Forex Dictionary

Appreciation (Appraisal): It is said that a currency is "seen" when its value increases depending on market demand.


Arbitrage (Arbitration): Operation of buying or sell a security immediately doing the reverse in another market to profit from the price difference between two squares.

Around: colloquial term used by operators to indicate when the forward premium / discount is near parity. For example, "two-two around" would be understood as 2 pips difference between the purchase price and current market sales.

Ask Rate (Prices for sale): The price at which an instrument is offered for sale (as in the difference between the purchase and sale)

Asset Allocation (Asset Allocation): Practice of investment is the distribution of assets in different markets, diversification for the purpose of risk management and / or get the expected performance based on the objectives of the investor.

Back Office: The departments and processes related to the settlement of financial transactions.

Balance of Trade (Trade Balance) - Value of exports of a country less the value of its imports.

Base Currency (Base Currency): Overall, the currency in which the investor or issuer maintains its book of accounts. In forex trading, normally considered the U.S. dollar currency "base" for quotes, ie quotes are expressed as a unit of $ 1 USD per the other currency quoted in the pair. The main exceptions to this rule are the British pound, euro and Australian dollar.

Market Bear Market (bass): A market characterized by falling prices.

Bid / Ask Spread (difference between purchase price and sale): The difference between the purchase and sale, the most common way to measure market liquidity.

Big Figure: Term used by the broker-dealer (dealer or trader) that refers to the first digit of the exchange rate. These digits do not change frequently in normal market fluctuations and thus are eliminated from the contributions of the agents, especially during periods of high market activity. For example, the exchange rate USD / Y might be 107.30/107.35, but the agents did not mention the first three digits, ie, they will say "30/35".

Book (Book): In a field of professional sale, the book summarizes the total positions a trader or trading desk.

Broker (Broker): A person or company acting as an intermediary between buyers and sellers and receives a fee or commission for the transaction. On the other hand, a "dealer" or "trader" (agent, dealer) commits capital and takes a position, hoping to obtain a difference (profit) by closing the position in a subsequent transaction with another party.

Bretton Woods Agreement of 1944 (Bretton Woods Agreement of 1944): Agreement establishing fixed exchange rates for major currencies, provided for central bank intervention in currency markets, and fixed the price of gold at $ 35 per ounce. This agreement was in effect until 1971, when President Nixon rescinded and established a floating exchange rate for the major currencies.

Bull Market (Bull Market): A market characterized by high prices.

Bundesbank: Germany's Central Bank.

Cable (Cable): colloquial term used by traders to refer to the exchange rate of sterling and the dollar. It is called so because the exchange rate was originally transmitted by transatlantic cable beginning in the mid-19th century.

Candlestick Chart (Figure candelabrum): Graph showing the operating range of the day as the opening and closing prices. If the opening price is higher than the closing price, the rectangle between the purchase price and closing is shaded. If the closing price is higher than the opening price, this area is not shaded.

Central Bank (Banco Central) governmental or quasi-governmental institution that manages a country's monetary policy. For example, the central bank of the United States is the Federal Reserval (Federal Reserve) and the German central bank is the Bundesbank.

Chartist: A person who studies charts and graphs of historical data to discover trends and anticipate changes in trend. Also known as Technical Operator (Technical Trader).

Clearing (Compensation): The process of settlement of a transaction.

Contagion (Contagion) - The trend of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in its currency, the rupee. Then, contagion affected other emerging Asian currencies, and then came to America, and now is known as the "Asian Contagion".

Commission (Commission): Fees charged by the broker operation.

Confirmation (Confirmation) - A document exchanged by the parties to a transaction that confirms the terms of the transaction.

Contract (Unit or Lot) - The standard unit operations.

Counterparty (Counterpart): One of the parties involved in a financial transaction.

Country Risk: Risk associated with a transaction between countries, including, without limitation, legal and political conditions.

Cross Rate (cross exchange rate): exchange rate between two currencies considered non-standard in the country where the currency pair traded. For example, in the United States, the GBP / JPY will be considered a cross rate, whereas in the UK or Japan will be one of the major currency pairs traded.

Currency (currency): All kinds of money issued by a government or central bank and used as payment and legal basis for trade.

USD - U.S. Dollar
JPY - Japanese Yen
EUR - Euro
GBP - British Pound

CHF - Swiss Franc
AUD - Australian Dollars
CAD - Canadian Dollar
NZD - New Zealand Dollar

Currency Risk (Foreign Exchange Risk): The risk of incurring losses resulting from an adverse change in exchange rates.

