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Is normally an official action to either change the internal economic policies to correct a payment imbalance or the official currency rate.


The growth of value in any financial instrument.


The purchase or sale of an instrument and the simultaneous taking of an equal and opposite position in a related market, in order to take advantage of a price differential of the instrument between markets.


The quoted price at which a customer can buy a currency pair. Also referred to as the ‘offer’, ‘ask price’, or ‘ask rate.’


Either a positive balance or in the context of foreign exchange the right to receive a specific currency from a counterparty (broker) as brought about from an outstanding forward or spot deal.


Slang for the Australian Dollar.

Balance of Payments

A systematic record of the economic transactions during a given period for a country.


Or Trading Band, is the range in which a currency is permitted to move against another, according to restrictions imposed on the currency by the local Government.

Bank Line

Line of credit granted by a bank to a customer, also known as a “line” or “credit line”.

Bank Rate

The rate at which a central bank is prepared to lend money to its domestic banking system.

Base Currency

For foreign exchange the base currency refers to the first currency in a currency pair. For example, in a EUR/USD currency pair, the EUR is the base currency.


A group of currencies normally used to manage the exchange rate of a currency, usually each currency in the basket is weighted to form the exchange rate.


An investor who believes that prices or the market are going to fall.

Bear Market

A prolonged period of generally falling prices.


The quoted price where a customer can sell a currency pair. This is also known as the “bid price” or “bid rate”.

Bid/Ask Spread

The difference in pips between the “bid” and the “ask” (offer) price.

Bollinger Bands

A technical indicator that allows users to compare volatility and relative price levels over a period of time. It consists of three bands designed to encompass the majority of a security’s price action. Prices will often meet resistance at the upper band and support at the lower band.


An investor who believes that prices are going to rise.

Bull Market

A prolonged period of generally rising prices.

Buy Signal

A condition that indicates a good time to buy an instrument. The exact circumstances of the signal will be determined by the indicator that an analyst is using. For example, it is considered a buy signal when the MACD crosses above its signal line.

Buying Rate

The rate at which the market maker is willing to buy the currency. Often called bid rate.

Call Rate

The overnight inter-bank interest rate.

Candlestick Chart

A form of Japanese charting system that has become popular in the West. A narrow line shows the day’s price range. A wider body marks the area between the open and the close. If the close is above the open, the body is green or blue; if the close is below the open, the body is red.

Capital Risk

The risk arising from a bank having to pay to the counter party without knowing whether the other party will or is able to meet its side of the bargain.


(Value same day) normally refers to an exchange transaction contracted for settlement on the day the deal is struck. This term is mainly used in the North American markets.

Central Bank

A nation’s main regulatory bank. Traditionally, the primary responsibility is development and implementation of monetary policy.

Central Rate

Exchange rates against the ECU adopted for each currency within the EMS. Currencies have limited movement from the central rate according to the relevant band.


An agreement to buy or sell a specified amount of a particular currency or option for a specified month in the future (see Futures contract).


The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.

Convertible Currency

Currency which can be freely exchanged for other currencies or gold without special authorization from the appropriate central bank.

Cross Rate

An exchange rate between two currencies, usually constructed from the individual exchange rates of the two currencies, measured against the USD.

Currency Pair

The two currencies that make up a foreign exchange rate. For example, EUR/USD is a currency pair.

Day Trader

Speculators who take positions in financial markets which are then liquidated prior to the close of the same trading day.

Day Trading

Refers to opening and closing the same position or positions within one day’s trading.

Delivery Date

The date of maturity of the contract, when the exchange of the currencies is made; this date is more commonly known as the value date in the FX or Money markets.


A fall in the value of a currency or any financial instrument.


A candlestick formation with a body so small that the open and close prices are equal. A Doji occurs when the open and close for that day are the same, or very close to being the same.

Entry Limit

An order to buy or sell a foreign currency against another at a specific price. As opposed to a market order, limit orders might not be filled if the market moves away from the specified price.

Entry Stop

An instruction to the dealer to buy or sell a currency pair when it trades beyond a specified price. A buy order is at a rate that is higher than the current market rate; a sell order is at a rate that is lower than the current market rate. They serve to either protect a trader’s profits or limit your losses.


A single European currency called the Euro, which officially replaced the national currencies of the member EU countries.


This is the last day on which an option may either be exercised.

Fed Fund Rate

The interest rate where registered banks can borrow from the Fed. This also indicates the Fed’s view as to the state of the money supply.

Federal Reserve (Fed)

The Central Bank of the United States.

Flexible Exchange Rate

Exchange rates with a fixed parity against one or more currencies with frequent revaluations, a form of a managed float.


Federal Open Market Committee, the committee that sets money supply targets in the US which tend to be implemented through Fed Fund interest rates etc.

Foreign Exchange

The purchase or sale of a currency against sale or purchase of another. Online forex trading involves off-exchange Forex transactions.

Foreign Exchange Swap

Transaction which involves the actual exchange of two currencies (principal amount only) on a specific date at a rate agreed at the time of the conclusion of the contract (short leg), at a date further in the future at a rate agreed at the time of the contract (the long leg), in reality this is a combination of a spot and an opposite forward deal.


A term commonly used when referring to the foreign exchange market.

Fundamental Analysis

Thorough analysis of economic and political data with the goal of determining future movements in a financial market.


The macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.


A term commonly used when referring to the foreign exchange market or a short for foreign exchange.

