Forex Finance Definitions

Dictionary of Forex Finance Legal Terms

More than 200 clear, informative definitions of key terms used in forex finance legal practice. A handy quick-reference source for agents, brokers, investors, actuaries, underwriters, lawyers and attorneys concerned with forex legal issues, and consumers looking for easy-to-understand meanings of forex investments terms.

The Dictionary

AGGREGATE DEMAND (Forex Definition)
The sum of government spending, personal consumptionexpenditures, and business expenditures.
ANNUALIZED (Forex Definition)
Extrapolates the behavior of an element (such as volatility) from a certain time period to a full year.
APPRECIATION (Forex Definition)
A currency is said to ‘appreciate’ when it strengthens in price in response to market demand.
ARBITRAGE (Forex Definition)
The purchase or sale of an instrument and simultaneous taking of anequal and opposite position in a related market, in order to take advantage of small price differentials between markets.
AROUND (Forex Definition)
Dealer jargon used in quoting when the forward premium/discount is near parity. For example, “two-two around” would translate into 2 points to either side of the present spot.
ASK (Forex Definition)
Price at which broker/dealer is willing to sell. Same as “Offer”.
ASK RATE (Forex Definition)
The rate at which a financial instrument if offered for sale (as in bid/askspread).
ASSET ALLOCATION (Forex Definition)
Investment practice that divides funds among different marketsto achieve diversification for risk management purposes and/or expected returns consistent with an investor’s objectives.
BACK OFFICE (Forex Definition)
The departments and processes related to the settlement of financial transactions.
BALANCE OF TRADE (Forex Definition)
The value of a country’s exports minus its imports.
BAR CHARTS (Forex Definition)
Standard bar charts are commonly used to convey price activity into an easilyreadable chart. Usually four elements make up a bar chart, the Open, High, Low, and Close for the trading session/time period. A price bar can represent any time frame the user wishes, from 1 minute to 1 month. The total vertical length/height of the bar represents the entire trading range for the period. The top of the bar represents the highest price of the period, and the bottom of the bar represents the lowest price…(more)
BASE CURRENCY (Forex Definition)
In general terms, the base currency is the currency in which an investor orissuer maintains its book of accounts. In the FX markets, the US Dollar is normally considered the �base’ currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.
BEAR MARKET (Forex Definition)
A market distinguished by declining prices.
BID (Forex Definition)
Price at which broker/dealer is willing to buy.
BID RATE (Forex Definition)
The rate at which a trader is willing to buy a currency.
BID/ASK SPREAD (Forex Definition)
The difference between the bid and offer price, and the most widely usedmeasure of market liquidity.
BID/ASK SPREAD (OR “SPREAD”) (Forex Definition)
The distance, usually in pips, between the Bid and Ask price. A tighter spread is better for the trader.
BIG FIGURE (Forex Definition)
Dealer expression referring to the first few digits of an exchange rate. These digitsrarely change in normal market fluctuations, and therefore are omitted in dealer quotes, especially in times of high market activity. For example, a USD/Yen rate might be 107.30/107.35, but would be quoted verbally without the first three digits i.e. “30/35”.
BOOK (Forex Definition)
In a professional trading environment, a �book’ is the summary of a trader’s or desk’stotal positions.
BRETTON WOODS AGREEMENT OF 1944 (Forex Definition)
An agreement that established fixed foreign exchangerates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.
BROKER (Forex Definition)
An individual or firm that acts as an intermediary, putting together buyers and sellersfor a fee or commission. In contrast, a �dealer’ commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
BULL MARKET (Forex Definition)
A market distinguished by rising prices.
BUNDESBANK (Forex Definition)
Germany’s Central Bank.
BUYING/SELLING (Forex Definition)
In the forex market currencies are always priced in pairs; therefore all tradesresult in the simultaneous buying of one currency and the selling of another. The objective of currency trading is to buy the currency that increases in value relative to the one you sold. If you have bought a currency and the price appreciates in value, then you must sell the currency back in order to lock in the profit.
CABLE (Forex Definition)
Trader jargon referring to the Sterling/US Dollar exchange rate. So called because therate was originally transmitted via a transatlantic cable beginning in the mid 1800’s.
CANDLESTICK CHART (Forex Definition)
A chart that indicates the trading range for the day as well as the openingand closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
CENTRAL BANK (Forex Definition)
A government or quasi-governmental organization that manages a country’smonetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank. others include the ECB, BOE, BOJ.