Day Trading: (Negotiation within the day) - Refers to open and closed positions in the same trading day.

Dealer (Trader) (Agent) - A person acting as principal or party to a transaction. Constituents take a position, hoping to obtain a difference (profit) by closing the position in a subsequent transaction with another party. A broker, however, acts as an intermediary between buyers and sellers and receives a fee or commission.

Deficit (Deficit): A negative balance in the trade balance or payment.

Delivery (Delivery): Transaction in the foreign exchange market where both parties give and receive in effect traded currencies.

Depreciation (Depreciation): Fall in the value of a currency due to market forces.

Derivative (Derivative): A contract whose value depends on the price changes of other related or underlying asset or future physical instrument. Option is the most common derivative.

Devaluation: The deliberate downward adjustment in the value of a currency, usually caused by an official announcement.

Economic Indicator (Economic Indicator): A government issued statistic that indicates the current growth and stability of the economy. The most common economic indicators are unemployment rates, gross domestic product (GDP), inflation, retail sales, etc..

European Monetary Union (EMU): (European Monetary Union) The main goal of the EMU is to establish a single European currency called the Euro, which officially replace the national currencies of different countries of the European Community in 2002 . On January 1, 1999, began the transition phase and introduction of the Euro. This badge is now a bank currency and paper financial transactions and foreign exchange are made in euros. This transition period will last three years, during which banknotes and coins come into circulation. On July 1, 2002, only the euro will be used as payment in the participating countries of the EMU, the national currencies of member countries will cease to exist. Current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, Netherlands, Italy, Spain and Portugal.

EURO (Euro): Currency of the European Monetary Union (EMU) which replaced the ECU (European currency basket).

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

Federal Deposit Insurance Corporation (FDIC) regulatory entity of the United States that administers the insurance on bank deposits.

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

Flat / square (equilibrium position): Figure of speech used by dealers to describe a position that has been completely reversed. For example, you buy $ 500,000 and then sold $ 500,000, thus creating a neutral (equilibrium).

Foreign Exchange (Forex or FX) (Forex): The simultaneous buying of one currency and selling another.

Forward (forward contract): Exchange default on a contract to buy or sell currencies at a future date agreed upon, based on the differential in interest rates between two currencies in question.

Forward points (points forward): The Pips added or removed from the current exchange rate to calculate the forward price.

Fundamental analysis (Fundamental Analysis): Analysis of economic and political data to determine future movements in the financial market.

Futures Contract (Futures contract): Obligation to exchange a commodity or security at a specified price at a future date. The main difference between a Future and a Forward is that Futures are usually traded on the stock (which is called ETC: Contract negotiated in the bag), while forwards contracts are considered OTC (OTC). An OTC is any contract NOT traded on an exchange.

Good 'Til Cancelled Order (GTC) (Order valid until canceled or execution): Order to buy or sell at a specified price. The order remains open until the client concrete or cancel the operation.

Hedge (coverage): A position or combination of positions which reduces the risk of the main position.

Inflation (Inflation): Economic situation in which no increase in the prices of consumer goods, reducing purchasing power.

Initial margin (initial margin): The initial deposit of collateral required to enter a position as a guarantee of future performance.

Interbank rates (interbank rates) foreign exchange rates large international banks quote other large international banks.

Leading Indicators (main): Statistics that are considered to predict future economic activity.

LIBOR: The London Inter-Bank Offered Rate.: (London Interbank Rate): Banks use LIBOR when taking funds from another bank.

Limit order (limit order): Order with restrictions on the maximum price to be paid or the minimum price to receive. For example, if the current price of USD / YEN is 102.00/05, then a limit order to buy USD would be at a price below 102 (ie, 101.5)

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

Liquidation (Liquidation): The closure of an open operation through the execution of an offsetting transaction.

Long position (long position): A position that increases its value if market prices rise.

Margin call (outside of warranty coverage): Request by a broker or dealer for additional funds or other assets to ensure compliance with a position that has seen adverse changes to the client.

Market Maker (market maker): An agent who regularly provides quotes for buying and selling and is willing to buy and sell at the prices stipulated.

Market Risk (Market Risk): Exposure to changes in market prices.

Mark-to-Market (Market to Market): The process of revaluation of all open positions with current market prices. These new prices then determine margin requirements.

Maturity (Maturity): Date of settlement or maturity of a financial instrument.

Momentum investor (Investor opportunistic): Market Participant increasing their exposure in the market when it is up and reduce their exposure or short selling when the market is down.

