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Forex Glossary - Financial Terms |
Appreciation - A currency that is raising its value
Arbitrage -Openining a position and simultaneous taking of an equal and opposite position in another market to get an advantage of small price differentials.
Ask Rate - The rate at which a cross is offered for sale (see bid/ask spread).
Asset Allocation - Dividing funds among different markets to diversify the investment and take a lower risk.
Balance of Trade - In a country, the value of that country exports minus its imports.
Base Currency - In Forex Market is the currency in which the quotes are expressed, usually the first currency in a cross. For example in EUR/USD the base currency is EUR, in USD/JPY is USD.
Bear Market - A market in which the price is lowering its value.
Bid/Ask Spread - The difference between the price that a buyer is willing to pay for a currency and the price for which a seller is willing to sell it.
Book - Is the list of the total positions opened by a trader.
Broker - A company or a person that acts as an intermediary to get a commission on from buyers and sellers.
Bretton Woods Agreement - A 1944 agreement who pegged the price of gold at US $35 per ounce. This agreement was overturned by US President Nixon in 1971.
Bull Market - A market in which the price is raising its value.
Bundesbank - Germany's Central Bank.
Cable - A jargon referring to the GBP/USD currency cross. The reason this cross is called also "CABLE" is the cross price was transmitted by a transatlantic cable.
Candlestick Chart - A particular kind of chart with prices indicated with candlesticks. A candlestick reflects the price for a timeframe (for example 1 hour) indicating the the opening and the closing price in a rectangular form (the candlestick's body) and the highest and the lower prices as shades (above or below the candlestick's body.
Central Bank - A government organization that oversees the monetary policy for a country.
Clearing - The necessary process to reconcile orders between transacting parties of a trade.
Commission - A fee charged by an itermediate.
Counterparty - A person or firm partecipating in a financial transaction.
Country Risk - Risk associated with investing in a foreign country. It could be either political, exchange rate or other economic risk.
Cross Rate - The currency exchange rate between any two currencies. Those currencies are not official currencies in the country where the currency pair is quoted.
Currency - Any accepted form of money, as coins and paper notes issued by a government or central bank.
Currency Pair - In the foreign exchange the value of a currency is always compared to another currency. For this reason currencies are always quoted in pairs like EUR/USD and USD/JPY.
Dealer - An individual or firm acting as buyer or seller in a transaction. A dealer acts as a principal in a transaction, differently by a Broker who doesn't take the ownership, a dealer takes one side of a position, hoping to earn a spread.
Deficit - A negative balance, where liabilities exceed assets.
Depreciation - A decrease in value of a currency due to market forces.
Derivative - An asset which price is dependent upon one or more underlying assets. For exemple an Option.
Devaluation - The deliberate downward adjustment to a currency's price.
Economic Indicator - A macroeconomic data, usually a government issued statistic. Most important indicatoris are The Consumer Price Index (CPI), employment rates, Gross Domestic Product (GDP), retail sales, etc.
European Monetary Union (EMU) - Born from the former European Monetary System, the EMU is a monetary and economic system to establish a single European currency: the Euro.
EURO - the official currency of the European Monetary Union (EMU). Formerly known as European Currency Unit (ECU).
European Central Bank (ECB) - the Central Bank for the European Union.
Federal Reserve (Fed) - The Central Bank for the United States.
Foreign Exchange - (Also Forex or FX) - the market in which participants are able to buy, sell, exchange and speculate on currencies.
Forward - The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.
Forward Price - The predetermined delivery price for an underlying asset decided upon by the buyer and the seller to be paid at a pre-decided date in the future.
Fundamental analysis - A method which consists in evaluating an asset by macroeconomic and political factors.
Futures Contract - An obligation to buy or sell an asset at a predetermined price on a future date.
Good 'Til Cancelled Order (GTC) - An order to buy or sell a security at a set price, this kind of order remains open until the specified price is filled or until the client cancels.
Hedge - A position, usually a combination, made for reducing the risk of adverse price movements.
Inflation - A rate or particular condition at which prices for consumer goods and services rise, so purchasing power falls.
Initial margin - The minimum deposit required to enter into a position as a guarantee on future performance.
Interbank rates - The Foreign Exchange rates offered by international banks to the other ones.
Leading Indicators - An economic factor used to predict future economic activity (a pattern or a trend).
Limit order - An order where the maximum price to be paid or the minimum to be received is pre set.
Liquidity - The degree of a market to accept transaction without affecting the price stability.
Liquidation - The closing of an existing position through the execution of an offsetting transaction.
Long position - Purchasing with the expectation that the asset will rise in value.
Margin call - A request from a broker to deposit additional money in ordet to maintain the minimum margin.
Market Maker - A dealer or a broker quoting bid and ask prices and is ready to make a two-sided market for any financial instrument.
Market Risk - The exposure risk linked to changes in market prices.
Offer - The price offered by a party who's willing to sell an asset.
Offset - To liquidate or cancel an open position by entering an opposite transaction.
One Cancels the Other Order (OCO) - A designation for two orders whereby if one part of the order is executed, then the other part is automatically canceled.
Open order - An order to buy or sell an asset that will be executed when a market moves to its designated price.
Over the Counter (OTC) - A decentralized market where any transaction is not conducted over an exchange and there's not a meeting place for it.
Overnight - A trade which occurs when an investor takes a position that remains open until the next business day.
Pips (Points) - The smallest digit indicated in a given exchange rate, for example 0.0001.
Position - The amount of an asset, either owned or borrowed.
Quote - The most current market price for an asset.
Rate - The quote of a currency in terms of another.
Resistance - A price level at which, according to technical analysists people will probably sell.
Revaluation - Opposite of Devaluation, an increase of a currency rate decided by that country's government.
Risk - Exposure to uncertain change, related to the chance that an investment's actual return will be different than expected.
Risk Management - the process made by analysis and trading tecniques to reduce risk exposure.
Rollover - Process whereby the settlement of a deal is rolled forward to the following delivery date.
Short Position - Selling with the expectation that the asset will decline in value.
Spot Price - The current market price at which an asset and be purchased or sold.
Spread - The difference, expressed in pips, between the bid and ask prices.
Sterling - British Pound.
Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price. 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.
Support - A price level at which, according to technical analysists people will probably buy.
Swap - A currency swap involves the exchange of principal and interest in one currency for the same in another currency.
Swissy - Swiss Franc.
Technical Analysis - A method which consists in evaluating an asset by analyzing market data and historical trends.
Transaction Cost - the cost of purchasing or selling an asset.
Uptick - a transaction occurring at a price higher than the preceding.
Uptick Rule - In the U.S., a regulation whereby every short sal should be entered at a price that is higher than the price of the previous trade.
US Prime Rate - The interest rate at which US commercial banks their most credit-worthy customers.
Value Date - A future date on which counterparts agree and will settle their respective obligations.
Volatility (Vol) - A statistical indicator measuring the size of changes in an asset's value. |
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