- Arbitrage
A risk-free type of trading where the same instrument is bought and sold simultaneously in two different markets in order to cash in on the difference in these markets.
- Ask
The price at which the currency or instrument is offered.
- At Best
An instruction given to a dealer to buy or sell at the best rate that is currently available in the market.
- At the Price Stop-Loss Order
A stop-loss order that must be executed at the requested level regardless of market conditions.

- Bar Chart
A charting method which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line to the right of the bar.
- Base Currency
The currency in which the operating results of the bank or institution are reported.
- Base Price
One hundredth of a percentage point. 50 basis points [50bp] is half a percentage point.
- Bid-Offer Spread
The difference between the buy (bid) and sell (offer) price of a currency or financial instrument.
- Break-Even Point
The price of a financial instrument at which the option buyer recovers the premium.
- Bretton Woods
The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
- Broker
An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account.

- Cable/Sterling
A term used in the foreign exchange market for the US Dollar/British Pound rate.
- Candlestick Chart
A type of chart which consist of four major prices: high, low, open, close. The body (jittai) of the candlestick bar is formed by the opening and closing prices. To indicate that the opening was lower than the closing, the body of the bar is left blank. If the currency closes below its opening , the body is filled. The rest of the range is marked by two "shadows": the upper shadow (uwakage) and the lower shadow (shitakage).
- Carrying interest
The interest cost of financing securities or other financial instruments held.
- Central Bank
A central bank provides financial and banking services for a country's government and commercial banks. It implements the government's monetary policy, as well, by changing interest rates.
- Central Rate
Exchange rates against the ECU adopted for each currency within the EMS. Currencies have limited movement from the central rate according to the relevant band. Chartist
An individual who studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.
- Closed position
A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.
- Cross-Rate
The exchange rate between two currencies.
- Currency
The type of money that a country uses. It can be traded for other currencies on the foreign exchange market, so each currency has a value relative to another.

- Deal Slip
The method of recording the basic information relating to a transaction.
- Dealer
An individual or firm acting as a principal, rather than as an agent,
in the purchase and/or sale of securities. Dealers trade for their own account and risk.
- Dealing Systems
On-line computers which link the contributing banks around the world on a one-on-one basis.
- Delivery Date
The date of maturity of the contract, when the exchange of the currencies is made. This date is more commonly known as the value date in the FX or Money markets.
- Devaluation
Deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.
- Direct Quotation
Quoting in fixed units of foreign currency against variable amounts of the domestic currency.
- Discount Rate
The interest rate at which eligible depository institutions may borrow funds directly from the Federal Reserve Banks. This rate is controlled by the Federal Reserve and is not subject to trading.
- Durable Goods Order
An economic indicator which measures the changes in sales of products with a life span in excess of three years.

- Elliot Wave Principle
A system of empirically derived rules for interpreting action in the markets. It refers to a five-wave/three-wave pattern which forms one complete bull market /bear market cycle of eight waves.
- Exposure
The total amount of money loaned to a borrower or country. Banks set rules to prevent overexposure to any single borrower. In trading operations, it is the potential for running a profit or loss from fluctuations in market prices.

- Factory Orders
An economic indicator which refers to the total orders of durable and nondurable goods. The nondurable goods orders consist of food , clothing , light industrial products and products designed for the maintenance of the durable goods.
- Fedwire
An automated communications and settlement system linking the Federal Reserve banks with other banks and with depository institutions.
- Fill or Kill
An order which must be entered for trading, normally in a pit three times, if not filled is immediately cancelled.
- Foreign Exchange Centers
London is the largest centre of foreign exchange trading. New York, Tokyo, Singapore, Zurich and Hong Kong are also important.
- Foreign Exchange Market
Market where currencies are traded internationally. About a trillion (million million) dollars-worth of foreign exchange is traded globally every day, making forex larger than all bond markets put together. Currency markets exist in the form of spot, forward, futures and options markets. Foreign exchange transactions are made up of: Trade flows Only 5% to 10% of total forex transactions. Imports usually need to be paid for in the currency of the country from which they originate. Exports are usually paid for in one's own currency. A trade deficit therefore causes a currency to depreciate. Flow-ons Created when a large trade is split up into several smaller trades. Capital flows Cross-border investment. Speculation Short-term investment based on expected currency movements. This accounts for the lion's share of forex market volume.
- Forward Outright
Foreign exchange deal which matures on any day past the spot delivery date.
- Forward Rate
Forward rates are quoted in terms of forward points , which represents the difference between the forward and spot rates. In order to obtain the forward rate from the actual exchange rate the forward points are either added or subtracted from the exchange rate. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefore the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate.
- Forward Spread (forward points or forward pips)
Forward price used to adjust a spot price to calculate a forward price. It is based on the current spot exchange rate, interest rate differential and the number of days to delivery.
- Futures
Exchange-traded contracts. They are firm agreements to deliver (or take delivery of) a standardized amount of something on a certain date at a predetermined price. Futures exist in currencies, money market deposits, bonds, shares and commodities. The Chicago Board of Trade's Treasury bond future is the world's most actively-traded derivative contract. The Chicago Mercantile Exchange's Eurodollar contract has the world's largest open interest.

