Forex Glossary

A

ABC Bear (bassist) – A person who believes that markets will continue a downward trend.

Agent – Someone who acts as principal or counterparty to a transaction, the order placed to buy or sell.

Adjustment to Market (or End of Day) – Traders account for their positions in two ways: accrual or adjustment to the market. A system based on accrual accounts only when cash flows occur, therefore, only show a gain or loss when it is done. The method of setting the market assesses the record of the operator at the end of each working day using the closing market rates or rates of revalued. All gains or losses are recorded and the operator will start the next day with a net position.

Fundamental analysis – Comprehensive analysis of political and economic data to determine future movements in financial markets.

Technical Analysis – An effort to forecast future market activity by analyzing data from them, such as charts, price trends and volume.

Findings – It is said that a currency will appreciate when the price increases in response to market demand, an increase in the value of an asset.

Arbitration – Benefiting from compensatory prices in different markets through the purchase or sale of an instrument and simultaneous taking of an equal or opposite position in a related market to profit from small price differences.

Asset Allocation – Investment practice that distributes funds among different markets (currencies, equities, bonds, commodities, real estate) to achieve diversification for the purpose of risk management and / or to obtain an expected return consistent with the point of Given the investor or investment manager.

B

Back-Office – The departments and processes related to the settlement of financial transactions (ie written confirmation and settlement of transactions, record keeping).

Balance of Payments – A record of the claims of a nation in transactions with the rest of the world during a given period of time. They include flows of goods, services and capital.

Basis – The difference between the cash price (spot) price and the future.
Bear Market (bear market) – A market where prices of securities down sharply and the prevailing atmosphere of pessimism (opposite of bull market).

Bid (Bid) – The price that a buyer is willing to pay for a title worth the price being offered for a currency.

Bid / Ask Spread (margin between the buying and selling) – See spread (margin).

Bonds – Bonds are tradable instruments (debt securities) issued by a borrower to raise capital. They pay a fixed or floating interest, known as coupon. As interest rates fall, bond prices rise and vice versa.

Broker (Broker) – An agent who handles investors’ orders to buy and sell currencies. For this service, it charges a commission, which the broker and the amount of the transaction, may or may not be negotiable.

Bull (bullish) – A person who considers that a securities market or continue an upward trend.

Bull market (bull market) – A market characterized by rising prices.

C

Cable – colloquial term used by brokers for the spot exchange rate of the dollar and the pound sterling.

Call Rate (Rate “Call”) – the interbank interest rate from one day to another.

Cambio (Exchange) – The purchase of one currency and simultaneously selling in one market over another. The most important changes are quoted against the U.S. Dollar.

Cash Market (Cash Market) – Market in which securities are delivered and paid at the time of the transaction.

Close a Position (Position Balancing a) – Delete an investment portfolio by buying back a short position or selling a long position.

Coverage – A position or combination of investment positions that reduces the volatility of the value of its portfolio. You can take an offsetting position in a related securities. The instruments used are varied and include operations analysis, futures, options and combinations of them all.

Commission – Fees in respect of the broker fee for a transaction.

Compensation – The process of finalizing a transaction.

Confirmation – A document exchanged by the parties to a transaction that confirms the terms of the transaction.

Spot (Spot) – A transaction that occurs immediately, but the funds usually change hands within two days after having performed the operation.

Contract (Unit or Lot) – The standard unit operations in some pockets.

Broker (Broker) – A person or company acting as an intermediary, bringing together buyers and sellers, usually in exchange for a fee or commission. Conversely, an operator “ commits capital and takes one side of a position, hoping to earn a spread (profit) by closing the position in a subsequent transaction with another party.

Cost of Funding – The cost associated with making a loan of money to maintain a position. It is based on interest parity, which determines the price at term.

Negotiating costs – The costs associated with buying or selling a financial instrument.

Maximum Cotización / Low – Usually the highest traded price and the negotiated price for the underlying instrument during the current day operations.

Quote – An indicative market price; shows the purchase price and the highest or the lowest price available for a title worth at a given time.

Counter party (partner) – The customer or bank with the establishment of a currency. The term is also used in exchanges on interest rates and foreign exchange refers to a participant in an exchange ( “exchange swap).

Account – Records all transactions.

Cross Rate (Rate crossover) – The foreign exchange market in a given country, a number of units of foreign currency equivalent to one unit of another currency. The quotation expresses a crusade against another, ie in terms of one another, from the ratio of both the U.S. Dollar used as a reference.

Currency Option (Option on coins) – Contract of options granted the right to buy or sell a certain amount of foreign currency at a specific exchange rate for a set period.

Currency Risk (risk exchange) – The risk of incurring losses due to an adverse change in foreign exchange rates.

