Forex Glossary
Commonly Used Forex Terms
A, B, C, D-F, G-I, L-P, R-S, T-Z
Forex Terms - A
Aggregate Demand
Total demand for good and services - including the public and private sectors - in the economy.
Aggregate Risk
The bank’s total exposure with a customer with regards to spot and forward contracts.
Aggregate Supply
Total supply of good and services available to meet aggregate demand.
Agio
Difference between the value of two currencies.
Appreciation
The strengthening of a currency in response to market demand.
Arbitrage
Risk free trading that includes a currency being bought and sold simultaneously to take advantage of the difference between markets.
Forex Terms - B
Bank Rate
The rate at which a country’s central bank lends money to its domestic banking system.
Basis
The difference between the cash price and the futures price of a currency.
Basis Trading
Taking one approach in the cash market and the opposite in the futures market to profit from movements in the basis.
Broker
An agent who, for a commission, places buy and sell orders for someone else.
Buying Rate
Rate at which the market buys currency.
Forex Terms - C
Chartist
Someone who studies charts and graphs to predict trend reversals and to identify developing trends.
Consumer Price Index
The measure of the cost of goods and services to the consumers in a given country.
Contract
An agreement to buy or sell currency at a specific rate in a specific time frame.
Country Risk
Political, economic, regulatory, legal and other factors that affect the currency in a particular country.
Credit Risk
The risk that the other party in the trade will not be able to deliver.
Forex Terms - D-F
Day Trading
A currency exchange deal that continues until the stop-loss is reached, the take-profit rate is met or the deal end date; a deal that is renewed daily.
Delivery
The settlement of a trade.
Exposure
The potential for profit or loss based on changes in the market price.
Fast market
With many buyers/sellers, deals happening too quickly in the market to be fully reported.
Fixing
Determining rates based on the balance or buyers to sellers; typically occurs twice daily.
Forex Deal
The purchase or sale of a currency against that of another currency.
Forex Terms - G-I
Going Long
To make an investment because of long term speculation.
Going Short
To sell a currency that you don’t yet have (that you’ll be receiving through a Forex deal).
Gross Domestic Product
The total value of exports from a country in relation to the value of imports.
Hard Currency
Currency that’s value will remain steady or that will increase in value in relation to other currencies.
Hedging
Protecting an asset or liability against changes in the exchange rate (rather than trading to make a profit).
Initial Margin
Deposit required so that a trader can begin making deals.
Forex Terms - L-P
Leading Indicators
Statistics that impact economic growth and business activity.
Limit Order
An order to sell an investment before it falls below a set value.
Margin
Difference between buying and selling rates for a particular currency.
Open Position
Any deal that has not been balanced by a counter deal or a physical payment.
Option
Documentation of the intent to make a deal without an obligation to the deal.
Pip (or Point)
Smallest increment of price change that is recognized; one percent of one percent.
Forex Terms - R-S
Rate
The cost of one currency in relation to another currency.
Resistance Point/Resistance Level
The price at which rates will rebound or experience a major price movement.
Risk Management
Actions taken to reduce the impact of the market or unexpected rate changes.
Settlement
Physical exchange of one currency for another.
Soft Market
Market condition in which prices are likely to fall because there are more sellers than buyers.
Spot Price/Spot Rate
The current trading value of a currency.
Spread
Difference between the bidding price and asking price for a currency.
Stop Loss Order
A tool for limiting the amount that can be lost on a Forex deal.
Forex Terms - T-Z
Technical Analysis
A study of trends, prices and factors that will have an effect on the value of a currency.
Trade Balance
A measure of the gap between the goods a country imports and those that are exported.
Value Date
The day in which buyer and seller will exchange the currencies bought and sold.
Volatility
A measure of the likelihood that a currency will lose or gain value during a set amount of time.
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