- G7
The seven leading industrial countries: The United States, Germany, Japan, France, United Kingdom, Canada, and Italy.
- Gap
The price Gap between consecutive trading ranges ( i.e. the low of the current range is higher than the high of the previous range)
- Gold Standard
The original system for supporting the value of currency issued. The way that where the price of gold is fixed against the currency it means that the increased supply of gold does not lower the price of gold but causes prices to increase.
- Good Until Cancelled
An instruction to a broker that unlike normal practice the order does not expire at the end of the trading day, although normally terminates at the end of the trading month.
- Gross Settlement
A process where full payment of each transaction is made rather than clearing a group of transactions as currently occurs in the FX market. A method designed to eliminate capital risk.
- Gross Domestic Product
Total value of a country's output, income or expenditure produced within the country's physical borders.

- Hard Currency
A currency whose value is expected to remain stable or increase in terms of other currencies.
- Head and Shoulders
A pattern in price trends which chartist consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder, profit taking has caused the price to drop or level. The price then rises steeply again to the head before more profit taking causes the the price to drop to around the same level as the shoulder. A further modest rise or level will indicate a that a further major fall is imminent. The breach of the neckline is the indication to sell.
- Hedging
A strategy used to offset market risk, whereby one position protects another.

- IMF
International Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates. The IMF supports countries with balance of payments problems with the provision of loans.
- IMM
International Monetary Market part of the Chicago Mercantile Exchange that lists a number of currency and financial futures.
- Implied Rates
The interest rate determined by calculating the difference between spot and forward rates.
- Inconvertible Currency
Currency which cannot be exchanged for other currencies, either because this is forbidden by the foreign exchange regulations.
- Index Linking
The process of linking wages, social benefits payments, prices, interest rates or loan values to an economic index, usually of prices.
- Indicative Quote
A market-maker's price which is not firm.
- Industrial Production Index
A coincident indicator measuring physical output of manufacturing, mining and utilities.
- Inflation
Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.
- Initial Margin
The margin is a returnable deposit required to be lodged by buyers and sellers with the clearing house to secure a new futures or options position.
- Inter-bank Rates
The bid and offer rates at which international banks place deposits with each other. The basis of the Interbank market.
- Inter-dealer Broker
A specialist broker who acts as an intermediary between market-makers who wish to buy or sell securities to improve their book positions, without revealing their identities to other market-makers.
- Interest Parity
One currency is in interest parity with another when the difference in the interest rates is equalised by the forward exchange margins. For instance, if the operative interest rate in Japan is 3% and in the UK 6%, a forward premium of 3% for the Japanese Yen against sterling would bring about interest parity.
- Interest Rate Swaps
An agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. It is the interest cash flows be they payments or receipts that are exchanged.
- Intervention
Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
- Intra-Day limit
Limit set by bank management on the size of each dealer's Intra Day Position.
- Intra-Day Position
Open positions run by a dealer within the day. Usually squared by the close.
- Inverted Market
Where short term instruments are trading at premiums to long term instruments.

- J Curve
A term describing the expected effect of a devaluation on a country's trade balance. It is anticipated that import bills rise before export orders and receipts increase.

- Key currency
Small countries, which are highly dependent on exports, orientates their currencies to their major trading partners, the constituents of a currency basket.
- Kiwi
Slang for the New Zealand dollar.

