Glossary

Alligator: Technically, Alligator is one of the more basic indicators that we use as an introduction to moving averages that use fractal geometry and nonlinear dynamics.

Appreciation: A currency appreciates when it strengthens in price.

Ask Rate: It is also called "offer", this is a particular rate at which traders are able to buy a specific currency.

Asset Allocation: Investment practice that divides trading funds among different markets to achieve diversification for risk management purposes.

Balance of Trade: Exports minus Imports for a country.

Base Currency: The currency which is shown as the base for quotes purpose. For instance, US Dollar is the base currency for USD/EUR quotes, while the Euro is the base currency for EUR/JPY.

Bear Market: A market that has a trend of declining prices.

Bid Rate: The currency rate at which traders are able to sell a particular currency.

Bid/Offer (Ask) Spread: The difference between the bid and the ask (offer) price.

Bollinger Bands: These are a technical analysis tool formulated by John Bollinger during the 80s. This technique is determined as a method that focuses on the instrument's volatility combining a swing average. In principle, these bands are used for understanding if the prices are high or low on a relative basis.

Broker: An individual or a corporate entity that acts as an intermediary, handling investors' orders to buy and sell various currencies. Some brokers charge fees for their services.

Bull Market: A market that has a trend of rising prices.

Cable: Slang for the GBPUSD dollars exchange rate.

Central Bank: A government or quasi-governmental organization that manages a country's monetary policy. An example is the Federal Reserve, which is the US Central Bank.

Commission: A transaction fee charged by a broker.

Cross Rate: An exchange rate between two currencies that do not include the U.S. dollar, such as EURJPY.

Currency: Any form of money issued by a government or central bank and used as legal tender.

Currency Risk: The probability of an adverse change in exchange rates.

Day Trading: Refers to positions that have been opened and closed on the same day.

Deficit: A negative balance of trade or payments.

Economic Indicator: A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), CPI (inflation) and retail sales.

Envelopes: Envelopes Technical Indicator is formed with two moving averages one of which is shifted upward and the other is shifted downward. The selection of optimum relative number of band margins shifting is determined with the market volatility.

European Central Bank (ECB): The Central Bank of the European Monetary Union.

Federal Reserve (Fed): The Central Bank of the United States.

Foreign Exchange/ Forex or FX market: A market where currencies are bought and sold against each other.

Fundamental analysis: Analysis of economic and political information with the objective of determining future movements in a financial market.

Futures Contract: An obligation to exchange a good or an instrument at a set price on a future date. The main difference between a future and a forward is that futures are typically traded on an exchange to a fixed settlement date. Forwards are over-the-counter (OTC) contracts and the maturity date can be defined on a bespoke basis.

Hedge: A position or a combination of positions that reduces the risk of the trader's primary position.

Inflation: An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Leverage: Leverage is one of the most important concepts to Forex traders. It is considered as a profit maximization tool while trading Forex, but it is important to remember that using leverage will also increase the risk while trading Forex. Leverage takes the form of a loan given to the trader by his broker, of which this loan is invested with the intent to earn a greater rate of return. Simply, it is trading with borrowed money in intent to earn more. A leverage of 1:100 means that trader can buy an amount equivalent to $100,000 by depositing only $1,000 in his trading account. This practice is referred to as "Margin trading".

Limit order: An order to buy at or below a specific price or to sell at or above a specific price.

Liquidity: The ability of a market to accept large transaction with minimal or no impact on price stability.

Long position: A market position where the client has bought a currency he did not previously have. Normally expressed in base currency terms, e.g. long Dollars (short Swiss Franc)...

Margin: The required equity that an investor must deposit to collateralize a position.

Margin call: A request from a broker or a dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer. Alternatively the client can choose to close one or more positions.

Market Maker: A dealer who supplies prices and is prepared to buy or sell at those stated bid and ask prices.

Moving Average: The Moving Average Technical Indicator shows the mean instrument price value for a certain period of time. When one calculates the moving average, one averages out the instrument price for this time period. As the price changes, its moving average either increases or decreases.

Offer: The price or rate that a trader is prepared to sell at.

Open position: A deal that has not been settled by physical payment or reversed by an equal and opposite deal for the same value.

Over the Counter (OTC): Used to describe any transaction that is not conducted over a regulated exchange.

