Exchange rate regimen where a currency’s exchange rate is pegged (fixed) in relation to a stronger currency, such as the US Dollar or the Euro. The pegged rate is adjusted occasionally in an attempt to improve the country’s competitive position. For example, China’s Yuan is sometimes pegged to the US Dollar.

The total amount of exposure a bank or broker has with a client for in spot and forward foreign exchange contracts.

A fee charged to exchange money from one currency to another.

This is the simultaneous buying and selling of foreign exchange pairs in order to realize a profit from a discrepancy between foreign exchange rates in the market at the same time in different markets.

This is the price at which the foreign exchange pair or CFD is offered.

An item that has value; an investment such as stocks, options, or Forex.

An instruction provided to a broker to buy or sell at the best rate that is currently available in the market.

The abbreviation for the Australian dollar and U.S. dollar (AUD/USD) currency pair or cross. The currency pair tells the reader how many U.S. dollars (the quote currency) are needed to purchase one Australian dollar (the base currency).

Slang for the AUD/USD currency pair.

Depending on the regulatory body, a dealer authorised to deal in Foreign Exchange.

Depending on the regulatory body, a dealer authorised to deal in ForeiA trader who uses an automated system to input trades without any human input.gn Exchange.

A settlement system used by banks and brokers to process and report transactions.

System of recording a country’s economic transactions.

A common type of 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.

In countries where the currency is pegged, the range in which the rates are permitted to fluctuate.

Paper issued by a Central Bank, redeemable as money and considered to be legal tender.

The date on which a transaction expires which is usually 2 business days before the settlement date.

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.

Foreign Currencies of countries that do not have a developed international market and are relatively illiquid.

Fiat currency is the opposite of a gold standard arrangement. In a fiat currency system, the currency value rises and falls on the market in response to demand and supply pressures. It is this fluctuation that makes it possible to speculate on future currency values.

Indicates that a Currency is strengthening or is stronger than previously quoted.

A Market where foreign currencies are traded internationally. As measured by the Bank for International Settlements the daily turnover of the foreign exchange market is around 4 trillion dollars making it the largest market in the world.

A transaction with a settlement date that is more than 2 business days after the actual trade date.

The expression of value of one currency in terms of another where the settlement date is more than 2 business days after the trade date. A forward exchange rate is the spot exchange rate of the currencies on the trade date adjusted for the forward points.

The value of the interest rate differential for a currency pair over the period from the spot settlement date to the forward settlement date, this is expressed as an adjustment to the spot exchange rate.

A settlement date for a Forward transaction, which is greater than two business days from the trade date.

The basic economic determinants of exchange rates, such as inflation, interest rates, commodity prices and economic activity.

An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange while forwards are traded over the counter (OTC).

A term related to margin trading where you are controlling a position whose face value is greater than the money you deposit.

The seven leading industrial countries: The United States, Germany, Japan, France, United Kingdom, Canada, and Italy.

In technical analysis, when two moving averages intersect, usually a short one like a 20 day and a long one such as 40 day. This is considered a favourable sign that the underlying currency will move in the same direction.

Term that describes an economy that has steady growth and acceptable inflation. In this sense, the economy is not too hot and not too cold.

An order instruction provided to a broker that does not expire at the end of the trading day, although normally terminates at the end of the trading month.

A series of positions and open orders that are built with a predetermined spread defined by the trader.

Total value of a country’s output, income or expenditure produced within the country’s physical borders.

A currency that investors have confidence in. Examples could be the US Dollar or the Euro.

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 price to drop to around the same level as the shoulder. A further modest rise or level will indicate that a further major fall is imminent. The breach of the neckline is the indication to sell.

A strategy used to offset market risk, whereby one position protects another.

Buyer and subsequently owner of a currency pair.

International Foreign Exchange Master Agreement

A Foreign Currency which cannot be exchanged for other currencies, because it is forbidden by the foreign exchange regulations.

A market-maker’s price that is an indication of price, it cannot be dealt on.

Continued rise in the general price level in conjunction with a related drop in purchasing power. This is sometimes referred to as an excessive movement in such price levels.

The margin is a returnable deposit required to be lodged by buyers and sellers when opening a new position.

When entering a position, the minimum amount that must be paid in cash.

The specification of the banks at which funds shall be paid upon settlement.

The bid and offer rates at which international banks place deposits with each other. The basis of the Interbank market.

A specialist broker who acts as an intermediary between market-makers who wish t

The difference between the interest rates applicable to a currency pair.

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.

A person or firm that introduces customers to a market maker often in return for commission or a portion of the spread.

The Yen is t.he Japanese currency unit. It is the third most-traded currency in the foreign exchange market after United States dollar and the Euro.

A trader who trades for small, short-term profits during the course of a trading session, rarely carrying a position overnight.

For smaller countries, the act of orienting their currency to that of a major trading partner.

Traders term for the New Zealand Dollar.

Economic indicators used to predict future economic activity, such as the levels of the S&P 500 index.

Taking the left hand side of a two way quote i.e. selling the quoted currency. AUD/USD = 1.04430/432, you would sell on the left hand side at 1.04430.