- Lagging Indicator
A measure of economic activity which tends to change after change has occurred in the overall economy e.g. CPI.
- Lay Off
To carry out a transaction in the market to offset a previous transaction and return to a square position.
- Leading Indicators
Statistic that are considered to precede changes in economic growth rates and total business activity, e.g. factory orders.
- Left-hand Side
Taking the left hand side of a two way quote i.e. selling the quoted currency. See Right-hand Side.
- Leverage
The use of credit or borrowed funds to improve one's speculative capacity and increase the rate of return from an investment, as in buying securities on margin.
- Liability
In terms of foreign exchange , the obligation to deliver to a counterparty an amount of currency either in respect of a balance sheet holding at a specified future date or in respect of an un-matured forward or spot transaction.
- LIBOR
The London Interbank Offered Rate, the rate charged by one bank to another for lending money.
- Limit Order
An order to buy or sell a specified amount of a security at a specified price or better.
- Limited Convertibility
When residents of a country are prohibited from buying other currencies even though non-residents may be completely free to buy or sell the national currency.
- Liquidation
Any transaction that offsets or closes out a previously established position.
- Liquidity
The ability of a market to accept large transactions.
- Long
The holding of an excess of a particular currency.
- Long Hedge
The purchase of futures contracts for price protection purposes, as a defensive position against an increase in cash prices, or falling interest rates.

- Maintenance Margin
The minimum margin which an investor must keep on deposit in a margin account at all times in respect of each open contract.
- Make a Market
A dealer is said to make a market when he or she quotes bid and offer prices at which he or she stands ready to buy and sell.
- Managed Float
When the monetary authorities intervene regularly in the market to stabilise the rates or to aim the exchange rate in a required direction.
- Margin
Difference between the buying and selling rates, also used to indicate the discount or premium between spot or forward.
- Margin Call
A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse future price movements.
- Marginal Risk
The risk that a customer goes bankrupt after entering into a forward contract. In such an event the issuer must close the commitment running the risk of having to pay the marginal movement on the contract.
- Markup
Premium.
- Market Maker
A market maker is a person or firm authorised to create and maintain a market in an instrument.
- Market Order
An order to buy or sell a financial instrument immediately at the best possible price.
- Matched Book
If the distribution of the maturities of a banks liabilities equal that of its assets, it is said to be running a matched book.
- Matching
The process of ensuring that purchases and sales in each currency and deposits given and taken in each currency are in balance , by amount and maturity.
- Minimum Reserve
Reserves required to be deposited at central banks by commercial banks and other financial institutions. Sometimes referred to as Registered Reserves.
- MITI
Japanese ministry of International Trade & Industry.
- Monetary Policy
A central bank's management of a country's money supply. Economic theory underlying monetary policy suggests that controlling the growth of the amount of money in the economy is the key to controlling prices and therefore inflation. However, central banks' monetary capability is severely limited by global money movements. This forces them to use the indirect tool of exchange rate manipulation.
- Monetary Union
An agreement between countries to maintain a fixed exchange rate between their currencies. A process which the EMS is intended to lead to, especially after the Maastricht Treaty.
- Money Market
A market consisting of financial institutions and dealers in money or credit who wish to either borrow or lend.
- Moving Average
A way of smoothing a set of data, widely used in price time series.

- Naked Intervention
A central bank type of intervention in the foreign exchange market which consist solely of the foreign exchange activity. This type of intervention has a monetary effect on the money supply and a long term effect on foreign exchange.
- Netting
A process which enables institutions to settle only the net positions with one another at the end of the day, in a single transaction, not trade by trade.
- Next Best Price Stop-loss Order
A stop-loss order which must be executed after the request level was reached.
- Nostro Account
A foreign currency current account maintained with another bank. The account is used to receive and pay currency assets and liabilities denominated in the currency of the country in which the bank is resident.

- Odd Lot
A non standard amount for a transaction.
- Offer
The price at which a seller is willing to sell. The best offer is the lowest such price available.
- Offset
The closing-out or liquidation of a currency position.
- Old Lady
Old lady of Threadneedle Street, a term for the Bank of England.
- Omnibus Account
An account maintained by one broker with another in which all of the accounts of the former are combined and carried only in its name, rather than designated separately.
- Open Outcry
A public auction method of trading conducted by calling out bids and offers across a trading ring or pit and having them accepted.
- Open Market Operations
Central Bank operations in the markets to influence exchange and interest rates.
- Open position
The difference between assets and liabilities in a particular currency. This may be measured on a per currency basis or the position of all currencies when calculated in base currency.
- Option
A contract conferring the right but not the obligation to buy (call) or to sell (put) a specified amount of an instrument at a specified price within a predetermined time period.
- OTC
A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange trading floor. These markets have not been very popular. They were never part of the Stock Exchange since they were seen as "unofficial". Each OTC firm operates a market in the shares of a restricted list of (generally small and little-known) companies. Sometimes the dealer simply puts would-be buyers and sellers together but does not take a position in the shares himself. These days OTC trading is seen as "consumer-friendly," meaning that it is interested in getting the buyer and seller the best possible price. Some see this as what share-trading is all about. However, market makers, many of whom create market movements purposefully, feel they are being elbowed out by OTC, and that speculation, arbitrage and "smart-trading" are undermined by the new market.
- Overnight Limit
Net long or short position in one or more currencies that a dealer can carry over into the next dealing day. Passing the book to other bank dealing rooms in the next trading time zone reduces the need for dealers to maintain these unmonitored exposures.
- Overnight
A deal from today until the next business day.
- Over the Counter
See OTC.