Currency Swap (Currency Exchange) – Contract by which two counterparties agree to exchange interest payments in foreign currencies by a different deadline and exchange foreign currency amounts to a kind of exchange rate agreed in advance, at maturity.

Currency Swaption (Swaption currency) – Option in the secondary market (OTC) to participate in a foreign currency exchange contract.

Currency Warrant (Warrant currency) – Option in the secondary market (OTC) currency option in the long term (over one year).

D

Day Trading (settlement day) – We buy a title and then sell it on the same day.

Deficit – A balance of trade (or payments) negative, the costs outweigh the revenue / profit.

Deposition – The taking and lending cash. The rate at which it takes / gives a loan is known as the deposit interest rate (or depo rate). Certificates of Deposit (CDs) are instruments which can be operated.

Depreciation – A decrease in the value of a currency due to market forces.

Derivatives – Operations designed or derived from other securities (share, bond, currency or commodity). Derivatives can be traded on the stock market or outside it (known as counter market or OTC). Among the derivatives include, for example: Options and Operations Pass Interest Rates, Interest Rate Agreements to End, Cap, options and floor passes.

Discovered – Go on `discovered ‘is that it has sold an instrument without actually having and maintaining a short position with expectations that the price decline so you can return to buy in the future a profit.

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

Dollar Rate (Rate in U.S. $) – When a variable amount of foreign currency is traded against the U.S. Dollar, regardless of where it is located or in which the broker seeks currency trading. The exception is the spot exchange rate of the dollar and the pound sterling (cable) which is listed as a variable amount of U.S. dollar against sterling.

E

EMS (European Monetary System (EMS)) – Abbreviation for European Monetary System, an agreement among member nations of the European Union to ensure greater stability in the exchange rate of their currencies.

Euro – the currency of the European Monetary Union (EMU – European Monetary Union) which replaced the European Monetary Unit (ECU – European Currency Unit).

Exchange Rate Risk (Currency Risk) – See currency risk (Currency Risk).

F

Negotiating date – The date on which the transaction occurs.

Effective Date – The date on which both parties to a transaction agree to exchange payments.

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

End of Day (or with the market) – Traders account for their positions in two ways: accrual or adjustment to the market. A system based on accrual accounts only when cash flows occur, therefore, only show a gain or loss when it is done. The method of setting the market assesses the record of the operator at the end of each working day using the closing market rates or rates of revalued. All gains or losses are recorded and the operator will start the next day with a net position.

Fixed Exchange Rate (fixed rate) – Exchange rate fixed by the official responsible for setting monetary policy for one or more countries. In practice, even fixed exchange rates can fluctuate between high and low bands, which can lead to intervention.

Flat / Square (upright) – Position of equilibrium. In foreign exchange transactions, a term that indicates that purchase of an operator are offset by their sales.

Floating Interest Rate (Floating Rate of Interest) – Unlike a fixed rate, such interest rate will fluctuate according to market rates or rates of reference. An example of a floating interest rate is a standard mortgage.

Foreign Exchange Swap (Currency Exchange) – Operation involving the exchange of one currency for another (principal amount only) on a specific date at a rate agreed to the date when the contract ends ( “short leg” side uncovered) in a future date at a rate agreed at the time of the contract ( “long leg” part of the differential option that indicates a commitment to buy the underlying security).

Foreign Exchange (or Forex or FX) (Foreign Exchange) – The simultaneous buying of one currency and selling another in a secondary market. Most currencies are traded against the U.S. Dollar.

Forward (contract term) – A contract that will begin at a specified future date. Foreign exchange term is usually expressed as a margin above (premium) or below (discount) the spot rate. To obtain the real future of the foreign exchange rate, coupled with the rate of the margin. The rate will reflect what should be the foreign exchange rate at a future date, so that if funds were re-exchanged at that rate there would be no gain or loss (ie a neutral). The rate is calculated on the relevant deposit rates in the 2 underlying currencies and the foreign exchange rate in cash. Unlike the futures market, forward transactions can be tailored to the needs of both parties and have greater flexibility. Furthermore there is no centralized exchange.

Front-Office – The front office usually comprises the activities of campus operations and activities of other major operation.

Fundamental Analysis (fundamental analysis) – Comprehensive analysis of political and economic information to determine future trends in the financial market.

Futures – A way to deal with financial instruments, currencies or commodities for a specific price at a specified future date. Unlike options, futures give the obligation (not the option) to buy or sell instruments at a later date. Can be used both to protect and to speculate against the future value of the underlying product.

G

GHI GTC (Order valid until canceled) – valid until canceled ( “Good Till Canceled). Order given to a broker to buy or sell at a fixed price. The order will remain in force until the customer cancels.

