Arbitrage — The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets. At this price, the trader can buy the base currency.
In the quotation, it is shown on the right side of the quotation. At Best — An instruction given to a dealer to buy or sell at the best rate that can be obtained. At or Better — An order to deal at a specific rate or better. Bar Chart — A type of chart which consists of four significant points: Base Currency — The first currency in a Currency Pair.
It shows how much the base currency is worth as measured against the second currency. Bear Market — A market distinguished by declining prices. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. Big Figure — The first two or three digits of a foreign exchange price or rate. The big figure is often omitted in dealer quotes.
Broker — An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. The agreement lasted until , when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.
Bull Market — A market distinguished by rising prices. Candlestick Chart — A chart that indicates the trading range for the day as well as the opening and closing price.
If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded. Carry Trade — Refers to the simultaneous selling of a currency with a low interest rate, while purchasing currencies with higher interest rates. Cash Market — The market in the actual financial instrument on which a futures or options contract is based.
Chartist — An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader. Cleared Funds — Funds that are freely available, sent in to settle a trade. Closed Position — Exposures in Foreign Currencies that no longer exist.
The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. Collateral — Something given to secure a loan or as a guarantee of performance.
Confirmation — A document exchanged by counterparts to a transaction that states the terms of said transaction. Counterparty — One of the participants in a financial transaction. Country Risk — Risk associated with a cross-border transaction, including but not limited to legal and political conditions. Cross Currency Pairs — A pair of currencies that does not include the U.
Currency — Any form of money issued by a government or central bank and used as legal tender and a basis for trade. Currency Pair — The two currencies that make up a foreign exchange rate.
Currency Risk — the probability of an adverse change in exchange rates. Current Account — The sum of the balance of trade exports minus imports of goods and services , net factor income such as interest and dividends and net transfer payments such as foreign aid.
The balance of trade is typically the key component to the current account. Day Trader — Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day. Dealer — An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread profit by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
Delivery — An FX trade where both sides make and take actual delivery of the currencies traded. Depreciation — A fall in the value of a currency due to market forces. Derivative — A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument.
An Option is the most common derivative instrument. Discount Rate — Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank. Economic Indicator — A government issued statistic that indicates current economic growth and stability. This order remains open until the end of the trading day which is typically 5PM ET. On January1, the transitional phase to introduce the Euro began.
The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros. This transition period will last for three years, at which time Euro notes and coins will enter circulation. On July 1 , only Euros will be legal tender for EMU participants, the national currencies of the member countries will cease to exist.
It measures overall economic health by combining ten leading indicators including: All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.
Foreign Exchange — Forex, FX — the simultaneous buying of one currency and selling of another. Forward — The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved. Forward Points — The pips added to or subtracted from the current exchange rate to calculate a forward price. Fundamental Analysis — Analysis of economic and political information with the objective of determining future movements in a financial market.
Futures Contract — An obligation to exchange a good or instrument at a set price on a future date. Going Long — The purchase of a stock, commodity, or currency for investment or speculation.
Going Short — The selling of a currency or instrument not owned by the seller. Gold Certificate — A certificate of ownership that gold investors use to purchase and sell the commodity instead of dealing with transfer and storage of the physical gold itself.
Gold Contract — The standard unit of trading gold is one contract which is equal to 10 troy ounces. Gross National Product — Gross domestic product plus income earned from investment or work abroad. This order remains open until filled or until the client cancels. Hedge — A position or combination of positions that reduces the risk of your primary position.
Industrial Production — Measures the total value of output produced by manufacturers, mines and utilities. This data tends to react quickly to the expansions and contractions of the business cycle and can act as a leading indicator of employment and personal income.
Inflation — An economic condition whereby prices for consumer goods rise, eroding purchasing power. Initial Margin — The initial deposit of collateral required to enter into a position as a guarantee on future performance.
Interbank Rates — The Foreign Exchange rates at which large international banks quote other large international banks. 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. Introducing Broker — A person or corporate entity which introduces accounts to Vipro Markets for a fee. ISM Manufacturing Index — An index that assesses the state of the US manufacturing sector by surveying executives on expectations for future production, new orders, inventories, employment and deliveries.
Values over 50 generally indicate an expansion, while values below 50 indicate contraction. Japanese Economy Watchers Survey — Measures the mood of businesses that directly service consumers such waiters, drivers, and beauticians. Readings above 50 generally signal improvements in sentiment. Japanese Machine Tool Orders — Measures the total value of new orders placed with machine tool manufactures.
Machine tool orders are a measure of the demand for machines that make machines, a leading indicator of future industrial production. Strong data generally signals that manufacturing is improving and that the economy is in an expansion phase. Leading Indicators — Statistics that are considered to predict future economic activity.
Leverage — Also called margin. The ratio of the amount used in a transaction to the required security deposit. Limit order — An order with restrictions on the maximum price to be paid or the minimum price to be received. Liquidation — The closing of an existing position through the execution of an offsetting transaction.
Liquidity — The ability of a market to accept large transactions with minimal to no impact on price stability. Long position — A position that appreciates in value if market prices increase. When the base currency in the pair is bought, the position is said to be long. Lot — A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.
Manufacturing Production — Measures the total output of the manufacturing aspect of the Industrial Production figures. This data only measures the 13 sub sectors that relate directly to manufacturing. Margin — The required equity that an investor must deposit to collateralize a position. Margin Call — A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.
Market Maker — A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.
Mark-to-Market — Process of re-evaluating all open positions with the current market. Maturity — The date for settlement or expiry of a financial instrument.
Net Position — The amount of currency bought or sold which have not yet been offset by opposite transactions. Offer ask — The rate at which a dealer is willing to sell a currency.More...