Hello dear traders, I open this thread to keep in touch with all, adding the FX expressions which is mostly asked by traders, beside, feel free to ask any FX related questions & I will answer it as much as I can.
FX Glossary
Account History
Listing of all transactions (trading and non-trading) completed for a given account.
Accounting Currency
Currency in which account deposit/withdrawal operations are denominated. Not to be confused with the currencies ultimately bought or sold with account funds.
Accrual Swap
An interest rate swap under which a counterparty pays a vanilla floating reference rate, usually three or six month LIBOR, and receives LIBOR plus a significant spread. Interest payments to this counterparty will only accrue on days when rates stay within a certain range dictated by preset upper and lower boundaries.
Aggregate Demand
Used loosely to describe all private and public sector demand for goods and services produced by a given country. In practice, it is interchangeable with Gross Domestic Product (GDP). Academic notions of aggregate demand make a distinction between short-term and long-term, and are modeled as a function of price levels.
Aggregate Risk
Can very depending on context, but generally defined as the amount of exposure a customer has to the (potential) movement of spot and forward rates.
Aggregate Supply
Measures the total volume of goods and services produced by a given economy. Generally speaking, an increase in demand should lead to an expansion of aggregate supply in the economy. In the event of a mismatch between aggregate supply and aggregate demand, prices would change (i.e. inflation/deflation) in order to return the economy to equilibrium.
Aggressor
A trader that has committed to the existing price in the market.
Agio
An archaic term used to describe the difference/premium between the official rate and the market rate.
American Depositary Receipt (ADR)
A vehicle which effectivelycenables American investors to own shares in foreign corporations. ADRS trade on exchanges like conventional securities. The sponsoring bank collects dividends, pays local taxes and converts them to dollars for distribution to American shareholders. It should be noted that ADRs are affected both by company performance and by changes in exchange rates.
American Option
An (currency) option which may be exercised at any time prior to expiration.
Appreciation
Common term used to describe a currency increasing in value, as a result of market forces as opposed to official adjustment.
Arbitrage
The simultaneous purchase and sale of an equivalent security in different markets, with the goal of profiting from pricing inconsistencies. In the context of currency trading, arbitrage applies to a mismatch in paired exchange rates between three currencies (triangular arbitrage) or an inefficiency between identical securities listed in different markets that arises from exchange rate fluctuation.
Around
Dealer jargon used to quote the forward premium/discount. For example, “two-two around” would translate into 2 points on either side of the present spot value.
Asset Allocation
Investment practice that divides funds among different types of securities/vehicles/markets in order to achieve a return that is calibrated to an investor’s risk profile.
Ask (Offer) Price
The price at which specific currency or contract can be purchased. In practice, this can be understood as the number on the right side of the quote, which is usually the higher price. For example, in the quote EUR/USD 1.4122/26, the ask price is 1.4126; meaning you can buy one Euro for 1.4126 US dollars. Opposite to bid price.
Association Cambiste International
The worldwide affiliation of foreign exchange dealers that together make most of the market for forex trading.
At Best
An type of order to buy or sell at the best rate that is currently available in the market.
At or Better
A type of order to deal at or above (whichever is available) a given price.
At Par Forward Spread
Describes a scenario in which the forward price (for a given time period) is equivalent to the spot price.
At the Price Stop-Loss Order
A type of stop-loss order that must be executed at the requested price regardless of "market conditions."
At-the-Money
Describes an option whose strike/exercise price is equal to (or close to) the current market price of the underlying security.
Auction
Sale of securities to the highest bidder(s). In finance, it is mainly used by governments for the allocation of foreign exchange and government paper, such as US Treasury Bills. Sometimes, auctions are conducted in terms of yield, rather than price.
Autocorrelation
The correlation between changes in a single variable over different time periods. If a price is negatively autocorrelated, a move down in one period would suggest a move up in the next, and vice versa. If it were positively autocorrelated, a move down would suggest a move down in the following period as well, and vice versa.
Average Rate Option
A hedging tool where a series of spot rate fixings during the life of an option are used to calculate an average rate. If the average rate is below the strike price, then the bank must settle the difference with the customer. Otherwise, the the option expires worthless with no payment made. Average rate options are generally suited for those who need protection against adverse currency moves that still wish to retain full upside potential. Also known as an Asian Option.
Aussie
Slang term for the Australian dollar.
Back Office
The departments and processes related to the settlement of financial transactions.
Back to Back
Transaction where a loan is made in one currency against a loan denominated in another currency.
Balance sheet
Financial statement showing a company’s assets, liabilities, and shareholders’ equity on a given date.
Balance of Payments
A systematic record of the economic transactions during a given period for a country. Can refer to either current account (which takes trade into account), capital account, or a combination thereof. Prolonged balance of payment deficits theoretically lead to currency depreciation.