H

Hedging Strategy (cover) – The practice of making an investment to protect against losses in another. For example, selling uncovered prior to cancel a purchase, or buying long to offset a sale on the open. While hedging strategies reduce the potential losses may also reduce the potential yield.

High / Low (Cotización maximum / minimum) – In general, the highest price reached a title value and lowest price reached for the underlying instrument on the day of operations in progress.

I

Economic Indicator – A statistic that indicates the current growth and stability of the economy, issued by the government or a nongovernmental entity (ie Gross Domestic Product (GDP), employment rates, trade deficits, Industrial Production and Business Inventories ).

Inflation – An economic condition in which there is an increase in the price of consumer goods, thereby reducing purchasing power.

Initial Margin (Initial Margin Guarantee) – Minimum percentage of the value of a margin to an investor must deposit as a guarantee of future performance.

Interbank Rates (Interbank Rate) – The foreign exchange rates that large international banks traded to other major international banks.

Fixed Interest – This type of transaction pays an agreed interest rate that remains constant during the period of negotiation. Interest is often fixed in the bonds, as well as fixed rate mortgages.

Floating interest rate – Opposed to the fixed rate, the interest rate on this type of operation will fluctuate with market rates or rates of reference. An example of a floating interest rate is a standard mortgage.

L

Pounds – Term that refers to British Pounds.

Limit Order (limit order) – Order to buy at a specified price or below it or to sell at a certain price or above it.

Long Position (long position) – A market position where the customer buys a currency that was not previously. It is usually expressed in terms of base rate, eg long U.S. dollars (DEM short).

Liquidation – The closing of an open position through the execution of an offsetting transaction.

M

Margin (Margin) – Customers must deposit funds as collateral to cover any potential loss due to adverse movements in prices.

Margin Call (outside of warranty coverage) – Request for additional funds. Request a compensation chamber (or a broker-dealer) for the client to deposit more cash in your account in order to maintain the specified minimum margin to cover adverse movements in market price.

Market Maker ( “Market) – An agent that supplies prices and is willing to buy or sell at specified prices for buying and selling. A market maker runs a book operations.

Maturity (Maturity) – Settlement date.

Initial Margin – The initial deposit of collateral required to enter a position as a guarantee of future performance.

Bull market – A market distinguished by a prolonged period of rising prices. (Opposite the bear market).

Bear market – a market that is characterized by a prolonged period of declining prices accompanied by widespread pessimism.

Capital Markets – Markets for investment in the medium or long term (usually more than 1 year). These instruments are more international than the ‘money market’ (ie Government Bonds and Eurobonds).

Money Markets – Refers to short-term investments (ie: less than one year) and in which the participants include banks and other financial institutions. Examples include Deposits, Certificates of Deposit, Repurchase Agreements, Transactions Pass Rates at End of Day and commercial paper. Short-term investments are safe and highly liquid.

Money Markets – Refers to short-term investments (ie: less than one year) and in which the participants include banks and other financial institutions. Examples include Deposits, Certificates of Deposit, Repurchase Agreements, Transactions Pass Rates at End of Day and commercial paper. Short-term investments are safe and highly liquid.

Efficient Market – A market in which the current price reflects all available information about past prices and volumes.

Base Currency – The currency in which the investor or issuer maintains its book of accounts, the currency against which other currencies are quoted. In the currency market, usually considered to be U.S. Dollar currency `base ‘for quotes, meaning that quotes are expressed as a unit of $ 1 USD (U.S. Dollar) for the other currency quoted in the pair.

Convertible currency – A currency that can be changed freely by the other currencies market exchange rates, or gold.

Or

Offer (Price bid) – The price, or rate at which a seller is willing to sell.

Options – A contract that allows the holder to have the option to buy / sell specific securities at a certain price within a certain period of time. There are two types of options – option to buy (call) and put option (put). One option is the right to buy while a put option is the right to sell. You can launch or purchase options to buy and sell.

Open Position (Position Open) – Any operation that has not been canceled by surrender or reversed by an equal and opposite for the same value and same date.

Operation Day – Opening and closing the same position or positions within the same session of operations.

Go Operations (Swaps) – A move operation is performed when one currency is exchanged for another on a temporary basis, the currency is maintained and subsequently changed after a period of time. To calculate the operation of pass, take the differential in interest rates between the two underlying currencies, thus can be used for speculative purposes to exploit anticipated movement in interest rates.

Order – An order is an instruction given by a client to a broker for it to perform operations. You can place an order at a specified price or market price. It may also be valid until it is executed or until the closing hours of operation.

Open order – An order to buy or sell when the market moves to its designated price.

Alternative Order (OCO Order) – An order is subject to a condition in which the execution of a part of the order automatically cancels the other.

Best to order (market order) – An order to buy / sell at the best price available when the order reaches the market.

