Account – A record of all transactions
Account Balance – Money in an account
Agent – Someone who acts on behalf of another
Aggregate Demand – The sum of government spending, business expenditures and personal consumption expenditures
All or None – A limit price order for filling the whole order at the stated price or not at all.
Appreciation – Increase in asset value due to the rising of price in response to market demand
Ask Rate – Lowest price a financial instrument is offered for sale
Ask Size – Volume of shares being offered for sale at the ask rate.
Asset – Financial instrument with the possibility of generating future income.
Asset Allocation – Diverse distribution of funds in different markets for risk minimization
Back Office – The department that handles and processes all financial transactions of a Broker
Balance – The available money in an account
Balance of Payments – Record of a nation’s transactions with the world over a specific period of time.
Bar Chart – The most common format to examine the price action of currency pairs. For more information you may refer to the ‘Trading Charts’ Trading Guide.
Base Currency – 1) The currency against which other currencies are quoted 2) The First currency quoted in a pair
Basis – Difference between spot and futures price.
Basis Point – 1) Smallest measure used to quote yields on fixed income products 2) One hundredth of one percentage point (0.01%)
Bear – Trader/Investor who anticipates market prices will fall
Bear Market – A prolonged decline of prices together with investor pessimism
Bid – Price offered for a currency; the price at which a trader is willing to buy
Bid/Ask Spread – The difference between Bid and Ask prices
Big Figure – The first few digits of an exchange rate that rarely show change; usually omitted in everyday dealer quotes
Bonds – Financial Instruments, or tradable assets known as fixed-income securities. Bonds are loan agreements between issuer and investor where issuer is obligated to pay a specified amount at a specified date in the future.
Book – Summary of total market positions
Broker – Intermediary between Buyers and Sellers
Brokerage – A company that offers trading services to the public
Bull – Trader/Investor who anticipates a rise in market prices
Bundesbank – German Central Bank
Cable – Nickname for GBP/USD pair and its exchange rate. It derives from mid-19th century transmission of the exchange rate by transatlantic cable
Candlestick Chart – Chart indicating trading ranges for the day together with the opening and closing price. For more information you may refer to the Trading Charts Trading Guide.
Capital Markets – Medium to Long-term investment markets
Central Bank – The institution responsible for a nation’s fiscal policies
Chartist – Trader who spots trends by studying historical data to predict future market movement
Clearing – Settling a trade
Commission – Transaction fee a client is charged by a Broker
Confirmation – Document between participants that confirms terms of a transaction
Contagion – Spread of Economic Crisis between markets
Contract (Unit/Lot) – Standard unit of trading
Contract for Difference (CFD) – the contract between two parties. The select pays the buyer the difference between the current value of the underlying assets and its value at the moment that the contract is made.
Consumer Price Index (CPI) – an economic indicator which shows changes in the cost of living which is measured by price changes of good and services such as food, clothing and transportation.
Convertible Currency – Currency that can freely be exchanged for other currencies or for gold.
Conversion Rate – The value of one currency exchanged for another.
Cost of Carry – Cost of borrowing money to maintain open positions based on interest parity
Counter Party – The opposite party in a transaction
Country Risk – Risk that country’s government may intervene even further than central bank intervention in the currency market
Credit Checking – Check to ensure both parties are able to cover a trade
Credit Netting – Arrangement which maximizes free credit and expedites the dealing process by reducing the need for constantly re-checking credit
Cross Rate – Exchange Rate between two currencies
Currency – A nation’s official monetary unit
Currency Pair – Represents two currencies in a foreign exchange transaction. For more information read our Trading Guide on how to read a currency pair.
Currency Risk – Risk of loss due to sudden big changes in exchange rates
Day Trading – Opening and Closing of a position in the same session
Dealer – Places the order to buy or sell on behalf of a trader
Deficit – Negative Balance
Delivery – Transference of traded currency possession
Deposit – Borrowing and Lending of cash
Depreciation – Decline of a currency’s value
Derivative – Contract between parties that evaluates underlying assets
Devaluation – Deliberate lowering of a currency’s value
Done – Term used by traders to indicate that a contract has been agreed.
Economic Calendar – Shows indicators, monetary policy decisions and announcements from all over the world which have a high probability of impacting the financial markets. Stay updated for major events by checking out our Economic Calendar.