CHARTIST (Forex Definition)
An individual who uses charts and graphs and interprets historical data to find trendsand predict future movements. Also referred to as Technical Trader. Choice Market- A market with no spread. All trades buys and sells occur at that one price
CLEARING (Forex Definition)
The process of settling a trade.
COLLATERAL (Forex Definition)
Something given to secure a loan or as a guarantee of performance.
COMMISSION (Forex Definition)
A transaction fee charged by a broker.
CONFIRMATION (Forex Definition)
A document exchanged by counterparts to a transaction that states the terms ofsaid transaction.
CONTAGION (Forex Definition)
The tendency of an economic crisis to spread from one market toanother. In 1997, financial instability in Thailand caused high volatility in its domestic currency, the Baht, which triggered a contagion into other East Asian emerging currencies, and then to Latin America. It is now referred to as the Asian Contagion
CONTRACT (Forex Definition)
The standard unit of trading.
CONTRACT (UNIT OR LOT) (Forex Definition)
The standard unit of trading on certain exchanges.
COST OF CARRY (ALSO “INTEREST” OR “PREMIUM”) (Forex Definition)
The cost, often quoted in terms of dollars or pips per day, of holding an open position.
COUNTERPARTY (Forex Definition)
One of the participants in a financial transaction.
COUNTRY RISK (Forex Definition)
Risk associated with a cross-border transaction, including but not limited to legaland political conditions such as war etc.
CROSS RATES (Forex Definition)
The exchange rate between two currencies expressed as the ratio of two foreignexchange rates that are both expressed in terms of a third currency. Foreign exchange rate between two currencies other than the U.S. dollar, the currency in which most exchanges are usually quoted.
CURRENCY (Forex Definition)
Any form of money issued by a government or central bank and used as legaltender and a basis for trade.
CURRENCY FUTURES (Forex Definition)
Futures contracts traded on an exchange, most typically the Chicago Mercantile Exchange (“CME”). Always quoted in terms of the currency value with respect to the US Dollar. Parameters of the futures contract are standardized by the exchange.
CURRENCY MARKET (Forex Definition)
See foreign exchange market.
CURRENCY PAIR (Forex Definition)
Exchange rate relationship between two currencies, where one currency is expressed in terms of the other. For example, USD-EUR (US dollar against Euro) is a currency pair.
CURRENCY RISK (Forex Definition)
the probability of an adverse change in exchange rates.
CUSTOMIZABLE CURRENCY CONVERTER (Forex Definition)
A version of the 164 Currency Converter that you can customize for your personal use. The Customizable Currency Converter allows you to insert your own HTML headers and footers to change the appearance of the Currencies Converter and its results.
DAY TRADING (Forex Definition)
Refers to positions which are opened and closed on the same trading day.
DEALER (Forex Definition)
An individual who acts as a principal or counterpart to a transaction. Principals take oneside of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
DECISION-SUPPORT TOOL (Forex Definition)
Any tool that provides an unbiased second opinion and reliable support throughout an investor’s or trader’s decision-making process. A decision-support tool enables effective risk managment, thereby increasing the profit potential (higher exposure at lower relative risk, more consistent return). It enhances overall trading performance, enabling financial institutions to improve their customer service, and increases trading volume. It reduces the complexity in the trading room and allows better use…(more)
DEFICIT (Forex Definition)
A negative balance of trade or payments.
DELIVERY (Forex Definition)
An FX trade where both sides make and take actual delivery of the currencies traded.
DEPRECIATION (Forex Definition)
A fall in the value of a currency due to market forces.
DERIVATIVE (Forex Definition)
A contract that changes in value in relation to the price movements of a related orunderlying security, future or other physical instrument. An Option is the most common derivative instrument.
DEVALUATION (Forex Definition)
The deliberate downward adjustment of a currency’s price, normally by officialannouncement.
DIRECTIONAL QUALITY (Forex Definition)
The percentage of forecasts in the right direction.
DOLLAR RATE (Forex Definition)
The exchange rate of a foreign currency as quoted against the US dollar (USD). Some currencies are typically only quoted against the US dollar, such as the Algerian dinar (DZD) and the Andorran franc (ADF). The exchange rate of the Algerian dinar against the Andorran franc is thus computed from DZD-USD and ADF-USD.