Order with price-cap (Stop Order) – An order to buy / sell at an agreed price. One could also have a fixed ceiling priced order earlier, by which a position is liquidated automatically open when a specified price reaches or exceeds it.

Limit order – An order to buy at a specified price or below it or to sell at a specified price or above it.

Over The Counter (OTC) (Secondary Market / over) – Used to describe any transaction that is not done through a stock exchange.

Overnight Trading (Operations “overnight”) – Refers to the purchase or sale between 9 pm and 8 am the next day.

P

Pip (or Points) (Pip (or Points)) – This term is used in currency market to show the smallest increment that can make a rate. Very often one basis point.

Position – A position is an operational point of view expressed by buying or selling. You can refer to a sum of money owned or owed by an investor.

Short Position – An investment position resulting from a short sale (selling overdrawn). It benefits from a decline in market price because the position has not yet been covered.

Long position – A position to buy much of a tool that is sold, hence an increase in value if market prices increase.

Buying and selling – the exchange rate both buyer and seller exchange rate quoted for a transaction of exchange.

Spot Price – The current market price. Settlement of cash transactions are often carried out within two business days.

R

Reset Margin – A request by a broker or agent, additional funds or other collateral to raise the required margin at a level so as to ensure compliance in a position that has moved against the customer.

Resistance (Resistance Level) – The price level is expected to be held for sale.

Foreign Exchange Risk – The risk of incurring losses resulting from an adverse change in exchange rates.

Risk Capital (venture capital) – The amount of money that an individual can afford to invest, which, if lost would not affect their lifestyle.

Market Risk – Risk associated with the general market and can not diversify by coverage or possession of a variety of securities.

Rollover (Renegotiation) – When the settlement of the transaction is extended to another date based on the differential in interest rates of the two currencies.

S

Settlement (Settlement) – a real exchange of currency for another.

Short (discovered) – Usually the term refers to the early sale of a title that has not yet. A short position is created when a trader sells more assets it has, in anticipation of a price decline with the idea back to a lower value.

Spot (Cash) – A transaction that occurs immediately, but funds are usually delivered within two days of the closing of the transaction.

Spread (Net) – The difference between the selling price and buying is used to measure market liquidity. Usually narrower margins represent a higher level of liquidity.

Stop Loss Order (Order of sale on a certain level of trading / order with price-cap) – Order to buy or sell when it reaches a specified price, either above or below the price prevailing at the time when the order was placed. An order to buy / sell at an agreed price. One could also have a fixed ceiling priced order earlier, by which a position is liquidated automatically open when a specified price reaches or exceeds it.

Support Levels (Levels of Support / floor) – A term used in technical analysis indicating a specific price level at which a currency can not continue to fall. The recurring inability of the price move below that point produces a pattern that can often graphic by a straight line.

T

To reassess rates – rates to reassess the market rates are used when an operator performs an end of the day (market adjustment) for gains and losses of the day.

Selling rate – The lowest price at which a financial instrument is offered for sale (as a spread on the buy / sell)..

Interbank rates – The rates at which large international banks contribute to other major international banks.

Exchange Rate – The price of one currency in terms of another.

Cross Exchange Rate – An exchange rate between two currencies. It is said that the exchange rate is not standard across the country where the currency pair traded. For example, in the United States a trading GBP / CHF would be considered a cross rate, whereas in the United Kingdom or Switzerland would be one of the primary currency pairs in which it operates.

Fixed Exchange Rate – An official exchange rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates fluctuate between defined upper and lower bands, leading to intervention.

Next to tomorrow (the day after tomorrow) – simultaneous purchase and sale of a currency for delivery the next day and selling for the next day or vice versa.

Transaction of the Day (Day Trading) – We buy a title and then sell it on the same day.

Price Transparency – All market participants have equal access to the description of the contributions.

Transaction Compensation – An operation that serves to cancel or offset some or all of the market risk of an open position.

TUV Technical Analysis (Technical Analysis) – The strategy of predicting future market trends by analyzing economic indicators, such as charts, price trends and volume.

Two-Way Price (Purchase price and sales) – When the price quoted for buying and selling.

U

Uptick – A new price quote that is higher than the previous price for the same coin.

U.S. Prime Rate (preferential rate of interest of the United States) – The rate at which banks in the U.S. grant loans to their preferred corporate customers.

V

Value Date (Effective Date) – Settlement date of a spot or term.

Maturity – The date at which a debt becomes due for payment.

Volatility (Volatility) – A statistical measure of the movement of the market or the price of a title over time and is calculated using a standard deviation. A high level of volatility implies a higher degree of risk.

Volume – The amount or value of securities traded during a given period.

Traded volume – The volume traded, or level of operations in a given period, usually daily or yearly.