The ratio of margin to the maximum position size. With a deposit of $1000 and a leverage of 100, a trader could enter a position with a face value of $100,000. Leveraging allows you to profit quickly, but lose money just as fast.

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.

Excess of purchases over sales or of foreign currency assets over liabilities.

Dealer slang for the USA/CAD currency pair.

Standardised method of trading in Forex, which requires a trade of 100,000 units of a particular currency.

A set minimum margin that a customer must maintain in his margin account.

The minimum margin that must be available in an account to support all open trades.

A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse future price movements.

A dealer is said to make a market when they quote bid and offer prices at which they are ready to deal on.

The daily adjustment of an account to reflect accrued profits and losses often required to calculate the variation margin.

A market maker is a person or firm authorised to create and maintain a market in a foreign currency or CFD.

An order to buy or sell a financial instrument at the best possible price at the time the order is placed.

Difference between the buying and selling rates, also used to indicate the discount or premium between spot or forward.

The current or prevailing spot exchange rate in the foreign exchange market.

Electronic Systems duplicating the traditional brokers market. A price shown by a bank is available to all trades.

Date on which, under the contracted agreements, the foreign exchange is to be delivered or received.

The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers.

One million or 1,000,000.

A modest loosening of monetary constraint by changing interest rate, money supply, deposit ratios.

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.

A market consisting of financial institutions and dealers in money or credit who wish to either borrow or lend.

A way of smoothing a set of data, widely used in price time series.

A carry trade where you are long the lower interest currency and short the higher interest currency. This type of trade might be part of a hedging strategy.

Currency positions that have not been offset with opposite positions.

An investor who bases his/her decisions on the outcome of a news announcement and its impact on the market.

A non-standard transaction size. In Forex, a standard lot is usually 100,000 units of a particular currency.

The price at which a seller is willing to sell. The best offer is the lowest such price available.

A contingent order where the execution of one part of the order automatically cancels the other part.

The price at which a seller is willing to sell. The best offer is the lowest such price available.

A range of settlement dates allowed under a Forward transaction agreed between you and your brokers before the Forward transaction is entered into.

A range of settlement dates allowed under a Forward transaction agreed between you and your brokers before the Forward transaction is entered into.

Quantitative methods designed to provide signals regarding the overbought and oversold conditions.

A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange trading floor.

See OTC.

Is the term applied when the forward price of the purchase or sale of a currency is the same as the spot price.

A system where a currency’s value is tied with that of another currency. For example, the Chinese Yuan with the US Dollar. Most pegs are allowed to deviate within a small band.

See 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. i.e if AUD/USD moves from 1.0410 to 1.0420, it has moved 10 points / pips. (2) Minimum fluctuation or smallest increment of price movement.

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).

Amount by which a currency is more expensive to buy for future delivery than for spot delivery.

The actual “realized” gain or loss resulting from trading activities on Closed Positions, plus the theoretical “unrealized” gain or loss on Open Positions that have been Mark-to-Market.

An indicative price. The price quoted for information purposes but not to deal.

The second currency of two in a currency pair. For the EUR/USD, USD is the quote currency. The exchange rate quoted is how many units of the second currency you will receive for one unit of the base currency.

A recovery in price after a period of decline.

The difference between the highest and lowest price of a future recorded during a given trading session.

Price at which a currency can be purchased or sold against another currency.

The profit and loss that is generated by closing a position.

A currency pair involving the US Dollar in which the US Dollar is not the first currency quoted. An example is the Euro, which is the base currency when paired with the US Dollar. EUR/USD is the way of quoting these two currencies.

A price recognised by technical analysts as a price which is likely to result in resistance but if broken through is likely to result in a significant price movement.

Taking the right hand side of a two way quote i.e. buying the quoted currency. AUD/USD = 1.0441/451, you would buy on the right hand side at 1.0451.

An overnight swap, specifically the next business day against the following business day (also called Tomorrow Next, abbreviated to Tom-Next).

Buying and selling of a futures or options contract.

Excess of sales over purchases or of foreign currency liabilities over assets.

Foreign exchange bought and sold for delivery two business days after the deal is firmed.

The value difference between the bid and ask price of a currency pair.

An arrangement whereby a position is automatically closed out when it reaches a certain loss or when exchange rates reach specified values.

Trader’s nickname for the Swiss Franc.

A customer’s instructions to buy or sell a currency pair which, when executed, will result in the reduction in the size of the existing position and show a profit on said position.

A limit order that is placed above the market with a long position or below the market with a short position. When the market reaches the limit price, the position is closed thereby locking in a profit.

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.

An adjustment to price not based on market sentiment but technical factors such as volume and charting.

The smallest possible change in a price, either up or down. Also known as a pip.

Streaming display of the current or recent historical price of a currency pair.

A transaction with a settlement date that is on the same day as the trade date.

A transaction with a settlement date that is 1 business day after the trade date.

Your current potential account balance that can be realized by closing all your open trades. For example, if your actual account balance is $925 and you have an open trade for $50 with a $25 profit, your virtual account balance will show $1,000.

A measure of the extent to which the exchange rate changes over a given period.

The number, or value, of securities traded during a specific period.

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 centres in the case of a cross) are open.

A traders’ term for a billion as in a billion dollars.