DRAWDOWN (Forex Definition)
The magnitude of a decline in account value, either in percentage or dollar terms, as measured from peak to subsequent trough. For example, if a trader’s account increased in value from $10,000 to $20,000, then dropped to $15,000, then increased again to $25,000, that trader would have had a maximum drawdown of $5,000 (incurred when the account declined from $20,000 to $15,000) even though that trader’s account was never in a loss position from inception.
ECONOMIC INDICATOR (Forex Definition)
Economic indicators such as GDP, foreign investment, and thetrade balance reflect the general health of an economy, and are therefore responsible for the underlying shifts in supply and demand for that currency.
END OF DAY ORDER (EOD) (Forex Definition)
An order to buy or sell at a specified price. This order remains openuntil the end of the trading day which is typically 5PM ET.
EURO (Forex Definition)
since 2002 the Euro has been the currency of the European Monetary Union(EMU). A replacement for the European Currency Unit (ECU). Members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.
EUROPEAN CENTRAL BANK (ECB) (Forex Definition)
the Central Bank for the new European Monetary Union.
EXCHANGE RATE (Forex Definition)
The number of one currency needed to buy another.
EXCHANGE RATE RISK (Forex Definition)
The potential loss that could be incurred from a movement in bid/ask prices, or exchange rates. For traders, risk is measured by the open currency position.
EXPOSURE (Forex Definition)
The risk which an investor accepts when buying and selling in foreign currency-hedged financial instruments.
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) (Forex Definition)
The regulatory agency responsible foradministering bank depository insurance in the US.
FEDERAL RESERVE SYSTEM (Forex Definition)
The central bank of the United States, with responsibility forimplementing the country’s monetary policy and regulating member banks of the System. The Fed was created in 1913 and is composed of 12 regional Federal Reserve Banks and a national Board of Governors Fixed Exchange Rate- Official rate set by monetary authorities for one or more currencies
FILTERING DATA (Forex Definition)
Some data may be “bad,” stemming from such causes as a market maker incorrectly typing a price, or entering the correct price but in the wrong format. All data used by OANDA is filtered using its own sophisticated algorithms.
FINANCIAL INSTITUTION (Forex Definition)
An organization primarily established to offer and perform financial services. Examples of financial institutions include brokerages and banks.
FLAT/SQUARE (Forex Definition)
Dealer jargon used to describe a position that has been completely reversed, e.g.you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.
FLOATING EXCHANGE RATES (Forex Definition)
Floating exchange rates refer to the value of a currency as decidedby supply and demand
FORECAST (Forex Definition)
A statistical analysis of the markets whereby a percentage chance is assigned to a given price movement occurring. A forecast of the foreign exchange markets is similar to a weather report in that both assign a probability to the occurence of an identified market or climatic change.
FORECASTING SERVICES (Forex Definition)
Financial services that provide professional traders and investors with an unbiased second opinion and reliable support throughout the financial decision-making process. Any professional with international business relations can use the forecasting services to reduce there foreign exchange risks due to currency price fluctuations and get up-to-date information anytime.
FOREIGN EXCHANGE (Forex Definition)
(Forex, FX) is the simultaneous buying of one currency whileselling for another. This market of exchange has more buyers and sellers and daily volume than any other in the world. Taking place in the major financial institutions across the globe, the forex market is open 24-hours a day.
FOREIGN EXCHANGE MARKET (Forex Definition)
A condition or area where buyers and sellers are in contact to buy and sell foreign currencies. Foreign exchange markets exist wherever and whenever currencies are bought and sold, and are not necessarily confined to cities.
FORWARD (Forex Definition)
The pre-specified exchange rate for a foreign exchange contract settling at someagreed future date, based upon the interest rate differential between the two currencies involved.
FORWARD CONTRACT (Forex Definition)
A forward contract fixes the exchange rate for future delivery at a date tobe agreed by both participants. A deposit (or a minimum margin) is usually required in forward transactions. For example, if I want to lock in today’s rate to buy $10,000 USD at 1.5820 Canadian for the next 4 months, I will have the ability to purchase up to $10,000 USD at this rate.
FORWARD POINTS (Forex Definition)
The pips added to or subtracted from the current exchange rate to calculate aforward price.
