Forex abbreviations

Beginner Questions
1

Hi, i have done loads of reading of this forum, but not much posting, so thought i would start a thread on abbreviations used in forex trading,

Here goes

A
[B]All or None[/B] - A limit price order that instructs the broker to go ahead
with the whole order at the price or not at all
[B]Andrews Method[/B] - A technique, developed by Dr. Alan Andrews, for
identifying the upper and lower parallel lines of a trend
[B]Appreciation[/B] - A currency appreciates when the price rises or
strengthens
[B]Ask (Offer)[/B] - The price at which a dealer/trader is willing to sell a
currency. Also, the price at which a trader can buy a currency
[B]Ask Price (Ask Rate)[/B] - The lowest price at which a currency is offered
for sale
[B]Aussie[/B] - Market term for the Australian Dollar

B
[B]Back Office[/B] - The department in the back office who deal with financial
     transactions
[B]Bar chart[/B] - A chart showing the currency prices with each bar showing
     the opening, closing, high and low prices for a specific time
[B]Base currency[/B] - The first currency in a currency pair
[B]Bear Market[/B] - A market where prices are constantly declining
[B]Bid[/B] - The price at which a dealer/trader is willing to purchase currency.
     Also, the price at which a trader can sell a currency
[B]Big figure[/B] - The first few digits of an exchange rate. In some cases
     the digits rarely change and therefore are omitted in dealer
     quotes. Eg. EUR/JPY 148.20/148.25 would be quoted as 20/25
[B]Book[/B] - A summary of a traders/desks total positions
[B]Broker[/B] - Company/individual acting as a middle man between the
     buyer and seller, for a fee/commission
[B]Bull market[/B] - A market where prices rise constantly

C
[B]Cable[/B] - Market term for the British pound/US Dollar
[B]Central Bank[/B] - Organisation that manages their countrys monetary
     policy
[B]Call Rate[/B] - Overnight interbank interest rate
[B]Candlestick chart[/B] - The chart shows the trading range for the day and
     the opening and closing of prices; the range is shaded in the form
     of a candlestick
[B]Clearing[/B] - Process of settling a trade
[B]Commission[/B] - Transaction fee charge by the broker
[B]Contract[/B] - Standard trading lot, usually 100,000 units of the base
     currency
[B]Country Risk[/B] - Risk associated with cross-border transactions
     determined by legal or political activy
[B]Cover[/B] - Close out a foreign currency trading position
[B]Cross Rate[/B] - The exchange rate between two currencies where the
     currency pair in the country that the original quote came from
[B]Currency[/B] - Money issued by the government or central bank

D
[B]Day Trading[/B] - Opening and Closing positions on the same day
[B]Dealer[/B] - Person who acts as the middleman for the transaction,
     placing the buying or selling order
[B]Deficit[/B] - Negative balance of trade
[B]Delivery[/B] - A forex trade where an actual delivery of currencies traded
     is made
[B]Depreciation[/B] - Decline in the value of currency
[B]Devaluation[/B] - The deliberate adjustment of a currencys value usually
     by the Central bank or government
[B]Downtrend[/B] - When the price moves consistently downwards
[B]Dow Theory[/B] - Used by analysts to check the direction of the market
     prices. Originated by Charles Dow

E
[B]Economic Indicator[/B] - A measure of strength or weakness of a
     country's economy, eg. employment rates, inflation and so on
[B]Euro[/B] - Currency of the European Monetary Union
[B]European Monetary Union[/B] - Setup to establish a single European
     currency (the Euro)
[B]Exchange Rate[/B] - The value of one currency quoted in terms of
     another currency

F
[B]Foreign Exchange / Forex / FX[/B] - The buying of one currency and
selling of another
[B]Forward[/B] - A deal that will commence, on an agreed date, in the future
[B]Forward Points[/B] - The pips or points added or subtracted from the
current exchange rate to calculate a forward price
[B]Fundamental Analysis[/B] - The analysis of economical or political
information to determine future movements in the financial market

G
[B]Gross Domestic Product (GDP)[/B] - The measure of a countrys economic
     growth
[B]Good Till Cancelled (GTC)[/B] - A trading order that remains with dealer
     until the trader cancels it

