A B C D E F G H I L M O P Q S T Y

Appreciation

A currency appreciates when it strengthens in price.

Ask Rate

The rate at which non-market makers can buy a particular currency. Also known as the offer.

Back Office

The departments and processes related to the settlement of financial transactions.

Balance

Balance is the amount of funds you have in your account when you have no positions open.

Base Currency

The currency which is the base for quotes. For example, the euro is the base currency for EUR/USD quotes, while the US dollar is the base currency for USD/JPY.

Bid Rate

The rate at which traders can currently sell a particular currency.

Broker

An individual or a company that acts as an intermediary, handling investors’ orders to buy and sell currencies.

Bull Market

A market that is characterized by rising prices.

Buy Limit Order

An order to execute a transaction at a specified price (the limit) or lower.

Cable

Slang nickname for the GBP/USD exchange rate.

Candlestick Patterns

Candlesticks are the Japanese equivalent of bar charts that display the relationship between the opening price, closing price, highest price and lowest price of a financial instrument. The relationship between the opening and closing price is considered vital information and indicates either buying or selling pressure. The body of the candle also gives good visual information on trading activity; the longer the body of the candlestick, the more intense the buying or selling pressure. On the other hand, short candlesticks indicate little price movement and represent consolidation.

Close Price

Referred as the last quoted price at the end of a given time period (i.e., one minute, one hour, a day, week, month, year).

Close Time / Market Closing Time

The Forex market closes on Friday at 21:00 GMT (FinFX MetaTrader time).

Commission

A transaction fee charged by brokers.

Counter Currency

The currency which is the counter for quotes. For example, the US dollar is the counter currency for EUR/USD quotes, while the Japanese yen is the counter currency for USD/JPY.

Currency

Any form of money issued by a government or central bank and used as legal tender.

Currency Risk

The probability of an adverse change in exchange rates.

Day Trading

Refers to positions that have been opened and closed on the same day.

Dealer

An individual or firm that buys and sells assets from their own portfolio, acting as a principal or counterparty to a transaction.

Dealing Desk (DD)

Used loosely as the place where dealers facilitate pricing and executing trades.

Deficit

A negative balance of trade or payments.

Depreciation

A fall in the value of a currency due to market forces.

Economic Indicator

A government issued statistic that indicates current economic growth and stability. Common indicators include Employment Rates, Gross Domestic Product (GDP), CPI (inflation) and Retail Sales.

End Of Day Order (EOD)

An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 22:00 GMT (or 21:00 GMT during Daylight Saving Time).

European Central Bank (ECB)

The Central Bank of the European Monetary Union.

Equity

Equity is your account balance plus the floating profit/loss of your open positions: Equity = Balance + Floating Profit/Loss

Fixed Exchange Rate

Foreign exchange policy where a central bank maintains an official rate for their currency, often intervening to keep the rate fixed within a limited range.

Foreign Exchange (Forex, FX) market

A market where currencies are bought and sold against each other.

Fundamental analysis

Analysis of economic and political information with the objective of determining future movements in a financial market.

Good ’til Canceled (GTC)

An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.

Hedge

A position or a combination of positions that reduces the risk of the trader’s primary position.

Inflation

An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Interbank Rates

The Foreign Exchange rates at which large international banks quote other large international banks.

Leverage

A loan provided to an investor by a brokerage where he or she owns a trading account. The value of leverage influences the margin which is reserved for each trade. Leverage can increase profits as well as losses. For example, to trade $100,000 of currency, with a margin of 1%, an investor will only have to deposit $1,000 into his or her margin account. The leverage provided on a trade like this would be 100:1.

Limit order

An order to buy at or below a specific price or to sell at or above a specific price.

Line Charts

The Line Chart connects single prices for a selected time period.

Liquidity

The ability of a market to accept large transactions with minimal or no impact on price stability.

Long position

A market position where the client has bought a currency he did not previously have. Normally expressed in base currency terms, e.g. USD/CHF means long Dollars (short Swiss Franc).

Margin

The required equity that an investor must deposit to collateralize a position.

Margin call

A request from a broker or a dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer. Alternatively the client can choose to close one or more positions.

Market Maker

A dealer who supplies prices and is prepared to buy or sell at those stated bid and ask prices. FinFX is not a Market Maker as we use STP ECN/DMA model, which gives you a direct access to display your order in the market.

Offer

The price or rate that a trader is prepared to sell at.

One Cancels the Other Order (OCO)

A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.

Open Position

A deal that has not been settled by physical payment or reversed by an equal and opposite deal for the same value.

Open Price

Referred as the first quoted price at the beginning of a given time period (i.e., one minute, one hour, a day, week, month, year).

Open Time / Market Opening Time

The Forex market opens on Sunday at 21:00 GMT (FinFX MetaTrader time).

Over the Counter (OTC)

Used to describe any transaction that is not conducted over a regulated exchange.

Pips

A pip means percentage in point and the term is used in the currency market to characterize the smallest incremental move an exchange rate can make. The value of a pip depends on the currency pair. One pip/ basis point equals for instance 0.0001 for EUR/USD, GBP/USD and USD/CHF, and 0.01 for USD/JPY.

Points

1 pip is 10 points, so one pip/ basis point equals for instance 0.00001 for EUR/USD, GBP/USD and USD/CHF, and 0.001 for USD/JPY.

Quote

An indicative market price, normally used for information purposes only.

Short position

An investment position that benefits from a decline in market price.

Spot price

The current market price. Settlement of spot transactions usually occur within two business days.

Spread

The difference between the bid and the offer (ask) price.

Stop order

An order to sell at or below a specific price or to buy at or above a specific price.

Stop loss

An order to close a position when a particular price is reached in order to minimize loss.

Support level

A price level at which you would expect buying to take place.

Swap

The term swap the is used to designate the interest rate differential credited or debited in the trader’s account as a result from the trading activity.

Take profit

An order to close a position when a particular price is reached to ensure a profit.

Technical Analysis

This deals with past price and volume trends and frequently with the help of chart analysis in order to be able to make forecasts about future price advances of the commodity in question.

Thin Market

A market in which trading volume is low and in which as a result bid and ask quotes are wide and the liquidity of the instrument traded is low.

True Limit Order

A limit order which is executed only with the requested or a better price. There is no slippage with True limit orders. If the requested or a better price is not available, the order is not executed.

Yard

Slang for a billion.

Yield

Return on capital investment.