FORWARD RATES (SWAPS) (Forex Definition)
A Forward Rate refers to a cash price of 2 currencies interestdifference for a fixed term. Forward rates can be calculated easily given the fixed term interest rates of each currency and the current spot rate
FORWARD TRADING (Forex Definition)
Forward trading is making the opposite trade of a spot trade in a givenperiod of time. Often investors will swap their trades forward for anywhere from a week or two up to several months depending on the time frame of the investment. Even though a forward trade is on a future date, the position can be closed out at any time. The closing part of the position is then swapped forward to the same future value date
FUNDAMENTAL ANALYSIS (Forex Definition)
focuses on the economic forces of supply and demand that causesprice movement. The Fundamentalist studies the causes of market movement, whereas the Technician studies the effects. Futures Contract- An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded
FX OR FOREX (Forex Definition)
An abbreviation for foreign exchange.
GEARING (Forex Definition)
Also known as margin trading. A term used to in the relationship of actual equityversus controlling equity.
GOOD TIL CANCELLED (GTC) (Forex Definition)
An order to buy or sell at a specified price. This order remainsopen until filled or until the client cancels.
GROUP OF FIVE (G5) (Forex Definition)
are five leading industrial nations (France, Japan, Germany, the UK andUS), which meet from time-to-time to discuss common economic problems. Group of Seven (7) are 7 leading non-communist industrial nations composed of G5 plus Canada and Italy. Group of Ten (G10) is also known as The Paris Club which includes Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, UK and US. These nations signed an accord in 1962 to increase the fund available to the IMF and aid member countries…(more)
HEDGING (Forex Definition)
A hedging transaction is a purchase or sale of a financial product, having as itspurpose the elimination of loss arising from price fluctuations. With regards to currency transactions it would protect one against fluctuations in the foreign exchange rate. (see Forward Contract)
INFLATION (Forex Definition)
An economic condition whereby prices for consumer goods rise, eroding purchasingpower.
INITIAL MARGIN (Forex Definition)
The initial deposit of collateral required to enter into a position as a guaranteeon future performance.
INTERBANK PRICES (Forex Definition)
Currency prices that reflect market rates among financial institutions for transactions typically over US $1 million. Interbank prices are different from retail prices.
INTERBANK RATES (Forex Definition)
The Foreign Exchange rates at which large international banks quote otherlarge international banks.
ISO (Forex Definition)
The International Standards Organization, a worldwide standard-setting body. We use ISO 4217 currency codes in all of our services.
LEADING INDICATORS (Forex Definition)
Statistics that are considered to predict future economic activity.
LEVERAGE (Forex Definition)
The amount, expressed as a multiple, by which the notional amount traded exceeds the margin required to trade. For example, if the notional amount traded (also referred to as “lot size” or “contract value”) is $100,000 dollars and the required margin is $2,000, the trader can trade with 50 times leverage ($100,000/$2,000).
LIBOR (Forex Definition)
The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from anotherbank.
LIMIT (Forex Definition)
An order to buy at a specified price when the market moves down to that price, or to sell at a specified price when the market moves up to that price.
LIMIT ORDER (Forex Definition)
An order with restrictions on the maximum price to be paid or the minimum priceto be received. As an example, if the current price of USD/YEN is 102.00/05, then a limit order to buy USD would be at a price below 102. (ie 101.50)
LINE CHARTS (Forex Definition)
The Line Chart connects single prices for a selected time period.
LIQUIDATION (Forex Definition)
The closing of an existing position through the execution of an offsettingtransaction.
LIQUIDITY (Forex Definition)
The ability of a market to accept large transaction with minimal to no impact on pricestability.
LONG POSITION (Forex Definition)
A position that appreciates in value if market prices increase. When one buys acurrency, their position is long.
MARGIN (Forex Definition)
The required equity that an investor must deposit to collateralize a position.
MARGIN CALL (Forex Definition)
A request from a broker or dealer for additional funds or other collateral toguarantee performance on a position that has moved against the client. If the equity balance in your account falls below the margin requirement, a margin call will be generated. In the event that an account exceeds its maximum allowable leverage, ALL open positions are liquidated immediately, regardless of the size or the nature of positions held within the account.
MARGIN DEPOSIT (Forex Definition)
The margin deposit is not a down payment on a purchase of equity, as manyperceive margins to be in the stock markets. Rather, the margin is a performance bond, or good faith deposit, to ensure against trading losses. The margin requirement allows traders to hold a position much larger than the account value, which allow for this high leverage. In the event that funds in the account fall below margin requirements, brokerage firms will automatically close all open positions.
MARK-TO-MARKET (Forex Definition)
Process of re-evaluating all open positions with the current market prices.These new values then determine margin requirements.
