Appreciation – Currency value increases due to demand in the Foreign exchange market.
Arbitrage – Exploiting price differences between markets.
Around – Forward price close to spot rate.
Ask Rate – Selling price of a currency, also known as the offer price.
Asset Allocation – Dividing assets to manage risk.
Back Office – Handles trade settlement processes.
Balance of Trade – Exports minus imports.
Base Currency – The primary currency in a pair. In foreign exchange markets, the US Dollar is typically the base currency for quotes, except for the British Pound, Euro, and Australian Dollar.
Bear Market – Market with declining prices.
Bid/Ask Spread – Difference between buying and selling prices.
Bid Rate – Buying price for a currency.
Big Figure – First digits of an exchange rate, often omitted in quotes.
Book – Summary of trading positions.
Bretton Woods Agreement – Fixed FX system, 1944–1971.
Broker – Middleman for trades, facilitating transactions for a fee.
Bull Market – Market with rising prices.
Bundesbank – Germany’s central bank.
Cable – GBP/USD exchange rate, named for the transatlantic cable.
Candlestick Chart – Chart showing open, high, low, close prices.
Central Bank – Institution managing monetary policy.
Chartist – Trader using technical charts for predictions.
Choice Market – No spread; one trading price.
Clearing – Settling a trade.
Collateral – Asset pledged as loan security.
Commission – Broker fee for trade execution.
Confirmation – Agreement of trade terms.
Contagion – Spread of financial instability across markets.
Contract – Standard trading unit.
Counterparty – Participant in a transaction.
Country Risk – Risk tied to cross-border trades.
Cross Rate – FX rate between non-local currencies.
Currency – Legal tender issued by authority.
Currency Risk – Risk of exchange rate impact.
Day Trading – Buying and selling within a day.
Dealer – Takes one side of a trade for profit.
Deficit – Spending exceeds income or exports.
Delivery – Physical currency exchange.
Depreciation – Currency value decline.
Derivative – Contract tied to another asset’s value.
Devaluation – Official reduction in currency value.
Economic Indicator – Data reflecting economic health.
End Of Day Order (EOD) – Order valid until day-end.
EURO – Currency of the Eurozone.
European Central Bank (ECB) – Governs Euro monetary policy.
European Monetary Union (EMU) – Unified monetary EU system.
Federal Deposit Insurance Corporation (FDIC) – Insures US bank deposits.
Federal Reserve (Fed) – US central banking system.
Flat/Square – No open trading position.
Foreign Exchange (Forex) – Global currency market.
Forward – FX agreement for future settlement.
Forward Points – Adjust spot rate for forward value.
Fundamental Analysis – Studying factors behind price movements.
Futures Contract – Standardized future trading agreement.
Good ‘Til Cancelled Order (GTC) – Stays active until filled or canceled.
Hedge – Strategy to reduce exposure or risk.
Inflation – Decline in money’s purchasing power.
Initial Margin – First deposit in a trading position.
Interbank Rates – Rates quoted between banks.
Leading Indicators – Forecast future economic activity.
LIBOR – Benchmark interbank lending rate.
Limit Order – Price-restricted trade instruction.
Liquidation – Closing a trade position.
Liquidity – Ease of market transaction.
Long Position – Buying with expectation of price rise.
Margin – The amount of equity or collateral traders must deposit to enter or maintain a position. Helps ensure sufficient funds to cover potential losses.
Margin Call – Demand for additional funds to meet margin requirements.
Marked-to-Market – Valuing open positions using current market prices.
Market Maker – Entity quoting buy and sell prices to provide liquidity.
Market Risk – Potential losses from market price changes.
Maturity – End date of a financial bulldog.
Offer – Also known as the ask price—what a seller is willing to accept.
Offsetting Transaction – Trade that reduces or eliminates exposure.
One Cancels the Other (OCO) – Order setup where one execution cancels another.
Open Order – Active order waiting to be executed or canceled.
Open Position – Trade not yet settled, representing market exposure.
Overnight – Positions held past market close, may incur rollover interest.
Over-the-Counter (OTC) – Private trade outside a formal exchange.
Pips – Smallest unit of price movement in currency pairs, typically 0.0001.
Political Risk – Impact of political decisions on investments.
Position – Net holdings in a currency, long or short.
Premium – Amount by which a forward price exceeds the spot price.
Price Transparency – Equal access to market pricing for all participants.
Quote – Indicative pricing for a financial instrument.
Rate – Exchange rate between two currencies.
Resistance – Technical level where selling may overcome buying.
Revaluation – Upward change in currency value by central bank.
Risk – Exposure to potential losses or uncertainty.
Settlement – Completion of a trade with exchange of funds and assets.
Short Position – Profits from market decline by selling high, buying low.
Spot Price – Current market price for immediate transaction.
Spread – Difference between bid and ask prices.
Sterling – Nickname for the British Pound (GBP).
Stop Loss Order – Automatic sell order to cap potential losses.
Support Levels – Price levels where buying may prevent decline.
Swap – Agreement to exchange financial instruments or cash flows.
Technical Analysis – Study of historical price patterns to forecast movements.
Tomorrow Next (Tom/Next) – Rolling a trade to the next day without delivery.
Transaction Cost – Expenses associated with executing a trade.
Transaction Date – Date a trade agreement is made.
Turnover – Total traded volume over a set period.
Two-Way Price – Quote including both bid and offer prices.
Uptick – Trade executed at a higher price than the previous one.
Uptick Rule – Restricts short selling unless price has moved up.
US Prime Rate – Benchmark lending rate for top US corporate borrowers.
Value Date – Agreed-upon date for trade settlement.
Variation Margin – Additional capital to cover unrealized losses.
Volatility – Measure of price fluctuation over time.
Whipsaw – Sharp market movements followed by quick reversals.
Yard – Slang for one billion, used in trading contexts.
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