H

[B] Hedging[/B] - An investment that reduces the volatility of your portfolio
value by undertaking one investment activity to protect against
loss in another
[B] High / Low[/B] - Highest traded price and lowest trading price for the
current trading day

I
[B]Inflation[/B] - Where there is a rise in consumer goods and services,
     thereby reducing purchasing power
[B]Initial margin[/B] - The deposit required by a broker for a trader to
     execute currency trades
[B]Interbank rates[/B] - The forex rates that international banks quote
     other large international banks

K

[B] Kiwi[/B] - Market term for the New Zealand Dollar

L
[B]Leverage[/B] - The ability to trade with borrowed funds. The trader can
     then gain more profit but also lose more
[B]Limit Order[/B] - An order to buy below a specified price (enter market)
     or to sell above a specified price (exit market)

[B] Long (position)[/B] - To buy a currency expecting to sell it at a higher
price
[B] Lot[/B] - Standard trading contract, usually 100,000 units of base
currency

M

[B] Major Currency[/B] - A more frequently traded currency, for example,
USD, GBP, EUR and JPY
[B] Margin[/B] - The amount of deposit that a broker requires a trader to
keep in their account to cover losses
[B]Margin Call[/B] - This happens when a broker needs you to put additional
funds into your account to bring the margin up to the required
minimum level
[B]Market maker[/B] - A dealer or broker who is prepared to buy or sell at
stated prices
[B] Market Order[/B] - An order from the trader to buy or sell at the best
price available
[B]Market timing[/B] - Using technical tools to time exit and entry moves
[B]Market trend[/B] - The direction in which currency prices are moving at
the time
[B] Minor Currency[/B] - A lesser traded currency, for example, PLN, SGD
and THB
O
[B]Order Cancels the Other (OCO)[/B] - When executed, an order that
cancels another
[B]Offer (Ask)[/B] - The price at ehich a dealer/trader is willing to sell a
currency
[B] Open Order[/B] - An order that is executed when a certain price is
reached
[B] Open position (trade)[/B] - A deal that has not yet been settled or
reversed by payment
[B]Over The Counter (OTC)[/B] - Transaction that is carried out over the
counter and not over an exchange
[B] Overnight[/B] - A trade that remains open until the next trading day

P

[B] Pegging[/B] - Technique to stabilize a countrys currency by making it
fixed to the exchange rate of another country
[B] Pip (point) [/B]- The smallest move an exchange can make. Normally
0.0001 but in a few cases it is 0.1
[B]Position[/B] - Referes to the amount of currency owned or owed by a
trader
[B]Pound [/B]- Market term for the British Pound Sterling
[B]Pricing currency[/B] - The second currency in a currency pair

Q
[B]Quote [/B]- A price quote that shows the bid price and ask (offer) price
[B]Quoting currency[/B] - The second currency in a currency pair

R
[B]Rate [/B]- Price of one currency in terms of another

[B] Revaluation[/B] - Opposite of devaluation. Ussually involves the central
bank increasing the exchange rate for a currency
[B]Risk Capital[/B] - The amount of money a trader has in their account
[B]Risk Management[/B] - Technique to monitor and control risk
[B] Roll-over[/B] - Where a deal is rolled over to another date. The cost
involves the difference of interest rates between the two
currencies

S
[B]Sell[/B] - Selling a base currency in terms of the pricing
     (quoting) currency
[B]Sell Order[/B] - An order to sell a base currency in terms of the pricing
     (quoting) currency
[B]Sell Limit Order [/B]- An order placed above the current market price,
     where the sell limit attempts to sell at a higher price
[B]Short (position)[/B] - To sell a currency expecting to buy at a lower price
     (appreciates in value if market price declines)

[B] Spot Price[/B] - Current exchange rate of a currency
[B]Spread[/B] - The difference between the bid and offer (ask) price
[B] Sterling[/B] - Market term for the British Pound Sterling
[B]Stop Order[/B] - Used to buy or sell when a particular price is reached
[B]Stop loss Order[/B] - An order to buy or sell when a particular price is
reached often used to minimize losses
[B]Swap [/B]- When one currency is temporarily swapped for another, then
the currency is held and exchanged later. The swap is calculated
by the difference in interest rates
[B]Swissy[/B] - Market term for the Swiss Franc