MARKET (Forex Definition)
The city to whose financial institutions a Trading Model is constrained. Trading Models follow and act upon the price quotes originating from these banks and financial institutions. The market of a given Trading Model simply maintains differences in opening and closing times in order to ensure that Trading Models only trade when the market is open and its recommendations can be followed. Trading Model markets exist for a number of the world’s financial capitols.
MARKET MAKER (Forex Definition)
A dealer who regularly quotes both bid and ask prices and is ready to make atwo-sided market for any financial instrument.
MARKET ORDER (Forex Definition)
An order to buy at the current Ask price.
MARKET RISK (Forex Definition)
Exposure to changes in market prices.
MATURITY (Forex Definition)
The date for settlement or expiry of a financial instrument
NARROW MARKET (Forex Definition)
occurs when there is light trading and greater fluctuations in prices relative tovolume. This is often interchanged for THIN MARKET.
OANDA (Forex Definition)
A company created to make personal and business transactions that utilize foreign currencies easier for Internet users.
OFFER (Forex Definition)
The rate at which a dealer is willing to sell a currency.
OFFSETTING TRANSACTION (Forex Definition)
A trade with which serves to cancel or offset some or all of the marketrisk of an open position.
ONE CANCELS THE OTHER ORDER (OCO) (Forex Definition)
A designation for two orders whereby one part of thetwo orders is executed the other is automatically cancelled.
OPEN ORDER (Forex Definition)
An order that will be executed when a market moves to its designated price.Normally associated with Good �til Cancelled Orders.
OPEN POSITION (Forex Definition)
A deal not yet reversed or settled with a physical payment.
OVER AN EXCHANGE (EXCHANGE- TRADED CONTACTS (Forex Definition)
ETC), versus forwards, which are consideredOver The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.
OVER THE COUNTER (OTC) (Forex Definition)
Used to describe any transaction that is not conducted over anexchange.
OVERBOUGHT (Forex Definition)
Situation where price movement has risen 150% faster or stronger than normal, rising too far in response to net buying. A price movement that becomes overbought is expected to soon make a contrarian move. In other words, the price of the currency pair is expected to soon fall.
OVERNIGHT (Forex Definition)
A trade that remains open until the next business day.
OVERSOLD (Forex Definition)
Situation where price movement has fallen 150% faster or stronger than normal, declining too far in response to net selling. A price movement that becomes oversold is expected to soon make a contrarian move. In other words, the price of the currency pair is expected to soon rise.
PIP (Forex Definition)
The smallest price increment in a currency. Often referred to as “ticks” in the futures markets. For example, in EURUSD, a move from .9015 to .9016 is one pip. In USDJPY, a move from 128.51 to 128.52 is one pip.
PIPS (Forex Definition)
Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.
POINT & FIGURE CHARTS (Forex Definition)
The Point & Figure Chart disregards Time and focuses entirely on price activity.
POLITICAL RISK (Forex Definition)
Exposure to changes in governmental policy which will have an adverse effecton an investor’s position.
PORTFOLIO (Forex Definition)
A selection of securities held by an investor or financial institution. Portfolios are designed primarily to spread investment risk.
POSITION (Forex Definition)
The netted total holdings of a given currency.
PREMIUM (Forex Definition)
In the currency markets, describes the amount by which the forward or futures priceexceed the spot price.
PREMIUM (ALSO “INTEREST” OR “COST OF CARRY”) (Forex Definition)
The cost, often quoted in terms of dollars or pips per day, of holding an open position.
PRICE MOVEMENT (Forex Definition)
The change in the price of a currency over a specified time period.
PRICE POINT OR PIP (Forex Definition)
One basis point: 0.0001.
PRICE TRANSPARENCY (Forex Definition)
Describes quotes to which every market participant has equal access.
QUOTE (Forex Definition)
An indicative market price, normally used for information purposes only.
RATE (Forex Definition)
The price of one currency in terms of another, typically used for dealing purposes.
REGISTRATION (Forex Definition)
Creating an online account with OANDA. For details, see Summary of Services.
RELATIVE STRENGTH (Forex Definition)
Indicates the forecasted price movements for each of the eight currencies in the Currency Ranking service due to expected medium-term rate fluctuations. The relative strength for each currency is computed from a correlation between a Trading Model-generated forecast and the currency’s price history. The strength of each currency can range from a minimum -1.0 to a maximum +1.0. We use Trading Models 40, 60, and 70 to compute relative strengths every hour on the hour, 365 days a year.