- Par
The official value of a currency.
- Parity
Foreign exchange dealer's slang for your price is the correct market price.
- Parities
The value of one currency in terms of another.
- Petrodollars
Foreign exchange reserves of oil producing nations arising from oil sales.
- Pip
See point.
- Point
(1) 100th part of a per cent, normally 10,000 of any spot rate. Movement of exchange rates are usually in terms of points.
(2) Minimum fluctuation or smallest increment of price movement.
- Position
The netted total commitments in a given currency. A position can be either flat or square ( no exposure), long, (more currency bought than sold), or short ( more currency sold than bought).
- Primary Reserves
Gold related monetary reserves, being gold, SDR, etc.
- Prime Rate
(1) The rate from which lending rates by banks are calculated in the US.
(2) The rate of discount of prime bank bills in the UK.
- Principal
A dealer who buys or sells currency for his/her own account.
- Producer Price Index
An economic indicator which gauges the average changes on prices received by domestic producers for their output at all stages of processing.
- Profit Taking
The unwinding of a position to realise profits.
- Purchasing Power Parity
Model of exchange rate determination stating that the price of a good in one country should equal the price of the same good in another country, exchanged at the current rate. Also known as the law of one price.

- Quota
(1) A limit on imports or exports.
(2) A country's subscription to the IMF.
- Quote
An indicative price. The price quoted for information purposes but not to deal.

- Rally
A recovery in price after a period of decline.
- Range
The difference between the highest and lowest price of a future recorded during a given trading session.
- Rate
The price of one currency in terms of another, normally against USD
- Realignment
Simultaneous and mutually co-ordinated re- and devaluation of the currencies of several countries. An activity that mostly refers to EMS activity.
- Reciprocal Currency
A currency that is normally quoted as dollars per unit of currency rather than the normal quote method of units of currency per dollar. Sterling is the most common example.
- Repo Rate
See Repurchase Agreement.
- Reserve Currency
A currency held by a central bank on a permanent basis as a store of international liquidity, these are normally Dollar , Deutschemark, and sterling.
- Resistance Point or Level
A price recognised by technical analysts as a price which is likely to result in a rebound but if broken through is likely to result in a significant price movement.
- Retail Price Index
Measurement of the monthly change in the average level of prices at retail, normally of a defined group of goods.
- Reversal
Reversal Patterns that occur at the end of the trend, signalling the trend change.
- Revaluation
Increase in the exchange rate of a currency as a result of official action.
- Revaluation Rate
The rate for any period or currency which is used to revalue a position or book.
- Right-hand Side
To do a deal on the right hand side of a two way quote, normally to buy the currency and sell dollars. See Left-hand Side.
- Risk
The degree of uncertainty associated with an investment. The main elements that contribute to the riskiness of an investment are volatility, liquidity and leverage. All things being equal, a high degree of volatility and leverage makes an investment more risky. An illiquid market, where buyers are not always matched by sellers, also increases risk�investors can be left holding an asset that is falling in price.
- Risk/Return
The relationship between the risk and return on an investment. Usually, the more risk you are prepared to take, the higher the return you can expect. Depositing your money in a bank is safe and therefore a low return is regarded as sufficient. Investing in stock market exposes you to more risk (from capital losses) and so investors will expect a higher return.
- Risk Management
The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to foreign exchange involves among others consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.
- Risk Position
An asset or liability, which is exposed to fluctuations in value through changes in exchange rates or interest rates.
- Rollover
An overnight swap, specifically the next business day against the following business day (also called Tomorrow Next, abbreviated to Tom-Next).
- Round Trip
Buying and selling of a currency contract.
- Running a Position
Keeping open positions in the hope of a speculative gain.