Balance of Trade
Calculated by subtracting imports from exports. A negative balance of trade (when imports exceed exports) is called a “deficit,” while a positive balance is known as a “surplus.” The balance of trade is inversely related to the difference between savings and investment.
Bank of England
Central Bank for the UK, whose actions directly weigh on the value of the Pound Sterling.
Bank Line
A Line of credit provided by a bank.
Bank Notes
Issued as legal tender; while they can sometimes be converted into currencies, they are generally excluded from the forex market.
Bar Chart
A chart type consisting of four points: high price and low price (represented by a vertical bar), opening price (represented by a small horizontal line to the left of the bar), and closing price (represented by small horizontal line to the right of the bar).
Barrier Option
A type of option whose value/survival depends on whether the underlying security.currency breaks a predetermined price level at any time during the life of the option. Depending on market conditions, it is variously referred to as Down and Out call/put, Down and in call/put, Up and out call/put, and/or Up and in call/put.
Base Currency
Currency in which the operating results of the bank or institution is reported.
Basis
Difference between the cash price and futures price.
Basis Convergence
The process whereby the basis tends towards zero as the contract expiration date nears.
Basis Point
One per cent of one per cent. For example, 25 basis points is equal to .25%.
Basis Price
The price expressed in terms of yield-to-maturity or rate of return, rather than the actual unit price.
Basis Trading
The practice of taking opposing positions in the spot and futures markets with the goal of profiting from favorable changes between the two.
Basket
Group of currencies (as opposed to one single currency) normally used to peg/manage the exchange rate of another currency.
Bear Market
While precise standards vary, refers generally to prolonged period of falling asset prices.
Bear(ish)
Describes an an investor who believes that asset prices will fall.
Bear Put Spread
An options strategy that seeks to capitalize on a depreciating currency by buying a put option with a high strike price and selling one with a low strike price.
Bid Price
The price at which specific currency or contract can be sold. In practice, this can be understood as the number on the left side of the quote, which is usually the lower price. For example, in the quote EUR/USD 1.4122/26, the bid price is 1.4122; meaning you can sell one Euro for 1.4122 US dollars. Opposite of Ask/Offer price.
Big Figure
Refers to the first three digits of an exchange rate, such as the 2.30 in 2.3025. The big figure is often omitted in dealer quotes, such that a quote of “25/30” on dollar mark would indicate a price of 2.3025/2.3030.
Bilateral Clearing
In a system of limited foreign currency, payments are usually routed through the central bank, which is also charged with clearing the balance of payments.
Black-Scholes Model
The most common option pricing formula, which is based on a set of ideal assumptions that pertain mostly to the underlying security/currency.
Bollinger Bands
Technical analysis tool used to measure the highness or lowness of the price relative to previous trades, consisting of three bands: middle band (simple moving average), upper band (given number of standard deviations above the middle band), and lower band (given number of standard deviations below the middle band)
Book
Summary of a (professional) trader’s total positions; may also include gains and losses.
Booked
Refers to the location where the transaction is recorded, which may differ from the location/country of negotiation.
Break Even Point
The price at which the option buyer recovers the necessary premium paid, resulting in neither loss nor gain. With a call option, the break even point is simply the premium plus the strike price.
Break of Which (BOW)
Based on a series of predetermined levels, this describes the belief that if a price breaks a specific level, it will move towards the next level, and continue (upwards or downwards) if it then breaks through that level.
Break Out
Describes a technical scenario in which a currency/security is seen to have exited a pre-existing pattern, such as a range or other trend.
Breakaway Gap
Price gap that forms following breakout which often represents a (temporary) pricing inefficiency following a long period of consolidation.
Bretton Woods
1944 agreement that used the price of gold to fix exchange rates for major currencies. It was replaced in 1971 by a floating exchange rate system that remains in place today.
Broken Dates/Period
Describes deals involving non-standard periods.
Broker
An agent who executes orders to buy and sell currencies either for a commission or based on a bid/ask spread. In the foreign exchange market, brokers essentially serve as intermediaries between banks. This commission is known as the brokerage fee.
Bull Market
While precise standards vary, refers generally to prolonged period of rising asset prices.
Bull(ish)
Describes an an investor who believes that asset prices will rise.
Bull Spread
An options strategy that seeks to capitalize on a (moderate) rise in exchange rates, executed typically by buying a call option with a low strike price and selling one with a high strike price. Also known as Buying the Spread.
Bulldogs
Bonds issued in the UK by foreign institutions, denominated in British Pounds.
Bullion
Refers to gold bars, as opposed to coins or indirect ownership of gold.
Bundesbank (BUBA)
Central bank of Germany and most influential member of the European System of Central Banks (ESCB).
Butterfly Spread
An options strategy in which options with different expiration dates and strike prices are bought and sold simultaneously against each other.
Buyer/Taker
Refers to the buyer/holder of an option, who has the right
but not the obligation, to purchase the underlying security.
To be resumed in the comments.