Forex Glossary

Category: Forex Market Terms

Category: Forex Market Terms

  • Aggressor →

    A trader dealing on a price that can be obtained in the market. This is in opposition to a trader who is waiting for a price to be quoted that he is willing to buy or sell at.

  • American Option →

    An option that can be exercised at any time up until its expiry

  • Arbitrage →

    A trading technique used by sophisticated investors to take advantage of differences for the same asset between different markets.

  • Ask Price →

    The price at which a trader can purchase a particular financial instrument, such as currency pairs. Also known as the offer.

  • At Best →

    An order to purchase a currency at the best currently available price.

  • At or Better →

    An order to purchase a currency at a specific price, or a better price than the specified price.

  • At-the-Money →

    An option whose exercise or strike price is equal to the current market price of the underlying asset.

  • Auction →

    The sale of an asset to the highest bidder.

  • AUD →

    Short for the Australian Dollar.

  • Average Hourly Earnings →

    A measure of how much workers are being paid.

  • Average Rate Option →

    An option where the exercise price is based on the difference between the average spot market price and the strike price. Also called an Asian Option.

  • Band →

    The price range within which the value of a specified currency is allowed to fluctuate. This does not apply to free floating currencies.

  • Bank Line →

    Credit granted by a bank to a customer.

  • Bank Notes →

    Paper issued by a central or issuing bank which are considered legal tender.

  • Base Currency →

    The first currency stated in a currency pair.

  • Basis Point →

    One percent of one percent.

  • Basis Price →

    The price expressed in annual rate of return.

  • Basis Trading →

    Trading to profit from the increase in the basis.

  • Basket →

    A group of currencies.

  • Bear Market →

    A market in which prices are declining.

  • Bid Price →

    The price a trader can sell a particular financial instrument, such as currency pairs.

  • Bid/Ask Spread →

    The difference between the bid and ask price.

  • Big Figure →

    Often refers to the first two or three digits of a currency's price.

  • Book →

    A summary of a traders total positions.

  • Broker →

    An individual or a firm that executes investment or trade orders for a fee.

  • Building (Housing) Permits →

    The number of newly authorized construction projects.

  • Bull →

    An individual that believes price of a trading instrument will rise.

  • Bull Market →

    A market in which prices are increasing.

  • Buy Limit Order →

    An order to execute a transaction to buy an asset at a specified price or lower.

  • Buy On Margin →

    A process to buy an underlying asset with cash for only a part of the total price.

  • Cable →

    A term referring to GBP/USD.

  • Capacity Utilization Rate →

    A measure of how much of the productive capacity a country is using.

  • Capital Account →

    A component of the Current Account that summarizes the flow of investments and loans in and out of a country.

  • Carry →

    The amount credited or debited from an account for holding a currency pair where the components have different underlying interest rates overnight. The magnitude of the carry charge is determined by the size of the interest rate differential. For example, if a trader is long USDJPY there will be a relatively small carry charge since both currencies have a low interest rate. If a trade is long USDZAR there will be a greater cost of carry since the interest rate of the ZAR is significantly higher than that of the USD.

  • Carry Trade →

    An investment strategy whereby the investor borrows from a low-yielding or low-interest currency, and invest in high-yielding or high-interest currency.

  • Cash →

    Often refers to a transaction settled on the day the transaction is agreed upon.

  • Cash and Carry →

    The buying of an asset today and selling a future contract on the asset.

  • Channel →

    A range where prices seem to be contained within.

  • Chartist →

    A trader who studies price charts to try and find profitable behavior in financial markets. A chartist is a specific type of practitioner of technical analysis.

  • Closed Position →

    A position that no longer exists. A long position would be closed by offsetting with a short position of the same size and a short position would be closed by offsetting with a long positions of the same size.

  • Commission →

    A fee whether fixed or variable that a broker or dealer charges per trade.

  • Compound Option →

    An option on an option usually with a fixed price and expiration date.

  • Confirmation →

    A document exchanged by counterparts to a transaction that states the terms of said transaction.

  • Consolidation →

    The period when prices are less volatile and are moving sideways.