T
[B]Technical Analysis [/B]- Technical study of currency price behaviour
[B]Tick[/B] - Market term for a Pip or a Point
[B]Ticker [/B]- Scrolling graph or scrolling quotes
[B]Tomorrow to Next[/B] - The simultaneous buying and selling of currency
     for delivery the following day and selling the next
[B]Trading platform[/B] - Online software used for currency trading
[B]Trend[/B] - When the price moves consistently in one direction

U
[B]Uptrend [/B]- When the price moves consistently upwards

V
[B]Value date[/B] - The settlement date of a spot or forward deal (usually
     two business days forward)
[B]Volatility[/B] - Measure of market movement over time

W
[B]Whipsaw[/B] - Market term used to describe a very volatile market where
     a sharp price movement in one direction is followed by a sharp
     reversal

Y
[B]Yard[/B] - Market term for a billion

please feel free to add any that have been missed

2

Great idea TETO, just a suggestion may be to [B]bold[/B] the word and normal the defination, could be confusing with the word wrap. I will have to dig up some of that I have collected over the years and add them if I still have them.

3

Good idea,

Thats better:)

4

nice reference and a great idea!

5

Ok… I did do a little digging and found these on an old backup… it’s just some ‘A’ and I will post the others every few days.

[B]Account Balance[/B] - The amount of money in an account, equal to the net of credits and debits at that point in time for that account.
[B]Account[/B] - A record or statement of transactions of goods and services owed to one person by another
[B]Accrual[/B] - The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.
[B]Accumulation[/B] - The first phase of a bull market. While most investors are discouraged with the market, and earnings are at their worst, some investors start buying shares. Or, an addition to a traders position.
[B]Active Money[/B] - Currency that is in circulation.
[B]Actualize[/B] - The underlying assets or instruments which are traded in the cash market
[B]Adaptive Filter[/B] - A technical analysis tool that is continuously updating the weighting of past prices for smoothing or forecasting purposes.
[B]ADB[/B] - Asian Development Bank
[B]Adjustable Peg[/B] - Term for an exchange rate regime where a country’s exchange rate is “pegged” (i.e. fixed) in relation to another currency , often the dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system.
[B]Adjustment[/B] - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.
[B]Advance/Decline Line[/B] - A technical analysis tool considered a good measure of the overall market’s direction. Equal to the number of stocks which rose divided by the number of stocks which fell during some specified period. Considered bullish if greater than 1, or bearish if less than 1.
[B]African Development Bank or the Asian Development Bank ADB[/B] - Either the African Development Bank or the Asian Development Bank
[B]Agent Bank[/B] - (1) A bank acting for a foreign bank. (2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
[B]Agent[/B] - An individual or firm authorized to act on behalf of another (called the principal), such as by executing a transaction or selling and servicing an insurance policy. The agent does not assume any financial risk in the transaction, as a dealer would.
[B]Aggregate Demand[/B] - Total demand for goods and services in the economy. It includes private and public sector demand for goods and services within the country and the demand of consumers and firms in other countries for goods and services.
[B]Aggregate risk[/B] - Size of exposure of a bank to a single customer for both spot and forward contracts.
[B]Aggregate Supply[/B] - Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
[B]Agio[/B] - Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency.
[B]American option[/B] - An option which can be exercised at any time between the purchase date and the expiration date. Most options in the U.S. are of this type. This is the opposite of a European-style option, which can only be exercised on the date of expiration. Since an American option provides an investor with a greater degree of flexibility than a European style option, the premium for an American style option is at least equal to or higher than the premium for a European-style option which otherwise has all the same features. also called American-style option.
[B]Anonymous trading[/B] - Visible bids and offers on the market without the identity of the bidder and seller being revealed. Anonymous trades allow the high profile investors to execute transactions without the scrutiny and speculation of the market.
[B]Arbitrage channel[/B] - The range of prices within which there will be no possibility to arbitrage between the cash and futures market.
[B]Arbitrage[/B] - The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials. The exchange rate differential or Swap points. May be derived from Deposit Rate differentials.
[B]Arcru[/B] - A unit of account based on the movement of 12 Arab currencies against the USD.
[B]Area Patternv - A technical analysis term used when a currencies upward or downward trend has stalled. The sideways movement in price which follows forms a pattern. Some of these patterns may have predictive value. Examples of these patterns are head & shoulders, triangles, pennants, flags, wedges
[B]Around[/B] - 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.