RESISTANCE (Forex Definition)
A term used in technical analysis indicating a specific price level at which analysisconcludes people will sell.
RETAIL PRICES (Forex Definition)
Currency prices which reflect commissions and special charges that a bank or exchange agency demands to convert currencies for noncorporate customers. These commissions and special charges vary among countries, banks, and exchange agencies. Please inquire at your local bank or travel agency, or consult available travel guides for more information on specific commissions and special charges which may be charged for converting currencies.
REVALUATION (Forex Definition)
An increase in the exchange rate for a currency as a result of central bankintervention. Opposite of Devaluation.
REVALUATION RATES (Forex Definition)
The revaluation rates are the market rates used when a trader runs anend-of-day to establish profit and loss for the day.
RISK (Forex Definition)
Exposure to uncertain change, the variability of returns significantly the likelihood of less-than-expected returns. Risk Capital- The amount of money that an individual can afford to invest, which, if lost would not affect their lifestyle.
RISK MANAGEMENT (Forex Definition)
To hedge one’s risk they will employ financial analysis and tradingtechniques
ROLL-OVER (Forex Definition)
Process whereby the settlement of a deal is rolled forward to another value date.The cost of this process is based on the interest rate differential of the two currencies. Rollover Rate -The daily rollover interest rate is the amount a trader either pays or earns, depending on the established margin and position in the market. To avoid rollovers simply make sure positions are closed at the established end of the market day.
SETTLEMENT (Forex Definition)
The process by which a trade is entered into the books and records of thecounterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.
SHORT POSITION (Forex Definition)
An investment position that benefits from a decline in market price. When onesells a currency their position is short.
SPOT (RATE) (Forex Definition)
In FX Markets, Spot refers to the cash price without interest factored in.
SPOT FOREIGN EXCHANGE (Forex Definition)
Often referred to as the “interbank” market. Refers to currencies traded between two counterparties, often major banks. Spot Foreign Exchange is generally traded on margin and is the primary market that this website is focused on. Generally more liquid and widely traded than currency futures, particularly by institutions and professional money managers.
SPOT PRICE (Forex Definition)
The current market price. Settlement of spot transactions usually occurs within twobusiness days.
SPOT TRADE (Forex Definition)
When you trade foreign exchange you are always quoted a spot price 2 businessdays in advance. This is under normal conditions where there are no bank holidays in the traded currencies countries or is not over a weekend.
SPOT/NEXT (Forex Definition)
A currency deposit transaction or the simultaneous purchase and sale of currency,or vice versa by means of swap for spot value day against the next working day.
SPREAD (Forex Definition)
The difference between the bid (buy) and offer (ask, sell) prices; in other words thespread is the commission that the brokerage house makes on each trade. This can vary widely between currencies and between brokerage firms. For example, USD/JPY may bid at 131.40 and ask at 131.45, this five-pip spread defines the trader’s cost, which can be recovered with a favorable currency move in the market.
STERLING (Forex Definition)
slang for British Pound.
STOCHASTICS OSCILLATOR (Forex Definition)
This technical analysis indicator is based on the premise that during anupward trading market, prices tend to close near their high, and during a downward trading market, prices tend to close near their low.
STOP (Forex Definition)
An order to buy at the market only when the market moves up to a specific price, or to sell at the market only when the market moves down to a specific price.
STOP LOSS ORDER (Forex Definition)
Order type whereby an open position is automatically liquidated at a specificprice. Often used to minimize exposure to losses if the market moves against an investor’s position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.
STOP-BUY (Forex Definition)
A buy order for a currency price that is above the current “market,” or current price, that becomes a market order when the specified price is reached. Stop-buys are used by traders to establish positions in markets which they perceive to be rising in value.
STOP-LOSS (Forex Definition)
A price specified by a trader at which he closes his position (buys or sells currencies to exit the market) to ensure that in case of a loss (prices which don’t move in the expected direction) he is able to keep his loss in line with his risk profile.
SUPPLIER (Forex Definition)
See vendor.
SUPPORT LEVELS (Forex Definition)
A term used in technical analysis indicating a specific price level at which acurrency will have the inability to cross below. Recurring failure for the price to move below that point produces a pattern that can usually be shaped by a straight line. It is the opposite of Resistance levels.
SWAP (Forex Definition)
A currency swap is the simultaneous sale and purchase of the same amount of a givencurrency at a forward exchange rate.