  • Contagion →

    The nature of economic crisis to often spread from one market to another market.

  • Continuation →

    A term used to describe that a trend will extend course.

  • Contract →

    An agreement to buy or sell a fixed unit size.

  • Convertible Currency →

    A currency that can be freely traded for other currencies without central bank permission.

  • Correction →

    A term used to describe price action during a partial reversal of a trend.

  • Counter Currency →

    The second currency in a stated currency pair.

  • Cover →

    To take out a forward foreign exchange contract

  • Credit Risk →

    The risk that a debtor will not pay an obligation.

  • Cross Pair →

    A currency pair that does not include the USD.

  • Cross Rate →

    The exchange rate of currency pairs that do not include the USD.

  • Currency Option →

    A contract that gives either the right or the obligation to buy or sell a currency at a specified price by a specified date

  • Currency Pair →

    The two currencies that comprise a currency pair

  • Currency Risk →

    The risk that changes in the value of a currency may pose

  • Currency Swap →

    Bond which consigns two counter-parties to switch over streams of interest payments in different currencies for an agreed period of time.

  • Current Account →

    A component of Balance of Payments that measures net flow of trade, factor income, and transfer payments.

  • Current Balance →

    The total of all exports minus the total of all imports for a country for a specified period of time

  • Day Order →

    A buy or sell order that if not executed is canceled at the end of the day.

  • Day Trade →

    A trade that is opened and closed in the same day.

  • Day Trader →

    A trader who's style of trading is characterized by opening and closing positions of the same pair within the day.

  • Deal Date →

    The date when a transaction is agreed upon.

  • Dealer →

    An individual who acts as a counterparty to a transaction.

  • Dealing Desk →

    A "desk" where the transactions for buying and selling of securities occur. Also known as a trading desk.

  • Declaration Date →

    The last date when a buyer of an option can notify the seller of that option of his intention to exercise the option.

  • Deficit →

    A negative balance of trade.

  • Delta →

    The ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative.

  • Depreciation →

    A decrease in the value of an asset or currency.

  • Derivative →

    A contract that changes in value in relation to the price movements of an underlying security, future or other physical instrument.

  • Desk →

    Term referring to a group dealing with a specific currency or currencies.

  • Diamond Formations →

    Diamond formations are chart patterns showing a top or bottom and signal a reversal of a trend.

  • Direct quotation →

    Quoting in fixed units of foreign currency against variable amounts of the domestic currency.

  • Discount →

    When an asset is listed at a price that is less than the spot price.

  • Discretionary Account →

    An account in which the customer allows a trading institution to act on the customer's behalf in buying and selling currency exchange pairs.

  • Divergence →

    A situation where the trend of an indicator fails to confirm the trend of the price movement.

  • Doji →

    A candlestick which represents a relatively large price range between the high and low, but very narrow range between open and closing price.

  • Effective Exchange Rate →

    An attempt to summarize the effects on a country's trade balance of its currency's changes against other currencies.

  • Either Way Market →

    In the Euro Interbank deposit market where both bid and offer rates for a particular period are the same.

  • Epsilon →

    The change in the price of an option associated with a 1% change in implied volatility (technically the first derivative of the option price with respect to volatility).

  • Equilibrium →

    A price region, which suggests a balance between demand and supply for a currency pair in the marketplace.

  • Exchange Rate Risk →

    The potential loss that could be incurred from an adverse movement in exchange rates.

  • Execution →

    The Process of finishing an order or deal.

  • Exercise Price (Strike Price) →

    The price at which an option can be exercised.

  • Exotic →

    A less broadly traded currency.

  • Expiration Date →

    The last date after which the option can no longer be exercised.

  • Exposure →

    The potential for running a profit or loss from fluctuations in market prices.

  • Fast Market →

    A market with dramatic price movements in a short period of time caused by a lot of interest from sellers or buyers.

  • Federal Reserve Discount Rate →

    The rate the federal reserve bank charges to borrow its money.

  • Fill Price →

    The price at which a buy or sell order was executed.

Forex Trading Terms (Alphabetical)

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