Economic Exposure – Risk of a company’s cash flow when exposed to foreign exchange variations
Economic Indicator – Statistic that measures growth and stability
End of Day – Evaluation of trading book at the end of each market day
Estimated Annual Income – Expected yearly earnings
Euro – Single currency of the European Monetary Union
European Central Bank (ECB) – Central Bank of European Monetary Union which manages the EURO currency,EU Interest rates and monetary policy.
Exchange Rate Risk – Risk of loss due to unfavourable changes in exchange rates
Execution – Order is placed in the market.
Exposure – The net of all long and short positions for a currency. The exposure of a trader’s positions may result in loss or gain.
Federal Deposit Insurance Corporation (FDIC) – Regulatory body for bank depository insurance administration in the U.S
Federal Reserve (Fed) – U.S Central Bank
Fixed Exchange Rate – Official Exchange Rate set by monetary authorities
Fixed Interest – Interest Rate that remains unchanged for the duration of a deal
Flat – Not being short neither long; no open positions or no positions that contradict each other
Floating Rate Interest – Interest Rate that moves with market rate
Forex (FX)- Buying one currency and selling another in the market; short for Foreign Exchange
Forex Risk – Risk of loss to unfavourable changes in exchange rates
Forex Trader – Someone who invests in trading currencies
Forward – A deal that will begin on a pre-set date in the future
Forward Rate Agreements (FRA’s) – Over the counter contract between parties that determines interest rate or currency exchange rate to be paid or received as obligation at a future date
Front Office – Sales and Finance department of a financial institution
Futures – Method of trading financial instruments and assets for a specific price at a specific date in the future
Fundamental Analysis – Analysis based on political and economic factors.
Fundamental Trader – Trader who trades based on fundamental analysis
GTC – Short for “Good Til Cancelled”; an order to buy or sell at a fixed price that will remain in place until executed or cancelled
Gross Domestic Product (GDP) – Total value of a country’s output, income or expenditure produced within the country.
Hedge – A position or a combination of positions aimed to reduce portfolio volatility risk
High/Low – Highest and Lowest traded price over a time period
IMF – International Monetary Fund which provides international liquidity of a short and medium term and encourages liberalization of exchange rates. The IMF supplies necessary loans to its members to sort out the balance of payment issues.
Inflation – Raised consumer good prices with lowered purchasing power
Initial Margin – The initial deposit required to enter a trade
Interbank Rates – Foreign Exchange rates quoted between banks
Interest Rate Swaps (IRS) – Exchange of two loans that have different payment streams
ISDA – Short for “International Swaps and Derivatives Association”, which sets terms and conditions for derivative trading
No terms beginning with the letter J
Know Your Customer (KYC) – the process of a forex broker to identify and verify the identity of customers.
Latency – The time units (measured in milliseconds) required for a trade order to be sent and executed by the broker’s server.
Leading Indicators – Variables that are considered predictors of future economic activity
Leverage – The ratio of the amount used in a transaction to the required deposit. For more information please read our detailed Trading Guide which explains what Leverage is.
LIBOR – Short for “London Interbank Offer Rate”, the interest rate at which international banks will lend to each other
LIFFE – Short for “London International Financial Futures Exchange”, the three largest UK futures markets
Limit Order – Order to buy at/below or to sell at/above a specified price
Liquid Assets – Assets that can be easily converted to cash
Liquidation – Closing an open position via offsetting transaction execution
Long– 1) Trading jargon for a buying position, 2) Purchasing more of an asset than sold anticipating a rise in value
Lot – The volume of a transaction
Margin – Funds needed for a position to remain open
Margin Call – A request by the broker for the trader to arrange additional funds to guarantee performance on a position that is going against the trader
Mark to Market – Evaluation of a trader’s book at the end of each market day by using closing market and revaluation rates
Market Maker – Dealer who supplies prices and trades at those prices via a trading book
Market Risk – Risk that cannot be eliminated by hedging
Maturity – Date when a debt is due to be paid
MetaTrader 4 –Online trading platform that allows traders to deal with Forex, CFSs and Futures markets. For more information please refer to our MetaTrader 4 page.
Money Markets – Short term investment markets
Monetary Policy – The process by which a monetary authority controls the money supply in the economy.