Gold Standard

The original system for supporting the value of currency issued. When this was used the price of gold was fixed against the currency, this meant that any increase in the supply of gold did not lower the price of gold but caused prices to increase.

Gross Domestic Product

Total value of a country’s output, income or expenditure produced within the country’s physical borders.

Gross National Product

Gross domestic product plus “factor income from abroad” – income earned from investment or work abroad.

Hard Currency

Any one of the major world currencies that is well traded and easily converted into other currencies.


The practice of undertaking one investment activity in order to protect against loss in another, e.g. selling short to nullify a previous purchase, or buying long to offset a previous short sale. While hedges reduce potential losses, they also tend to reduce potential profits.


Comprised package of multiple stocks, also called index, in which the value reflects the individual prices of the underlying securities.


(CPI) Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.

Initial Margin

The required initial deposit of collateral to enter into a position as a guarantee on future performance.


Slang for the New Zealand dollar.

Leading Indicators

A statistic that is considered to precede changes in economic growth rates and total business activity, e.g. factory orders.


The usage of a margin to trade on a larger capital base. Leverage is a double-edged sword, of course, as it can significantly increase your losses as well as your gains.

Line Chart

Price charts that connect periodical prices of a given market over a span of time that form a curving line on the chart. This type of chart is most useful with overlay or comparison charts that are commonly employed in inter-market analysis.


A market position where the client has bought a currency he previously did not hold. Normally expressed in base currency terms.


Slang for the Canadian Dollar.


The amount of money or collateral that must be, in the first instance, provided or thereafter, maintained, to ensure against losses on open contracts. Initial must be placed before a trade is entered into.

Margin Call

A trader receives a margin call from a broker when the equity in their margin trading account falls below the level required to cover potential losses.

Market Order

An order to buy or sell a security at the prevailing market price.


The price, or rate, that a willing seller is prepared to sell at, it is also the best price available to a trader to buy at.

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.

Over The Counter (OTC)

Used to describe any transaction that is not conducted over an exchange.


A deal from today until the next business day.

Pairs Trading

Pairs allow you to predict which of two assets will outperform the other by expiry.  Pair options are based on comparison, and only the relative performance counts.


The percentage amount that the trader will receive at option expiry.


A system where a currency moves in line with another currency, some pegs are strict while others have bands of movement.


The term used in currency market to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY).


The netted total commitments in a given currency. A position can be either flat or square (no exposure), long, (more currency bought than sold), or short (more currency sold than bought).

Potential Payout

This is the percentage gained from the original capital invested if the trade is profitable.

Protected Amount

It is a percentage of the invested capital that is returned to the trader. This is given back to the trader if the option expires “Out of the Money”.

Put Option

When the trader has chosen a downward direction for the asset price. It provides the investor with the opportunity to make a profit even when the price of an underlying asset decreases once the expiry time is reached.

Quote Currency

The second currency in a currency pair is referred to as the quote currency. For example, in a USD/CHF currency pair, the Swiss Franc is the quote currency. This is also referred to as the secondary currency or the counter currency.


A recovery in price after a period of decline.


The distance between the high price and the low price for a given time period. For example, the daily range is equal to the day’s high minus the same day’s low.


The price of one currency in terms of another.


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

Risk Capital

The amount of money that an individual can afford to invest, which, if lost should not affect their lifestyle.

Risk Management

The identification of a potential loss and the handling of the risk usually under strict guidelines.


Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies, the swap is also called Tomorrow Next, Tom-Next or T/N.

Security Deposit

The amount of money needed to open or maintain a position. Also known as ‘margin’.


To go “short” is to have sold an instrument without actually owning it, and to hold a short position with expectations that the price will decline so it can be bought back in the future at a profit.


Refers to the negative (or depreciating) pip value between where a stop loss order becomes a market order and where that market order may be filled.

Soft Market

More potential sellers than buyers, which creates an environment where rapid price falls are likely.


The difference between the bid and the ask price.


British pound, also known as cable.


A price level at which there is an expectation of buying to take place, a break in the support often leads to lower prices. See resistance.


The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction. It is essentially made up of a spot deal and an opposite forward deal.


Market slang for Swiss Franc.

Technical Analysis

An effort to forecast future market activity by analyzing market data such as charts, price trends, and volume.

Technical Correction

An adjustment to price not based on market sentiment but technical factors such as volume and charting.

Thin Market

A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.


A minimum change in price, up or down.

Trade Date

The date on which a trade occurs.

Trailing Stop

A stop-loss level set above or below the current price that adjusts as the price fluctuates.


The buying or selling of currencies resulting from the execution of an order.

Transaction Date

The date on which a trade occurs.


Refers to the direction of prices. Rising peaks and troughs constitute an uptrend; falling peaks and troughs constitute a downtrend. A trading range is characterized by horizontal peaks and troughs. Trends are generally classified into major (longer than a year), intermediate (one to six months), or minor (less than a month).

Trend Line

Straight lines drawn on a chart below reaction lows (in an uptrend) or above rally peaks (in a downtrend) that determine the steepness of the current trend. The breaking of a trend line usually signals a trend reversal.


A transaction executed at a price greater than the previous transaction.


A statistical measure of a market or a security’s price movements over time and is calculated by using standard deviation. Associated with high volatility is a high degree of risk.

Working Day

A day on which the banks in a currency’s principal financial center are open for business. For FX transactions, a working day only occurs if the bank in both financial centers are open for business (all relevant currency centers in the case of a cross are open).

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