date in the FX or Money markets.
• Delivery RiskA term to describe when a counterparty will not be able to complete his side of the deal, although willing to do so.
• DepreciationA fall in the value of a currency due to market forces rather than due to official action.
• DeskTerm referring to a group dealing with a specific currency or currencies.
• DetailsAll the information required to finalize a foreign exchange transaction, i.e. name, rate, dates, and point of delivery.
• DevaluationDeliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.
• Direct quotationQuoting in fixed units of foreign currency against variable amounts of the domestic currency.

E

• Economic CalendarA calendar that shows scheduled economic events and data releases that may impact financial markets.
• Elliott Wave TheoryA technical analysis approach that suggests financial markets move in repetitive patterns or waves.
• Exchange RateThe price of one currency in terms of another currency.
• EquityThe value of an account if all positions were closed at the current market price.
• Economic IndicatorA statistic that indicates current economic growth and stability issued by the government or a non-government institution (i.e. Gross Domestic Product (GDP), Employment Rates, Trade Deficits, Industrial Production, and Business Inventories).
• Efficient MarketA market in which the current price reflects all available information from past prices and volumes.
• End Of Day (or Mark to Market)Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader's book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.
• EuroThe currency of the European Monetary Union (EMU) which replaced the European Currency Unit (ECU).
• European Central BankThe Central Bank for the European Monetary Union.
• ECUEuropean Currency Unit.
• EDIElectronic Data Interchange.
• Effective Exchange RateAn attempt to summarize the effects on a country's trade balance of its currency's changes against other currencies.
• EFTElectronic Fund Transfer.
• EMSEuropean Monetary System.
• Exchange controlRules used to preserve or protect the value of a country's currency.
• ExoticA less broadly traded currency.

F

• Economic CalendarA calendar that shows scheduled economic events and data releases that may impact financial markets.
• Elliott Wave TheoryA technical analysis approach that suggests financial markets move in repetitive patterns or waves.
• Exchange RateThe price of one currency in terms of another currency.
• EquityThe value of an account if all positions were closed at the current market price.
• Economic IndicatorA statistic that indicates current economic growth and stability issued by the government or a non-government institution (i.e. Gross Domestic Product (GDP), Employment Rates, Trade Deficits, Industrial Production, and Business Inventories).
• Efficient MarketA market in which the current price reflects all available information from past prices and volumes.
• End Of Day (or Mark to Market)Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader's book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.
• EuroThe currency of the European Monetary Union (EMU) which replaced the European Currency Unit (ECU).
• European Central BankThe Central Bank for the European Monetary Union.
• ECUEuropean Currency Unit.
• EDIElectronic Data Interchange.
• Effective Exchange RateAn attempt to summarize the effects on a country's trade balance of its currency's changes against other currencies.
• EFTElectronic Fund Transfer.
• EMSEuropean Monetary System.
• Exchange controlRules used to preserve or protect the value of a country's currency.
• ExoticA less broadly traded currency.

G

• GapA discontinuity in a security's price chart where there is no trading activity between two periods.
• Going LongBuying a security in anticipation of its price rising.
• Going ShortSelling a security in anticipation of its price falling.
• Gross Domestic Product (GDP)The total monetary value of all goods and services produced within a country's borders during a specific period.
• G7The seven leading industrial countries, being US, Germany, Japan, France, UK, Canada, Italy.
• G10G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.
• Gold StandardThe original system for supporting the value of currency issued. The was that where the price of gold is fixed against the currency it means that the increased supply of gold does not lower the price of gold but causes prices to increase.
• Good until canceledAn instruction to a broker that unlike normal practice the order does not expire at the end of the trading day, although normally terminates at the end of the trading month.
• GridFixed margin within which exchange rates are allowed to fluctuate.
• Gross National ProductGross domestic product plus 'factor income from abroad' - income earned from investment or work abroad.

