Glossary

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 CalendarShows 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

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