- Scalping
A strategy of buying at the bid and selling at the offer as soon as possible.
- Selling rate
Rate at which a bank is willing to sell foreign currency.
- Short Covering
Buying to unwind a shortage of a particular currency or asset.
- Short-Term Interest Rates
Normally the 90 day rate.
- Sidelined
A major currency that is lightly traded due to major market interest being in another currency pair.
- SIMEX
Singapore International Monetary Exchange
- Spot
(1) The most common foreign exchange transaction
(2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
- Spot Next
The overnight swap from the spot date to the next business day.
- Spot Price/Rate
The price at which the currency is currently trading in the spot market.
- Spread
The difference between the bid and ask price of a currency.
- Square
Purchase and sales are in balance and thus the dealer has no open position.
- Squawk Box
A speaker connected to a phone often used in broker trading desks.
- Squeeze
Action by a central bank to reduce supply in order to increase the price of money.
- Stable Market
An active market which can absorb large sale or purchases of currency without major moves.
- Sterling Index
A index based on the movement of sterling against the major currency.
- Sterling
British pound, otherwise known as Cable.
- Stocky
Market slang for Swedish Krona.
- Stop Loss Order
An order to a broker to sell (buy) when the price of a security falls (rises) to a designated level.
- Stagflation
Recession or low growth in conjunction with high inflation rates.
- Support Levels
When an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below;
(2) the monetary authorities intervene to stop any further downward movement. See Resistance Point.
- Swap
The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.
- SWIFT
Society for World-wide Interbank Telecommunications is Belgian based company that provides the global electronic network for settlement of most foreign exchange transactions.
- Swissy
Market slang for Swiss Franc.

- Technical Analysis
Is concerned with past price and volume trends and often with the help of chart analysis in a market in order to be able to make forecasts about future price developments of the commodity being traded.
- Technical Correction
An adjustment to price not based on market sentiment but technical factors such as volume and charting.
- Terms of Trade
The ratio between export and import price indices.
- Thin Market
A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
- Tick
A minimum change in price, up or down.
- Ticket
See Deal Slip.
- Today/Tomorrow
Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.
- Trade Date
The date on which a trade occurs.
- Trade Deficit/Surplus
The difference between the value of imports and exports. Often only reported in visible trade terms.
- Tradeable Amount
Smallest transaction size acceptable.
- Trade Ticket
See deal ticket.
- Transaction Date
The date on which a trade occurs.
- Transaction
The buying or selling of currency resulting from the execution of an order.
- Transaction Exposure
Potential profit and loss generated by current foreign exchange transactions.
- Turnover
The total money value of currency contracts traded is calculated by multiplying size by the number of contracts traded.
- Two-Way Quotation
When a dealer quotes both buying and selling rates for foreign exchange transactions.

- Uncovered
Another term for an open position.
- Under-Valuation
An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.
- Undo
A colloquial term for reversing a transaction, e.g., a spot sale by means of a forward purchase or if done in error a spot purchase.
- Unload
Term for sale of assets or unwinding positions either to limit loss or to undermine other market participants positions.
- Unmatched Book
If the average maturity of a banks liabilities is less than that of its assets, it is said to be running an unmatched book.
- Unwind
Selling of assets and or instruments to square a position.
- Up-Tick
A transaction executed at a price greater than the previous transaction.

- Value at Risk
The expected loss from an adverse market movement.
- Value Date
For a spot transaction it is two business banking days forward in the country of the bank providing quotations which determine the spot value date. The only exception to this general rule is the spot day in the quoting centre coinciding with a banking holiday in the country(ies) of the foreign currency(ies). The value date then moves forward a day.
- Value Spot
Normally settlement for two working days from today.
- Value Today
Transaction executed for same day settlement; sometimes also referred to as "cash transaction".
- Velocity of Money
The speed with which money circulates or turnover in the economy. It is calculated as the annual national income: average money stock in the period.
- Volatility
A measure of the amount by which an asset price is expected to fluctuate over a given period. Normally measured by the annual standard deviation of daily price changes. (historic). Can be implied from futures pricing, implied volatility.
- Vostro Account
A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn, as a result of a transaction.

- Wholesale Price Index
It measures changes in prices in the manufacturing and distribution sector of the economy and tends to lead the consumer price index by 60 to 90 days. The index is often quoted separately for food and industrial products.
- Working Balance
Discretionary element in the monetary reserves of a central bank.
- Working Day
A day on which the banks in a currency's principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both (all relevant currency centers in the case of a cross are open).
- World Bank
A bank made up of members of the IMF whose aim is to assist in the development of member states by making loans where private capital is not available.