[B]Article 8 Currency[/B] - An International Monetary Fund (IMF) term used for a senior currency, which should be freely convertible.
[B]As you like option[/B] - Enables the holder to convert from one style of option to a different style of option over a preset period of time. Sometimes referred to as either a “call-or-put option” or “chooser option”.
[B]Ascending Bottoms[/B] - Technical analysis term for a chart pattern in which each successive low price is higher than the previous one; considered a bullish indicator.
[B]Ascending Tops[/B] - Technical analysis term for a chart pattern in which each successive high price is higher than the previous one; considered a bullish indicator.
[B]Ascending Trend Channel[/B] - The tops of an ascending price line develop along a line parallel to the trend line which slopes upward across the bottoms of the down waves.
[B]Ascending Triangles[/B] - A bullish continuation pattern that is shaped like a right triangle consisting of two or more equal highs forming a horizontal line at the top.
[B]Asian Monetary Unit[/B] - An accounting unit for the Asian Clearing Union with the same value as an SDR.
[B]Asian Option[/B] - An option whose payoff depends on the average price of the underlying asset over a certain period of time. These types of option contracts are attractive because they tend to cost less than regular American options.
[B]Ask Size[/B] - The number of shares a seller is willing to sell at his/her ask rate.
[B]Asset Allocation[/B] - Investment practice that distributes funds among different markets (forex, stocks, bonds, commodity, real estate) to achieve diversification for risk management purposes and/or expected returns consistent with the outlook of the investor, or investment manager.
[B]Asset Swap[/B] - An interest rate swap used to alter the cash flow characteristics of an institution’s assets in order to provide a better match with its liabilities.
[B]Asset[/B] - In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal
[B]Assignment[/B] - Notice to an option holder, usually by the clearing house of an exchange traded option that the option has been exercised.
[B]Association Cambiste Internationale (ACI)[/B] - The international society of foreign exchange dealers consisting of national “Forex clubs” affiliated on a world wide basis.
[B]At Best[/B] - An instruction to a broker or dealer to get the best price or rate that he/she is able to at that time.
[B]At or Better[/B] - An order to deal at a specific rate or better.
[B]Attorney In Fact[/B] - A person who holds power of attorney, and therefore is legally designated to transact business and execute documents on behalf of another person.
[B]Au Jour le Jour[/B] - The rate for money lent from day to day on the French money market.
[B]Auction[/B] - Sale of an item to the highest bidder. (1) A method commonly used in exchange control regimes for the allocation of foreign exchange. (2) A method for allocating government paper, such as US Treasury Bills. Small investors are given preferential access to the bills. The average issuing price is then computed on the basis of the competitive bids accepted. In some circumstances for government auctions it is the yield rather than the price which is bid.
[B]Authorized Dealer[/B] - A financial institution or bank authorized to deal in foreign exchange.
[B]Automatic Clearing House (ACH)[/B] - A nationwide electronic funds transfer network which enables participating financial institutions to distribute electronic credit and debit entries to bank accounts and to settle such entries.
[B]Automatic Exercise[/B] - A procedure implemented to protect an option holder where the Option Clearing Corporation will automatically exercise an “in the money” option for the holder.
[B]Average Directional Index (ADX)[/B] - Unlike most oscillators, ADX does not attempt to gauge the direction of the trend; instead, it works to gauge the strength of the trend. ADX operates on a scale of 0 to 100; the higher the oscillator, the stronger the trend.
[B]Average Rate Option[/B] - A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period. Sometimes called an “Asian option”.
[B]Average True Range (ATR)[/B] - Developed by J. Welles Wilder and introduced in his book, New Concepts in Technical Trading Systems (1978), the Average True Range (ATR) indicator measures a currency�s volatility. Wilder defined the true range (TR) as the greatest of the following: Current high less the current low. The absolute value of: current high less previous close. The absolute value of: current low less previous close. The method of calculation ensures that significant gaps accompanied by small high/low ranges are not excluded when measuring volatility. The last two possibilities arise when the previous close is greater than the current high (potential gap up) or lower than the current low (potential gap down). Absolute values were applied to differences to ensure positive numbers. Typically, ATR is based on 14 periods and can be calculated on an intraday, daily, weekly or monthly basis. The first 14-day ATR value is a simple average of the last 14 daily ATR values. Subsequent calculations would smooth the indicator by including the previous 14-day ATR value when calculating the current day�s ATR value.
[B]Away From the Market[/B] - When the bid on an order is lower (or the ask price is higher) than the current market price for the security.

