Below are some examples of the terminology that might be used when looking at the currency markets and dealing with foreign currency brokers.
|Bid||The rate at which a dealer is willing to buy the base currency|
|Broker||A broker is a middleman acting between a client and a market maker. A broker will charge a commission for their services|
|Convertible Currency||Currency which can be freely exchanged for other currencies or gold without special authorisation from the appropriate central bank.|
|Exchange Rate Depreciation||Currency which loses in value against one or more currencies|
|Exchange Rate Risk||The potential loss that could be incurred from an adverse movement in exchange rates|
|Fixed Exchange Rate||Official rate of exchange set by monetary authorities for one or more currencies. In practice, some fixed exchange rates are allowed to fluctuate between defined upper and lower bands|
|Floating Exchange Rate||When the value of a currency is decided by supply and demand|
|FOREX/FX||An abbreviation of Foreign Exchange|
|Forward Points||The Interest Rate Differential between two currencies expresses in exchange rate points. The forward points are added or subtracted from the spot rate to give the forward or outright rate|
|Forward Rates||The rate at which a foreign exchange contract is struck today for settlement at a specified future date|
|Forward Contract||Contract struck at the forward rate as specified above.|
|Hedging||A hedging transaction is one which protects an asset or liability against a fluctuation in the foreign exchange rate.|
|Initial Margin||The deposit required from a client when they transact a forward order|
|Interbank Rates||The FX rates large international banks quote other large international banks. The difference between the buy rate and the sell rate, the spread can be around 0.07%. Normally the public and other businesses do not have access to these rates.|
|Interest Rate Risk||The potential for losses arising from changes in interest rate|
|Limit Order||An order given which has restrictions upon execution. The client specifies a price and the order can be executed at the prevailing market price only if the market reached the specified price|
|Margin||Cash deposit provided by clients as collateral to cover losses (if any) that may result from the client’s foreign exchange trades|
|Margin Call||A demand for additional funds to cover positions|
|Maturity||Date for settlement|
|Offer||The rate at which a dealer is willing to sell the base currency|
|Open Position||Any deal which has not been settles by a physical payment or reversed by an equal and opposite deal for the same value date|
| Outright Forward
||Foreign Exchange transaction involving either the purchase or the sale of a currency for settlement at a future date|
|Outright Rate||The forward rate of a foreign exchange deal based on the spot price plus or minus the forward adjustment which represents the difference in interest rates between the two currencies|
|Resistance||A price level at which you would expect selling to take place|
|Rollover||Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies (e.g. next day)|
|Settlement||Actual physical exchange of one currency for another between principal and client|
|Spot contract||Spot means the settlement date of a deal which is two business days forward|
|Spread||The difference between bid and offer prices|
|Stop Loss Order||An order to buy or sell when a particular price is reached either above or below the price that prevailed when the order was given|
|Support Levels||A price level at which you would expect buying to take place|
| Technical Analysis
||Analysis based on market action through chart study, moving averages, volume, open interest, formations and other technical indicators|
|Value Date||Settlement date of a spot or forward deal|
|Volatility||A measure of price fluctuations|
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