Pips: The term used in the currency market to characterize the smallest incremental move an exchange rate can make. The value of a pip depends on the currency pair. One pip/ basis point equals for instance 0.0001 for EUR/USD, GBP/USD and USD/CHF, and 0.01 for USD/JPY.

Resistance level: A price level at which you would expect selling to take place.

RSI: The Relative Strength Index Technical Indicator (RSI) is a price-following oscillator that ranges between 0 and 100. When Wilder introduced the Relative Strength Index, he recommended using a 14-day RSI. Since then, the 9-day and 25-day Relative Strength Index indicators have also gained popularity.

Short position: An investment position that benefits from a decline in market price.

Spot price: The current market price. Settlement of spot transactions usually occur within two business days.

Spread: The difference between the bid and the offer (ask) price.

Stochastic: A family of overbought/oversold indicators which are based on the belief that along with increasing (or decreasing) prices, closing prices tend to accumulate ever more closely to the highs (or lows) for a certain period.The curves produced reflect where the current price is in relation to the trading range over a period of time. The values vary between 0 and 100.Values above 80 are considered overbought, and values below 20 are considered oversold.

Stop order: An order to sell at or below a designated price or to buy at or above a specific price.

Stop loss: An order to close a position when a particular price is reached in order to minimize loss.

Support level: A price level at which you would expect buying to take place.

Take profit: An order to close a position when a particular price is reached to ensure a profit.

Talking Up: declarations made usually by the central bank or government minister intended to bolster market response with respect to the currency.

Technical Analysis: This deals with past price and volume trends and frequently with the help of chart analysis in order to be able to make forecasts about future price advances of the commodity in question.

Technical Correction: An alteration to price not based on market sentiment but technical aspects such as volume and charting.

Temporal Accounting: This is a technique of determining accounting exposure which interprets all balance sheet items at the current rate of exchange, not the rate at the time the cost was incurred.

Tender: (1) an official proposal to supply or purchase goods or services.(2) In the UK, this is the phrase for the weekly Treasury Bill issue.

Tenor: Maturity, or the number of days leading to maturity usually on bills of exchange. Terms of Trade The ratio between export and import price indices.

Theory of Elasticity’s: A representation of exchange rate determination which states that the exchange rate is merely the price of the foreign exchange which holds the BOP in equilibrium. The level to which the exchange rate react to a change in price.

Threshold of Divergence: A safety feature for the EMS which produces an urgent situation exit for currencies which become the singular center of various unfavorable forces. The threshold of divergence specifies when the precise country with the pressured currency should take additional steps other than simple central bank intervention in the foreign exchange markets.

Theta: A gauge of the sensitivity of the price of an option to a change in its time to termination.

Thin Market: A market in which trading volume is low and in which as a result bid and ask quotes are wide and the liquidity of the instrument traded is low.

Thursday/Friday Dollars: A U.S. foreign exchange detail. If the bank leaves the money overnight and transfers them on Friday via a clearing house check, then clearance is not until Monday, which is the next business day. Higher interest rates for this time are therefore available.

Tick: The smallest change in price, whether up or down.

Tier One Capital: One way regulators try and stop banks going bust is to impose capital requirements. The banks "own capital" could be split into some tiers. "Tier one" represents capital of the highest quality. This includes funds raised by issuing shares plus past profits.

Tight Capital: A condition in which there is a lack of credit as a result of financial policy restricting the supply of credit in general through raising interest rates.

TIFFE: Tokyo International Financial Futures Exchange.

Time Decay: The decline in the time value of an option as the end time draws near.

Time Value: That part of an option premium which mirrors the length of time left over in the option prior tending. The longer the time left over until cessation, the higher the time value.

Today/Tomorrow: Coincident buying of a currency for delivery the next day and selling for the spot day, or the other way around. Also called overnight.

Tombstone: Idiomatic expression for declaration in a publication that a loan or bond has been set.

Tomorrow Next (Tom Next): Coincident buying of a currency for delivery the next day and selling for the spot day or the other way around.

Trade Date: The day on which a trade happens.

Trade Deficit/Surplus: The differentiation between the worth of imports and exports. frequently only accounted in visible trade terms.

Trade-weighted Exchange Rate: The variations in the exchange rate in opposition to a trade weighted basket as well as the currencies of the country's main trading partners.

Traded Options: Transferable options with the right to buy and sell a consistent amount of a currency at asset cost within a specific period.

Tradable Amount: The smallest acceptable transaction size.

Trade Ticket: Please refer to deal ticket.