6

Good reference! :D:p

7

Nice addition Traderx

8

Another thing which I think we should add in this discussion is the abbreviations of currencies used in the Forex market. It will be useful for the newbie�s traders as well.

Foreign Exchange Currency Codes (Abbreviations)

ADF Andorran Franc
ADP Andorran Peseta
AED United Arab Emirates Dirham
AFA Afghanistan Afghani
ALL Albanian Lek
ANG Netherlands Antillian Guilder
AON Angolan New Kwanza
ARA Argentine Austral
ARS Argentine Peso
ATS Austrian Schilling (also see Euro)
AUD Australian Dollar
AWG Aruban Florin (old guilder)
BBD Barbados Dollar
BDT Bangladeshi Taka
BEF Belgian Franc (also see Euro)
BGL Bulgarian Lev (prior to Bulgaria becoming a democracy)
BGN Bulgarian Lev (“new”, i.e. current)
BHD Bahraini Dinar
BIF Burundi Franc
BMD Bermudian Dollar
BND Brunei Dollar
BOB Bolivian Boliviano
BRC Brazilian Cruzeiro
BRL Brazilian Real
BSD Bahamian Dollar
BTN Bhutan Ngultrum
BWP Botswana Pula
BZD Belize Dollar
CAD Canadian Dollar
CHF Swiss Franc
CLP Chilean Peso
CNY Chinese Yuan Renminbi
COP Colombian Peso
CRC Costa Rican Colon
CSK Czech Koruna
CZK Czech Koruna
CUP Cuban Peso
CVE Cape Verde Escudo
CYP Cyprus Pound
DEM German Mark (also see Euro)
DJF Djibouti Franc
DKK Danish Krone
DOP Dominican Peso
DZD Algerian Dinar
ECS Ecuador Sucre
EEK Estonian Kroon
EGP Egyptian Pound
ESP Spanish Peseta (also see Euro)
ETB Ethiopian Birr
EUR Euro Dollar (see footnote)
FIM Finnish Markka (also see Euro)
FJD Fiji Dollar
FKP Falkland Islands Pound
FRF French Franc (also see Euro)
GBP British Pound
GHC Ghanaian Cedi
GIP Gibraltar Pound
GMD Gambian Dalasi
GNF Guinea Franc
GRD Greek Drachma (also see Euro)
GTQ Guatemalan Quetzal
GWP Guinea-Bissau Peso
GYD Guyanan Dollar
HKD Hong Kong Dollar
HNL Honduran Lempira
HRK Croatian Kuna
HTG Haitian Gourde
HUF Hungarian Forint
IDR Indonesian Rupiah
IEP Irish Punt (also see Euro)
ILS Israeli New Shekel
INR Indian Rupee
IQD Iraqi Dinar
IRR Iranian Rial
ISK Iceland Krona
ITL Italian Lira (also see Euro)
JMD Jamaican Dollar
JOD Jordanian Dinar
JPY Japanese Yen
KES Kenyan Schilling
KHR Kampuchean (Cambodian) Riel
KMF Comoros Franc
KPW North Korean Won
KRW Korean Won
KWD Kuwaiti Dinar
KYD Cayman Islands Dollar
KZT Kazakhstan Tenge
LAK Lao Kip
LBP Lebanese Pound
LKR Sri Lanka Rupee
LRD Liberian Dollar
LSL Lesotho Loti
LTL Lithuanian Litas
LUF Luxembourg Franc (also see Euro)
LVL Latvian Lats
LYD Libyan Dinar
MAD Moroccan Dirham
MGF Malagasy Franc
MMK Myanmar Kyat
MNT Mongolian Tugrik
MOP Macau Pataca
MRO Mauritanian Ouguiya
MTL Maltese Lira
MUR Mauritius Rupee
MVR Maldive Rufiyaa
MWK Malawi Kwacha
MXP Mexican Peso
MYR Malaysian Ringgit
MZM Mozambique Metical
NAD Namibian Dollar
NGN Nigerian Naira
NIO Nicaraguan Cordoba Oro
NLG Dutch Guilder (also see Euro)
NOK Norwegian Kroner
NPR Nepalese Rupee
NZD New Zealand Dollar
OMR Omani Rial
PAB Panamanian Balboa
PEN Peruvian Nuevo Sol
PGK Papua New Guinea Kina
PHP Philippine Peso
PKR Pakistan Rupee
PLZ Polish Zloty
PTE Portuguese Escudo (also see Euro)
PYG Paraguay Guarani
QAR Qatari Rial
ROL Romanian Leu
RUB Russian Rouble
SAR Saudi Riyal
SBD Solomon Islands Dollar
SCR Seychelles Rupee
SDD Sudanese Dinar
SDP Sudanese Pound
SEK Swedish Krona
SGD Singapore Dollar
SHP St. Helena Pound
SIT Slovenian Tolar
SKK Slovak Koruna
SLL Sierra Leone Leone
SOS Somali Schilling
SRG Suriname Guilder
STD Sao Tome and Principe Dobra
SVC El Salvador Colon
SYP Syrian Pound
SZL Swaziland Lilangeni
THB Thai Baht
TND Tunisian Dinar
TOP Tongan Pa’anga
TRL Turkish Lira
TTD Trinidad and Tobago Dollar
TWD Taiwan Dollar
TZS Tanzanian Schilling
UAG Ukraine Hryvnia
UAK Ukraine Karbovanets
UGS Uganda Shilling
USD US Dollar
UYP Uruguayan Peso
VEB Venezuelan Bolivar
VND Vietnamese Dong
VUV Vanuatu Vatu
WST Samoan Tala
XAF CFA Franc BEAC (for Cameroon, the Central African Republic, Chad, Congo, Equatorial Guinea and Gabon)
XOF CFA Franc BCEAO (for Benin, Burkino Faso, Cote D’Ivoire, Mali, Niger, Senegal and Togo)
YUN Yugoslav Dinar
ZAR South African Rand
ZMK Zambian Kwacha
ZWD Zimbabwe Dollar