H

• HedgeA strategy used to offset potential losses from adverse price movements in one asset by taking an opposite position in another asset.
• High-Frequency Trading (HFT)Trading strategies that use advanced algorithms and high-speed computer systems to execute trades at extremely fast speeds.
• Historical VolatilityA statistical measure of the dispersion of returns for a financial instrument over a specific period.
• High/LowUsually the highest traded price and the lowest traded price for the underlying instrument for the current trading day.
• Hard currencyAny one of the major world currencies that is well traded and easily converted into other currencies.
• Head and ShouldersA pattern in price trends which chartists consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder, profit-taking has caused the price to drop or level. The price then rises steeply again to the head before more profit-taking causes the price to drop to around the same level as the shoulder. A further modest rise or level will indicate that a further major fall is imminent. The breach of the neckline is the indication to sell.

I

• Initial MarginThe initial deposit required by a broker from a trader to open a position.
• Inter-bank ratesThe bid and offer rates at which international banks place deposits with each other. The basis of the Interbank market.
• ISDAThe body that sets terms and conditions for derivative trades is The International Swaps and Derivatives Association.
• IMMInternational Monetary Market part of the Chicago Mercantile Exchange that lists a number of currency and financial futures Implied volatilityA measurement of the market's expected price range of the underlying currency futures based on the traded option premiums.
• Implied RatesThe interest rate determined by calculating the difference between spot and forward rates.
• Indicative quoteA market-maker's price which is not firm.
• InflationContinued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.
• Interest ArbitrageSwitching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, i.e. from foreign currency into the local one or outward, i.e. from the local currency to the foreign one. Sometimes better results can be obtained by not selling the forward interest amount. In that case some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.
• Interest rate SwapsAn agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. It is the interest cash flows be they payments or receipts that are exchanged.
• InterventionAction 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.
• InflationThe rate at which the general level of prices for goods and services is rising, eroding purchasing power.
• Interbank MarketA decentralized market where banks and financial institutions trade currencies directly with each other.
• IMFInternational Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates. The IMF supports countries with balance of payments problems with the provision of loans.

J

• Japanese CandlestickA type of chart used in technical analysis that displays the high, low, open, and close for a security over a specific period.

K

• KiwiNickname for the New Zealand dollar (NZD).

L

• LeverageThe ability to control a large position in the market with a relatively small amount of capital.
• LiquidityThe degree to which an asset or security can be quickly bought or sold in the market without significantly affecting its price.
• Liquid and Illiquid MarketsThe ability of a market to buy and sell at ease with no impact on price stability. A market is described as liquid if the spread between the bid and the offer is small. Another measure of liquidity is the presence of buyers and sellers, with more players creating tighter spreads. Illiquid markets have few players, hence, wider dealing spreads.
• Liquid AssetsAssets that can be easily converted into cash. Examples include money market fund shares, US Treasury Bills, bank deposits, etc.
• LongA position to purchase more of an instrument than is sold, hence, an appreciation in value if market prices increase.
• Leading IndicatorsStatistics that are considered to precede changes in economic growth rates and total business activity, e.g., factory orders.
• LiabilityIn terms of foreign exchange, the obligation to deliver to a counterparty an amount of currency either in respect of a balance sheet holding at a specified future date or in respect of an unmatured forward or spot transaction.
• Limit orderA request to deal as a buyer or seller for a foreign currency transaction at a specified price, or at a better price, if obtainable.
• LiquidationAny transaction that offsets or closes out a previously established position.
• LiquidityThe ability of a market to accept large transactions.

M

• LeverageThe ability to control a large position in the market with a relatively small amount of capital.
• LiquidityThe degree to which an asset or security can be quickly bought or sold in the market without significantly affecting its price.
• Liquid and Illiquid MarketsThe ability of a market to buy and sell at ease with no impact on price stability. A market is described as liquid if the spread between the bid and the offer is small. Another measure of liquidity is the presence of buyers and sellers, with more players creating tighter spreads. Illiquid markets have few players, hence, wider dealing spreads.
• Liquid AssetsAssets that can be easily converted into cash. Examples include money market fund shares, US Treasury Bills, bank deposits, etc.
• LongA position to purchase more of an instrument than is sold, hence, an appreciation in value if market prices increase.
• Leading IndicatorsStatistics that are considered to precede changes in economic growth rates and total business activity, e.g., factory orders.
• LiabilityIn terms of foreign exchange, the obligation to deliver to a counterparty an amount of currency either in respect of a balance sheet holding at a specified future date or in respect of an unmatured forward or spot transaction.
• Limit orderA request to deal as a buyer or seller for a foreign currency transaction at a specified price, or at a better price, if obtainable.
• LiquidationAny transaction that offsets or closes out a previously established position.
• LiquidityThe ability of a market to accept large transactions.

