| Term | Description
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| Appreciation | A currency is said to `appreciate` when its price rises in view of increase in its market demand.
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| Arbitrage | The purchase or sale of a currency and simultaneous sale of an equal amount of the same currency in another market, in order to take advantage of small price differentials between markets.
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| Ask Rate | The rate at which a currency is offered for sale.
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| Balance of Trade | The value of a country's exports minus its imports.
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| Base Currency | The first currency (to the left) in a currency pair.
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| Bear Market | A market distinguished by declining prices.
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| Bid / Ask Spread | The difference between the bid and ask price, and the most widely used measure of market liquidity.
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| Bid Rate | The rate at which a trader is willing to buy a currency.
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| Broker | An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a 'dealer' commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
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| Bull Market | A market distinguished by rising prices
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| Central Bank | A government or quasi-governmental organization that manages a country's monetary policy. For example, the US central bank is the Federal Reserve, and the in Indian central bank is the Reserve Bank of India.
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| Clearing | The process of settling a trade.
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| Commission | A transaction fee charged by a broker.
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| Confirmation | A document exchanged by counterparts to a transaction that states the terms of said transaction.
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| Counter-party | One of the participants in a financial transaction.
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| Country Risk | Risk associated with a cross-border transaction, including but not limited to legal and political conditions.
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| Cross Rate | The exchange rate between any two currencies not having domestic domestic currency as one of the currency in the country where the currency pair is quoted.
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| Currency | Any form of money issued by a government or central bank and used as legal tender and a basis for trade.
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| Currency Risk | The probability of an adverse change in exchange rates.
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| Day Trading | The term is used for positions which are opened and closed on the same trading day.
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| Dealer | An individual or firm or an institution, who 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.
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| Deficit | A negative balance of trade or payments.
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| Delivery | A Forex trade where both sides make and take actual delivery of the currencies traded.
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| Depreciation | A fall in the value of a currency due to market forces.
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| 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.
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| Devaluation | The deliberate downward adjustment of a currency's price, normally by the Government / Central Bank of the country. |
| Term | Description
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|---|
| Economic Indicator | A government issued statistical paper that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
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| 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.
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| European Central Bank (ECB) | the Central Bank for the new European Monetary Union.
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| Flat/square | Dealer jargon used to describe a position that has been completely reversed.
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| Foreign Exchange - (Forex, FX) | the simultaneous buying of one currency and selling of another.
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| Forward | The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date.
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| Forward points | The pips added to or subtracted from the current exchange rate to calculate a forward price.
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| Futures Contract | 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 (Exchange- Traded Contacts - ETC) while forwards traded Over The Counter (OTC) contracts.
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| Hedge | A position or combination of positions that reduces the risk of the primary position.
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| Initial margin | The initial deposit of collateral required to enter into a position as a guarantee on future performance.
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| Interbank rates | The Foreign Exchange rates at which large international banks quote other large international banks.
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| Leading Indicators | Statistics that are considered to predict future economic activity.
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| LIBOR | The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.
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| Liquidation | The closing of an existing position through the execution of an offsetting transaction.
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| Liquidity | The ability of a market to accept large transaction with minimal to no impact on price stability.
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| Long position | A position that appreciates in value if market prices increase.
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| Margin | The required equity that an investor must deposit as collateral.
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| Marked-to-Market | Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.
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| 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.
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| Market Risk | The risk of exposure to changes in market prices.
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| Offer | The rate at which a dealer is willing to sell a currency.
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| Offsetting transaction | A transaction to cancel or offset some or all of the market risk of an open position.
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| Open order | An order that will be executed when a market moves to its designated price. Normally associated with "Good 'till Cancelled Orders".
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| Open position | A deal not yet reversed or settled with a physical payment.
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| Overnight | A trade that remains open until the next business day.
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| Over the Counter (OTC) | Used to describe any transaction that is not conducted over an exchange.
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| Pip | The smallest unit by which the price of a currency can move in Forex market.
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| Position | The netted total holdings of a given currency.
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| Premium | In the currency markets, describes the amount by which the forward or futures price exceed the spot price.
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| Quote | An indicative market price.
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| Rate | The price of one currency in terms of another.
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| Revaluation | Increase in the exchange rate of a currency as a result of central bank intervention. Opposite of Devaluation.
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| Risk | Exposure to uncertain change, most often used with a negative connotation of adverse change.
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| Risk Management | The employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.
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| Roll-Over | Process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies.
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| Short Position | An investment position that benefits from a decline in market price.
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| Spot Price | The current market price.
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| Spread | The difference between the bid and ask prices.
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| Support Levels | A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself.
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| Swap | A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.
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Tomorrow Next
(Tom/Next) | Simultaneous buying and selling of a currency for delivery the following day.
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| Transaction Cost | The cost of buying or selling a financial instrument.
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| Transaction Date | The date on which a trade occurs.
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| Turnover | The total money value of all executed transactions in a given time period; volume.
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| Two-Way Price | When both a bid and offer rate is quoted for a Forex transaction.
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| Value Date | The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments.
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| Whipsaw | Slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
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| Yard | Slang for a billion. |