SWIFT (Forex Definition)
Society of Worldwide Interbank Financial Telecommunications. It is a dedicated computernetwork that is set up to support fund transfer messages between member banks worldwide.
TECHNICAL ANALYSIS (Forex Definition)
An effort to forecast prices by analyzing market action through chart study,volume, trends, moving averages, patterns, formations and many other technical indicators.
TICK (Forex Definition)
Minimum price move.
TICKER (Forex Definition)
Shows current and/or recent history of a currency either in the format of a graph ortable.
TIME HORIZON (Forex Definition)
The period of time over which a forecast (such as a Directional Forecast or a Trading Recommendation) of the foreign exchange markets is made. Traders generally look at forecasts over several time horizons before making a trading decision. Typical time horizons presented by OANDA for its financial services are: one day (24 hours) five days three weeks three months
TOMORROW NEXT (TOM/NEXT) (Forex Definition)
Simultaneous buying and selling of a currency for delivery thefollowing day.
TRADING (Forex Definition)
Buying or selling of goods and services among countries called commerce. ForexTrading is the trading of Foreign Currencies.
TRADING MODEL (Forex Definition)
A sophisticated software program that provides expert buy/sell recommendations for trading currencies on the foreign exchange markets. A Trading Model, based on its evaluation of historical analyses and forecasts and your trading profile, makes recommendations about currency positions. It makes recommendations by anticipating fluctuations in the foreign exchange markets and capitalizing on these movements.
TRADING RECOMMENDATIONS (Forex Definition)
A Trading Recommendation is the latest position of a Trading Model for a given market and one or more currency pairs. Trading Models are constantly reacting to the market as they receive each new price quote from live data suppliers.
TRANSACTION COST (Forex Definition)
the cost of buying or selling a financial instrument.
TRANSACTION DATE (Forex Definition)
The date on which a trade occurs.
TREND (Forex Definition)
simply the direction of the market, usually broken down to three categories�.major,intermediate and short-term trends. Three directions are also associated
TREND LINE (Forex Definition)
This is a Technical Analysis indicator also called or linear regression, which is astatistical tool used to uncover trends. It is calculated by using the “Least Squares” method. There are two ways to use the linear regression line: a. Trade in the direction of the Trend line. b. Construct a parallel trend channel above and below the Trend line to be used as support and resistance levels.
TURNOVER (Forex Definition)
The total money value of all executed transactions in a given time period; volume.
TWO-WAY PRICE (Forex Definition)
When both a bid and offer rate is quoted for a FX transaction.
UPTICK (Forex Definition)
a new price quote at a price higher than the preceding quote.
UPTICK RULE (Forex Definition)
In the U.S., a regulation whereby a security may not be sold short unless the lasttrade prior to the short sale was at a price lower than the price at which the short sale is executed.
US PRIME RATE (Forex Definition)
The interest rate at which US banks will lend to their prime corporatecustomers
VALUE DATE (Forex Definition)
The date on which counterparts to a financial transaction agree to settle theirrespective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date.
VARIATION MARGIN (Forex Definition)
Funds a broker must request from the client to have the required margindeposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements.
VENDOR OR SUPPLIER (Forex Definition)
An financial organization which collects, packages, and distributes up-to-the-minute price quotes from banks and other financial institutions.
VOLATILITY (Forex Definition)
A measure by which an exchange rate is expected to fluctuate or has fluctuated over a given period. Volatility figures are often expressed as a percentage per annum.
VOLATILITY (VOL) (Forex Definition)
A measure of price fluctuations. The standard deviation of a price series iscommonly used to measure price volatility.
VOLUME (Forex Definition)
represents the total amount of trading activity in a particular stock, commodity or indexfor that day. It is the total number of contracts traded during the day.
WEAK DOLLAR/ STRONG DOLLAR (Forex Definition)
dollar is said to be weak (relative to a previous time period)against another currency when more dollars are required to buy one unit of another currency. The dollar is strong or has gained in strength when fewer dollars are required to buy one unit of another currency. For example, if $1 buys 10 FF in 1989 but today $1 buys only 6 FF then the dollar has weakened against the franc.
WHIPSAW (Forex Definition)
slang for a condition of a highly volatile market where a sharp price movement isquickly followed by a sharp reversal.
YARD (Forex Definition)
Slang for a billion.
YIELD (Forex Definition)
Return on capital investment.