N

• Narrow MarketA market with low liquidity and wide bid-ask spreads.
• Non-Farm Payrolls (NFP)A monthly report released by the U.S. Bureau of Labor Statistics that measures the number of jobs added or lost in the non-farm sector.
• Net PositionThe amount of currency bought or sold which has not yet been offset by opposite transactions.

O

• Open OrderAn order to buy or sell when a market moves to its designated price.
• Open PositionA deal not yet reversed or settled and the investor is subject to exchange rate movements.
• OrderAn instruction, from a client to a broker to trade. An order can be placed at a specific price or at the market price. Also, it can be good until filled or until close of business.
• OvernightA trade that remains open until the next business day.
• Over The Counter (OTC)Used to describe any transaction that is not conducted over an exchange.
• OfferThe price at which a seller is willing to sell. The best offer is the lowest such price available.
• OffsetThe closing-out or liquidation of a futures position.
• Off-shoreThe operations of a financial institution which although physically located in a country, has little connection with that country's financial systems. In certain countries a bank is not permitted to do business in the domestic market but only with other foreign banks. This is known as an off shore banking unit.
• Overnight limitNet long or short position in one or more currencies that a dealer can carry over into the next dealing day. Passing the book to other bank dealing rooms in the next trading time zone reduces the need for dealers to maintain these unmonitored exposures.
• OptionA financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price within a predetermined time frame.
• OscillatorA technical analysis indicator that fluctuates above and below a central line to indicate overbought or oversold conditions in a security's price.
• Offsetting TransactionA trade that serves to cancel or offset some or all of the market risk of an open position.

P

• Open OrderAn order to buy or sell when a market moves to its designated price.
• Open PositionA deal not yet reversed or settled and the investor is subject to exchange rate movements.
• OrderAn instruction, from a client to a broker to trade. An order can be placed at a specific price or at the market price. Also, it can be good until filled or until close of business.
• OvernightA trade that remains open until the next business day.
• Over The Counter (OTC)Used to describe any transaction that is not conducted over an exchange.
• OfferThe price at which a seller is willing to sell. The best offer is the lowest such price available.
• OffsetThe closing-out or liquidation of a futures position.
• Off-shoreThe operations of a financial institution which although physically located in a country, has little connection with that country's financial systems. In certain countries a bank is not permitted to do business in the domestic market but only with other foreign banks. This is known as an off shore banking unit.
• Overnight limitNet long or short position in one or more currencies that a dealer can carry over into the next dealing day. Passing the book to other bank dealing rooms in the next trading time zone reduces the need for dealers to maintain these unmonitored exposures.
• OptionA financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price within a predetermined time frame.
• OscillatorA technical analysis indicator that fluctuates above and below a central line to indicate overbought or oversold conditions in a security's price.
• Offsetting TransactionA trade that serves to cancel or offset some or all of the market risk of an open position.

Q

• Quote CurrencyThe second currency listed in a forex pair, also known as the counter currency.
• Quote ConventionThe way in which currencies are quoted in the forex market, typically in terms of the base currency per unit of the quote currency.

R

• RangeThe difference between the highest and lowest prices of a security over a specific period.
• RolloverThe process of extending the settlement date of an open position by rolling it over to the next trading day.
• RallyA recovery in price after a period of decline.
• Rate(1) The price of one currency in terms of another, normally against USD. (2) Assessment of the credit worthiness of an institution.
• ReactionA decline in prices following an advance.
• RevaluationIncrease in the exchange rate of a currency as a result of official action.
• Risk managementThe identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to foreign exchange involves among others consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.
• Risk PositionAn asset or liability, which is exposed to fluctuations in value through changes in exchange rates or interest rates.