Transaction Date: The day on which a trade happens.

Tranche: A segment, in particular used for borrowings from the IMF.

Transaction: The buying or selling of securities ensuing from the carrying out of an order.

Transaction Exposure: Potential profit and loss generated by current foreign exchange transactions.

Treasury Bills: Temporary obligations of a Government issued for interludes of one year or less. Treasury bills do not bear a rate of interest and are issued at a reduction on the par value. Treasury bills are reimbursed at par on the due date. In the UK the bills are usually for 91 days and are presented at weekly tenders. In the United States they are auctioned.

Turnover: The entire capital value of currency contracts traded is calculated by multiplying dimension by the number of contracts dealt.

Two-Tier Market: A double exchange rate system where usually only one rate is open to market stress for example, South Africa.

Two-Way Quotation: When a trader quotes both buying and selling rates for foreign exchange dealings.

Uncovered: An additional expression for an open position.

Under Reference (Order): Before concluding a deal, all the details must be offered for approval to the order giver, whose prerogative it is to refuse the proposal.

Under-Valuation: An exchange rate is usually measured to be undervalued when it is underneath its Purchasing power parity (PPP).

Undo: A idiomatic expression for undoing a transaction, that is, a spot sale by way of a forward purchase or if erroneously done, a spot purchase.

Unload: A Term for sale of assets or unwinding positions either to minimize loss or to weaken other market Members' positions.

Unmatched Book: If the standard maturity of a banks accountability is less than that of its assets, it is considered to be operating an unmatched book.

Unwind: Selling of assets and or instruments to balance a position.

Up-Tick: A transaction carried out at a higher price than the previous transaction.

USDX: A currency index which is comprised of the weighted average of the prices of ten foreign currencies against that of the U.S. Dollar.

U.S. Quote: Exchange rate quotation on a mutual basis. Also referred to as an American Quote.

Value at Risk: The probable loss from an unfavorable market movement.

Value Date: This is a date in the future which is used in settling the price of a product/products that has fluctuations in values. Thus it has a possibility of noticing that the use of value dates in settling the paying of accounts and products differs due to the dissimilarities in the time of valuation.

Value Spot: Usually, a settlement for two working days from a given work day.

Value Today: Transaction carried out for settlement on the same day; sometimes also named "cash transaction."

Vanilla: An uncomplicated option whose terms and conditions do not take account of any provisions other than exercise style, expiry and strike. To weigh against exotic options which have supplementary terms.

Variation Margin: Profits or losses on open positions in futures and options contracts which are paid or gathered on a Daily basis.

Vega: States the price change of an option for a one per cent modification in the implied volatility.

Vertical (bear or bull) Spread: The sale of an option with a high implement price and the procure (in the case of a bull) or thecae (in the case of a bear ) of an option with a lower implement price. Both options will have the same end date.

Visible Trade: Trade in product goods as compared with capital flows and invisible trade.

Volatility: A gauge of the amount by which an asset cost is expected to vary over a given period. Normally calculated by the annual standard deviation of daily cost changes. (historic). Can be implied from futures pricing, implied volatility.

Vostro Account: A local currency account kept by another bank. This account is especially managed with the counter-party's account from which funds could be paid into or taken out of, as a result of its dynamic operations.

Whipsaw: Whipsaw refers to when a trader takes a position and has to move against it, triggering stop-loss limits and liquidation of positions. He then has to move in the original direction. This usually occurs in volatile markets.

Wholesale Capital: This refers to capital borrowed in large amounts from banks and institutions as opposed to from small investors.

Wholesale Price Index: The index measures changes in prices in the manufacturing and distribution division of the economy and tends to lead the consumer price index by 60 to 90 days. Many times the index is quoted separately for food as opposed to industrial products.

Window-dressing: A situation in which financial institutions or companies raise funds for specific reporting dates such as the end of the year to give the appearance of a high level of capital.

Working Balance: Discretionary element in the reserves of capital of a central bank.

Working Day: A day on which the banks in a currency's principal center of finance are open for business. For Forex transactions, a working day only happens if the bank in both (all relevant currency centers in the case of a cross are open).

World Bank:: A bank made up of members of the IMF whose aspiration is to assist in the development of member states by offering loans where private capital is not accessible.

Writer: The seller of a call or put option in correlation with an opening position who receives payment and who is obliged to perform if it is exercised.

Yield Curve: It is used to foresee the future direction of interest rates for a particular country.