please remind me if I forgot to add any currency code:).

9

Wow…that’s a useful long list. Even for me, I don’t know some of the abbreviations. Thanks.

Regards,
Dan

10

[B]hiii friends
I am adding some more terms to the post…
I am adding all the terms instead of giving the URL of the source because It will break the forum rules…I guess…

Happy Trading[/B]

Forex Trading - Abbreviations
Arbitrage
Dealing in two or more markets at the same time (or in similar products in the same market) to take advantage of temporary mispricing in order to make a profit.
At-the-Money
In options, when the strike price equals the price of the underlying contract.
Bear
A person who believes that prices will decline.
Bear Market
A market characterized by declining prices.
Bid
The rate at which a dealer is willing to buy the vase currency.
Big Figure
The first three digits of an exchange rate, e.g. USD 1.62 per pound or DEM 1.49 per dollar.
Bull
A person who believes that prices will rise.
Bull Market
A market characterized by rising prices.
Cable
Dealer’s slang for the UK sterling/US dollar exchange rate.
Call
An option that gives the buyer the right to long a position in the underlying contract at a specific price; the call writer (seller) may be assigned a short position in the underlying contract if the buyer exercises his call.
Call Rate
The overnight interest rate.
Cash Market
The market for the purchase and sale of physical currencies.
Convertible Currency
Currency which can be exchanged for other currencies of gold without authorization from the central bank.
Counterparties
The parties on either side of a transaction.
Cross Rate
Exchange rate that does not involve the US dollar.
Currency Clause
A clause in an export contract in which the sum payable is denominated in the buyer’s currency; but the amount payable will vary with the exchange rate for the buyer’s currency against the seller’s currency.
Day Trading
Refers to opening and closing the same position or positions within one day’s trading.
Delta
For options, also called the neutral hedge ratio. Expresses the expected change in the option price, given a one-unit change in the price of the underlying contract.
Derivative
Financial instruments, such as futures and options, which derive their value from underlying securities including bonds, bills, currencies, and equities.
Discount
Cheaper than the spot price, e.g. forward discount.
Dollar Rate
When a variable amount of a foreign currency is quoted against one unit of the US dollar, regardless of where the dealer is located or in what currency he is requesting a quote. The major exception is the UK sterling/US dollar rate cable which is quoted as units of the US dollar to UK sterling.
EMS
European Monetary System
ERM
Exchange Rate Mechanism
Eurobond
Marketable debt security issued outside the country in whose currency the debt is denominated.
Eurodollar
A dollar deposit acquired by a person or bank not residing in the United States and held outside the United States and therefore not subject to US reserve restrictions.
European Currency Unit
The currency unit in the EMS, where the unit is defined by the sum of quantities of each of the national currencies of the members of the EMS, so the value of the ECU changes in terms of third currencies, such as e.g. the US dollar.
Exchange Control
Government regulations restricting or forbidding certain types of foreign currency transactions including purchases from abroad, payment abroad of interest or dividends, and investing abroad.
Exchange Rate Depreciation
Currency which loses in value against one or more other currencies, especially if this happens in response to natural supply rather than by an official devaluation.
Exchange Rate Risk
The potential loss that could be incurred from a movement in exchange rates.
Exposure
A financial risk facing a business, which can be categorized according to its cause or source. Currency exposures are exposures to exchange rate risk.
Fed
Abbreviation for Federal Reserve System of the United States. In the domestic context Fed usually refers to its board of governors or to the Federal Reserve Bank of New York; in the foreign exchange context it usually refers to the latter.
Federal Open Market Committee