S

• Spot(1) The most common foreign exchange transaction. (2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
• Selling rateRate at which a bank is willing to sell foreign currency.
• Same day transactionA transaction that matures on the day the transaction takes place.
• Settlement dateThe date upon which foreign exchange contracts settle.
• Settlement RiskWhere a payment is made to a counter party before the counter value payment has been made. The risk is that the counter party's payment will not be received.
• Short saleThe sale of a specified amount of currency not owned by the seller at the time of the trade. Short sales are usually made in expectation of a decline in the price.
• Spot MarketA market where financial instruments are traded for immediate delivery and payment.
• SpreadThe difference between the bid and ask prices of a currency pair.
• SterlingNickname for the British pound (GBP).
• Swap priceA price as a differential between two dates of the swap.
• SwapThe simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.
• SwissyMarket slang for Swiss Franc.
• Same day transactionA transaction that matures on the day the transaction takes place.
• Selling rateRate at which a bank is willing to sell foreign currency.
• Settlement dateThe date upon which foreign exchange contracts settle.
• Settlement RiskWhere a payment is made to a counter party before the counter value payment has been made. The risk is that the counter party's payment will not be received.
• Short saleThe sale of a specified amount of currency not owned by the seller at the time of the trade. Short sales are usually made in expectation of a decline in the price.
• Spot(1) The most common foreign exchange transaction. (2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
• Spot nextThe overnight swap from the spot date to the next business day.
• Spot price/rateThe price at which the currency is currently trading in the spot market.
• SqueezeAction by a central bank to reduce supply in order to increase the price of money.
• Stable marketAn active market which can absorb large sale or purchases of currency without major moves.
• StandardA term referring to certain normal amounts and maturities for dealing.
• Stop-Loss orderOrder to buy or sell at the best available price when a given price threshold has been reached.
• Support levelsWhen an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below; (2) the monetary authorities intervene to stop any further down ward movement. See resistance point.
• ScalpingA trading strategy that involves making numerous small trades to capitalize on minor price movements.
• SlippageThe difference between the expected price of a trade and the price at which it is executed.
• Support LevelA price level at which a security tends to stop falling and may start to rise.
• Swing TradingA trading strategy that seeks to capture short- to medium-term gains by holding positions for several days to weeks.

T

• Technical AnalysisA method of analyzing securities based on historical price and volume data to predict future price movements.
• Take-Profit OrderAn order placed with a broker to automatically close a position when it reaches a specified profit level.
• TickThe smallest possible price movement for a security.
• TrendThe general direction in which a security's price is moving over time.
• Trade dateThe date on which a trade occurs.
• Transaction CostThe cost associated with buying or selling of a financial instrument.
• Transaction DateThe date on which the trade occurs.
• TurnoverThe volume traded, or level of trading, over a specified period, usually daily or yearly.
• Two Way PriceBoth the bid and offer rate is quoted for a Forex transaction.
• Thin marketA market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
• Today/TomorrowSimultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.
• Tomorrow next (Tom next)Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.
• Tradeable amountSmallest transaction size acceptable.
• TransactionThe buying or selling of currencies resulting from the execution of an order.

U

• UptrendA series of higher highs and higher lows in a security's price over time.
• Uptick RuleIn the U.S., a regulation which states that a security may not be sold short unless the trade prior to the short sale was at a price lower than the price at which the short sale is executed.
• UncoveredAnother term for an open position.
• Under-valuationAn exchange rate is normally considered to be undervalued when it is below its purchasing power parity.
• Up tickA transaction executed at a price greater than the previous transaction.

V

• VolatilityA statistical measure of the dispersion of returns for a security or market index.
• VolumeThe number of shares or contracts traded in a security or market during a specific period.
• Value DateThe date that both parties of a transaction agree to exchange payments.
• Value SpotNormally settlement for two working days from today. See value date.

W

• VolatilityA statistical measure of the dispersion of returns for a security or market index.
• VolumeThe number of shares or contracts traded in a security or market during a specific period.
• Value DateThe date that both parties of a transaction agree to exchange payments.
• Value SpotNormally settlement for two working days from today. See value date.

X

Y

Z