Offer (Offer): Rate at which a dealer (trader) is willing to sell a currency.

Offsetting transaction (Transaction compensation): A transaction that serves to cancel or offset some or all of the market risk of an open position.

One Cancels the Other Order (OCO) (OCO Order) An order subject to a condition in which the execution of part of the order automatically cancels the other.

Open order (Order open): An order to buy or sell when the market moves to its designated price.

Open position (position open): An operation that has not been reversed by an operation or settled by delivery.

Over the Counter (OTC) (OTC): Used to describe any transaction that takes place through a stock exchange.

Overnight: Operation that remains open until the next business day.

Pips: Digits are added or subtracted from the fourth decimal place, ie 0.0001. Also called Points.

Political Risk (Political Risk): Exposure to changes in government policy, adversely affecting the interests of investors.

Position (Position): The total holdings of certain currency obtained

Premium (Premium): In Forex markets, describes the amount by which the forward or future price exceeds the current market price.

Price Transparency (Transparency of prices): All market participants have equal access to the description of the contributions.

Quote (Quote): indicative market price, normally used for informational purposes only.

Rate (Exchange rate): The price of one currency in terms of another, usually used for trading purposes.

Resistance (Resistance Level): A term used in technical analysis indicating a specific price level at which, according to the analysis, people will sell.

Revaluation (Enhancement): Increases in the exchange rate of a currency as a result of central bank intervention. The opposite of devaluation.

Risk (Risk): Exposure to some change, usually used with negative connotation of adverse change.

Risk Management (Risk Management): Use of financial analysis and operating techniques to reduce and / or control exposure to various types of risks.

Roll-Over (Renegotiation): The process by which the settlement of a deal is rolled forward to a later date. The cost of this process is based on the differential in interest rates of both currencies.

Settlement (Settlement): The process by which a transaction is recorded in the books and records of the parties to a transaction. The settlement of foreign exchange transactions may or may not involve the actual exchange of one currency for another.

Short Position (short) investment position that benefits from a decline in market price.

Spot Price (spot price): The current market price. Settlement of spot transactions often take place within two business days.

Spread (Margin): Difference between purchase price and sales.

Sterling (British Pounds): Figure of speech with which he is called to the English pounds.

Stop Loss Order (Order of sale at a certain level of contribution): Order for which an open position is automatically liquidated at the price reach a certain level. It is commonly used to minimize the risk of losses if the market moves against record investor interests. For example, if an investor is long USD at 156.27, you may want to place an order "stop loss" to 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.

Support Levels (Floor): A technique used in technical analysis that establishes a specific minimum and maximum price at which the exchange rate will be fixed automatically. It is the opposite of resistance level.

Swap (Exchange): A currency swap is the simultaneous buying and selling the same amount of a particular currency at a forward exchange rate.

Swissy: slang word to refer to the Swiss Franc.

Technical Analysis (Technical Analysis): The strategy to forecast prices by analyzing economic indicators such as trends and averages of past price, volume, open interest, etc..

Tomorrow Next (Tom / Next) (Morning the next day): Sales and simultaneous buying of one currency for delivery the next day.

Trader (currency trader): The participation of traders in the Forex market is quite similar to the broker with the difference that sometimes there are occasions in which the trader operates foreign currency purchases for personal gain. Traders are professionals who buy and sell currencies for their customers, but also investors and speculators in the forex market.

Transaction Cost (Cost of transaction): The cost of buying or selling a financial instrument.

Transaction Date (Transaction Date): Date operation occurs.

Turnover (Turnover): The total money of all transactions during a specific time period; volume.

Two-Way Price (Purchase price and sales): When quoting the price of buying and selling for a forex transaction.

Uptick: A new price quote that is higher than the preceding quote for the same currency.

Uptick Rule: In the U.S. rule that can not be sold short unless the last trade before the short sale was at a price below the price of which a series of short selling.

U.S. Prime Rate (prime lending rate of the United States): The rate at which banks in the United States providing loans to corporate customers preferred.

Value Date (Settlement Date): Date parts of a financial transaction agree to settle their respective obligations, ie to pay benefits. For spot currency transactions, the settlement date is often within two business days. Also known as maturity date.

Variation Margin (variation margin): Funds that the broker should ask their clients to deposit the corresponding margin. The term usually refers to additional funds must be deposited as a result of adverse price movements.

Volatility (Vol) (Volatility): A statistical measure of price movement of a market over time.

Whipsaw: slang word used to refer to a highly volatile market where a sharp price movement is quickly followed by a sudden movement in the opposite direction.