Key decision making committee of the Federal Reserve System. The minutes of its meeting are published about a month later, and show the current stance of US monetary policy.
Figure
Dealers’ slang meaning “00” and denoting and.
Fixed Exchange rate
Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower intervention points.
Flat/Square
Where a client has not traded in that currency or where an earlier deal is reversed thereby creating a neutral (flat) position.
Floating Exchange Rate
When the value of a currency is decided by supply and demand.
Forex
An abbreviation for foreign exchange also FX.
Forward Points
The interest rate differential between two currencies expressed in exchange rate points. These forward points are added to or subtracted from the spot rate to give the forward or outright rate.
Forward Rate
The rate at which a foreign exchange contract is struck today for settlement at a specified future date.
Fundamental Analysis
Analysis based on economic factors.
Future
A contract giving the obligation to buy or sell an asset at a set date in the future.
GTC "Good Till Cancelled"
An order left with a dealer to buy or sell at a fixed price. It holds until cancelled.
Hard Currency
A currency whose value is expected to remain stable or increase in terms of other currencies.
Hedging
A hedging transaction is one which protects an asset or liability against a fluctuation in the foreign exchange rate.
IMF
International Monetary Fund
Initial Margin
The deposit required before a client can transact a deal.
Interest Parity
The interest parity theory is if there are two financial instruments in different currencies but identical in risk and maturity (e.g. three month UK gilts and Us Treasury bills), then a difference in the interest rate on the instruments will be reflected in the premium or discount for the forward exchange rate.
In-the-Money
In call options, when the strike price is below the price of the underlying contract. In put options, when the strike price is above the price of the underlying contract. In-the-Money options are the most expensive options because the premium includes intrinsic value.
Intrinsic Value
For in-the-money call and put options, the difference between the strike price and the underlying contract price.
Leads and Lags
Process of accelerating (leads) or slowing up (lags) foreign exchange payments or receipts when a change in exchange rates is expected.
Leverage
Facility whereby a small margin deposit can control a much larger total contract value, a mechanism which determines the ability to make extraordinary profits at the same time as keeping the risk capital to a minimum.
Limit Order
An order given which has restrictions upon its execution. The client specifies a price and the order can be executed only if the market reaches that price.
Lombard Rate
German term for the rate of interest charged for loans against the security of pledged paper. Particularly used by Bundesbank, which normally maintains its Lombard rate at about 1/2% above its discount rate.
London Interbank Offered Rate (LIBOR)
The interest rate at which banks in London are prepared to lend funds to first-class banks.
Long Position
A position where the client has bought a currency he does not already own. Normally expressed in base currency terms, e.g. long US dollars (short Deutsch marks).
Margin
Cash or guarantee deposited by a client wishing to trade.
Maturity
Date for settlement
Not Held Basis Order
An order whereby the price may trade through or even better than the client’s desired level, but the principal is not held responsible if the order is not executed.
Offer
The rate at which a dealer is willing to sell the base currency.
One Cancels Other (OCO) Order
Where the execution of one order automatically cancels a previous order.
Open Position
Any deal which has not been settled by physical payment or reversed by an equal and opposite deal for the same value date.
Option
The right, but not the obligation, to buy or sell an asset, such as currency, on or before a set of future date.
Out-of-the Money
Option calls with strike prices above the price of the underlying contracts, and puts with strike prices below the price of the underlying contracts.
Outright Forward
Foreign Exchange transaction involving either the purchase or the sale of a currency for settlement at a future date.
Outright Rate