Net Worth – Total value of all possessions of an individual
News Trading – Trading strategy based on important daily news
Nonfarm Payrolls (NFP) – Monthly report released every first Friday of each month, which presents the change of US employed people, excluding the farming and government sectors.
No Dealing Desk –Direct access to the interbank market with no dealing desk involved in transactions.
Offer – Price at which seller is prepared to sell
Offsetting Transaction – Trade that offsets market risk of an open position
One Cancels Other Order (O.C.O. Order) – An order which when one part is executed the other is automatically cancelled
Open Order – An order to buy or sell when the market moves at a pre-set price
Open Position – A trading deal not yet settled or reversed
Options – Agreement which allows the holder to buy or sell a specific security at a pre-set price during a pre-determined time period
Order – Instruction from trader to broker
Over The Counter (OTC) – Transactions that are not made over an exchange
Overnight – An open position that remains open until the next market day
Pegging – Fixing one country’s exchange rate to that of another
PIP – Smallest move an exchange rate can make. Normally the 4th decimal number
Pivot Points – The point at which the overall trend in price changes.
Political Risk – Changes in government policy that can impact a trader’s positions
Position – Either Buying or Selling
Premium – Points added to spot price to determine futures price
Price Transparency – Equal access to description of quotes for all market participants
Quote – Highest Bid and Lowest Ask price available
Quote Currency – The second currency quoted in a currency pair in forex.
Rally – Price increase after a decline
Rate – Price of one currency when pitted against another
Re-purchase (Repo) – Instrument to be re-purchased at specified date and time
Realized Profit/Loss – Profit or Loss when selling shares
Resistance – Technical Analysis term indicating a specific price level that a currency cannot cross above
Revaluation Rates – Market rates used by traders when evaluating end-of-day profit and loss
Risk – Exposure to undetermined changes
Risk Capital – Money that a trader is willing to lose
Risk Management – Hedging of risk
Rollover – Interest rate variation between two currencies when settlement date is moved to a different date
Settlement – Finalizing a deal/transaction
Short position – Trading jargon for a selling position
Short Selling – Selling an instrument without ownership
Spot – An immediate transaction
Spot Price – Current market price
Spread – Difference between the Bid and Ask prices
Sterling – Another name for the Great Britain Pound
Stop Order – Order to buy or sell when price reaches a pre-agreed level
Stop Limit – Option to set-up a stop price level and a limit price level. The order will not be executed if the price reaches the stop level but will only be executed once the price moves to the limit price level.
Support – Technical Analysis term indicating a specific price at which the currency cannot cross below
Swap – Interest rate differential between two currencies
Take Profit – Option to specify an exact price level at which the order will closed when the price reaches the pre-set level.
Technical Analysis – Analysis of historic market data to spot trends and predict future market movement
Tick – Minimum price move
Ticker – Instrument showing current and recent history of a currency
Tomorrow Next (TOM/NEXT) – Buying and Selling a currency at the same time for delivery the next day
Trading System – A plan or strategy for forex trading
Trading Platform – An online application used for trading Forex e.g. MetaTrader 4
Transaction Cost – Cost of buying or selling an asset or instrument
Transaction Date – Date when a trade occurs
Turnover – Volume traded during a time period
Two Way Price – Both Bid and Ask rates quoted for a Forex trade
Unit – Quantity of a currency. The smallest trade size in forex trading is one unit.
Uptick – New price quote that is higher than the preceding quote
US Prime Rate – The interest rate that US banks will lend money to prime corporate customers
Used Margin – The amount of funds which are kept aside with the aim of keeping transactions open.
UK100 – The name for FTSE 100 index
Value Date – Date that both transaction parties agree to exchange payments
Variation Margin – Additional requirement that a broker will need from a trader because of market volatility
Virtual Balance: The balance of your Demo Account. All funds in a Demo Account are virtual, which means that they cannot be exchanged for real funds.
Volatility – Measure of market price movements over time. High volatility is associated with high degrees of risk
Whipsaw – A condition when the market is highly volatile characterized by a sharp price movement followed immediately by a sharp reversal
XAG/USD – Symbol for Silver
XAU/USD – Symbol for Gold
XBR/USD – Symbol used for Brent Crude Oil
XTIUSD – Symbol used for Crude Oil
Yard – Jargon for Billion
No terms beginning with the letter Z