| Bid |
The rate at which a dealer is willing to buy the base currency |
|
Broker |
A broker is a middleman acting between a client and a market maker. A broker
will charge a commission for their services |
|
Convertible Currency |
Currency which can be freely exchanged for other currencies or gold without
special authorisation from the appropriate central bank. |
|
Exchange Rate Depreciation |
Currency which loses in value against one or more currencies |
|
Exchange Rate Risk |
The potential loss that could be incurred from an adverse movement in exchange
rates |
|
Fixed Exchange Rate |
Official rate of exchange set by monetary authorities for one or more
currencies. In practice, some fixed exchange rates are allowed to fluctuate
between defined upper and lower bands |
|
Floating Exchange Rate |
When the value of a currency is decided by supply and demand |
|
FOREX/FX |
An abbreviation of Foreign Exchange |
|
Forward Points |
The Interest Rate Differential between two currencies expresses in exchange rate
points. The forward points are added or subtracted from the spot rate to give
the forward or outright rate |
|
Forward Rates |
The rate at which a foreign exchange contract is struck today for settlement at
a specified future date |
|
Forward Contract |
Contract struck at the forward rate as specified above. |
|
Hedging |
A hedging transaction is one which protects an asset or liability against a
fluctuation in the foreign exchange rate. |
|
Initial Margin |
The deposit required from a client when they transact a forward order |
|
Interbank Rates |
The FX rates large international banks quote other large international banks.
The difference between the buy rate and the sell rate, the spread can be around
0.07%. Normally the public and other businesses do not have access to these
rates. |
|
Interest Rate Risk |
The potential for losses arising from changes in interest rate |
|
Limit Order |
An order given which has restrictions upon execution. The client specifies a
price and the order can be executed at the prevailing market price only if the
market reached the specified price |
|
Margin |
Cash deposit provided by clients as collateral to cover losses (if any) that may
result from the client’s foreign exchange trades |
|
Margin Call |
A demand for additional funds to cover positions |
|
Maturity |
Date for settlement |
|
Offer |
The rate at which a dealer is willing to sell the base currency |
|
Open Position |
Any deal which has not been settles by a physical payment or reversed by an
equal and opposite deal for the same value date |
Outright Forward
|
Foreign Exchange transaction involving either the purchase or the sale of a
currency for settlement at a future date |
|
Outright Rate |
The forward rate of a foreign exchange deal based on the spot price plus or
minus the forward adjustment which represents the difference in interest rates
between the two currencies |
|
Resistance |
A price level at which you would expect selling to take place |
|
Rollover |
Where the settlement of a deal is rolled forward to another value date based on
the interest rate differential of the two currencies. E.g next day |
|
Settlement |
Actual physical exchange of one currency for another between principal and
client |
| Spot contract |
Spot means the settlement date of a deal which is two business days forward |
|
Spread |
The difference between bid and offer prices |
|
Stop Loss Order |
An order to buy or sell when a particular price is reached either above or below
the price that prevailed when the order was given |
|
Support Levels |
A price level at which you would expect buying to take place |
Technical Analysis
|
Analysis based on market action through chart study, moving averages, volume,
open interest, formations and other technical indicators |
|
Value Date |
Settlement date of a spot or forward deal |
|
Volatility |
A measure of price fluctuations |