The forward rate of a foreign exchange deal.
Overnight Trading
Refers to a purchase or sale between 9:00 pm and 7:00 am.
Over-the-Counter Transaction (OTC)
A transaction arranged by direct negotiation, usually by telephone, rather than on an exchange.
Point
0.0001 of a unit; for instance, if the GBP/USD is 1.5220, then 1.5219 is one point lower
Political Risk
The potential for losses arising from a change in government policy.
Premium
In options, the price of a call or a put, which the buyer initially pays to the option writer.
Price Risk (Market Risk)
The risk of a fall in the market value of a foreign investment (as measured in the domestic currency of the investor) due to an adverse change in the value of the currency of the investment.
Principal
The counterparty that sells and buys currencies for his own account as opposed to a broker who introduces a buyer to a seller and vice versa.
Purchasing Power Parity
The proposition that over the long term, changes in the exchange rate between two currencies are the result of differences in the relative rate of inflation in the two countries concerned.
Put
In options, the buyer of a put has the right to acquire a short position in the underlying contract at the strike price until the option expires; the seller (writer) of a put obligates himself to take a long position in the contract at the strike price if the buyer exercises his put.
Resistance
A price level at which you would expect selling to take place due to technical analysis. The resistance level of one currency is the support level for the other.
Risk Neutrality
An attitude that risks should neither be sought nor avoided, but should be accepted whenever they arise.
Rollover
Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies.
Settlement
Actual exchange of base currency and currency between principal and client.
Short
A market position where the client has sold a currency he does not already own. Normally expressed in base currency terms, e.g. short US dollars (long Deutsch marks).
Soft Currency
A currency which is expected to devalue or depreciate against other currencies, or whose exchange rate must be supported by central bank intervention or exchange controls.
Speculation
Buying or selling currency in expectation of an exchange rate movement, so as to make a profit, either in the same market or between two different markets, e.g. forex cash markets and derivatives markets.
Spot
Spot means that the settlement date of a deal is two business days forward.
Spread
The difference in prices between bid and offer rates.
Stop Loss Order (or Stop)
An order to buy or sell when a particular price is reached, either above or below the price that prevailed when the order was given.
Strike Price
For call options, the specified price at which the buyer has the right to purchase the underlying contract.
Structural Hedging
The process of reducing or eliminating currency exposure by matching receivables and payables in each currency or currency bloc to minimise the net exposure.
Support
Price level at which you expect buying to take place. See resistance.
Swap
An agreement between two parties to exchange a series of future payments. In a currency swap, the exchange of payments (cash flow) are in two currencies, one of which is often the US dollar.
Swift
The society for Worldwide International Fund Transfers is a multinational facility for fund transfers based in Belgium and the Netherlands.
Technical Analysis
Analysis based on market action through chart study, moving averages, volume, open interest, oscillators, formations, stochastics and other technical indicators.
Thin Trading
When the volumes of currency bought and sold are low.
Time Value
In options, the value of the premium is based on the amount of time left before the contract expires and the volatility of the underlying contract. Time value represents that portion of the premium in excess of intrinsic value. Time value diminishes as the expiration of the option draws near and/or if the underlying contract’s price development becomes less volatile.
Two-Way Price
Rates for which both a bid and offer are quoted.
US Prime Rate
The rate at which US banks will lend to their prime corporate customers.
Value Date
Settlement date of a spot or forward deal.
Volatility
A measure of price fluctuation.