Germany’s Central Bank.

A market distinguished by rising prices.

An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.

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.

In a professional trading environment, a ‘book’ is the summary of a trader’s or desk’s total positions.

The first two or three digits of a foreign exchange price or rate. Examples: If the USD/JPY bid/ask is 115.27/32, the big figure is 115. On a EUR/USD price of 1.2855/58 the big figure is 1.28. The big figure is often omitted in dealer quotes. The EUR/USD price of 1.2855/58 would be verbally quoted as “55/58″.

The difference between the bid and offer price.

The bid is the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.

A market distinguished by declining prices.

The first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215 In the FX markets, the US Dollar is normally considered the ‘base’ currency for quotes, meaning that quotes are expressed as a unit of 1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.

A type of chart 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 little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.

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 is the key component to the current account.

The probability of an adverse change in exchange rates.

The two currencies that make up a foreign exchange rate. For Example, EUR/USD

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

AUD – Australian Dollar
CAD – Canadian Dollar
EUR – Euro
JPY – Japanese Yen
GBP – British Pound
CHF – Swiss Franc

A pair of currencies that does not include the U.S. dollar. For example: EUR/JPY or GBP/CHF.

Risk associated with a cross-border transaction, including but not limited to legal and political conditions.

One of the participants in a financial transaction.

The second listed Currency in a Currency Pair.

The standard unit of trading.

A document exchanged by counterparts to a transaction that states the terms of said transaction.

Something given to secure a loan or as a guarantee of performance.

The process of settling a trade.

A transaction fee charged by a broker.

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. This will ‘square’ the postion.

Funds that are freely available, sent in to settle a trade.

An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.

A government or quasi-governmental organisation that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.

The market in the actual financial instrument on which a futures or options contract is based.

Refers to the simultaneous selling of a currency with a low interest rate, while purchasing currencies with higher interest rates. Examples are the JPY crosses such as GBP/JPY and NZD/JPY.

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.

Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank.

The deliberate downward adjustment of a currency’s price, normally by official announcement.

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.

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

An FX trade where both sides make and take actual delivery of the currencies traded.

A negative balance of trade or payments.

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.

Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.

A monthly index produced by the OECD. It measures overall economic health by combining ten leading indicators including: average weekly hours, new orders, consumer expectations, housing permits, stock prices, and interest rate spreads.

The central bank for the euro and administers monetary policy of the Eurozone, which consists of 19 EU member states and is one of the largest currency areas in the world.

The official currency of the Eurozone, which consists of 19 of the 28 member states of the European Union: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

The principal goal of the EMU is to establish a single European currency called the Euro, which has gradually replaced the national currencies of most of the EU countries since 2002. The Euro has been adopted by 19 EU member states.

An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 5PM ET.

A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.

Foreign Exchange.

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 Contracts - ETC), versus forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.

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

The pips added to or subtracted from the current exchange rate to calculate a forward price.

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.

The simultaneous buying of one currency and selling of another.

Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.

Open positions are closed according to the FIFO accounting rule. All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.

The Central Bank for the United States.

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

Gross domestic product plus income earned from investment or work abroad.

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

The standard unit of trading gold is one contract which is equal to 10 troy ounces.

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.

The selling of a currency or instrument not owned by the seller.

The purchase of a stock, commodity, or currency for investment or speculation.

The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.

Acceptance of purchasing at the offer or selling at the bid.

A position or combination of positions that reduces the risk of your primary position.

An index that survey service sector firms for their outlook, representing the other 80% of the U.S. economy not covered by ISM MANUFACTURING REPORT. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.

An index that assesses the state of 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.

A person or corporate entity which introduces accounts to Tickmill for a fee.

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.

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

The initial deposit of collateral required to enter into a position as a guarantee on future performance.

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

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.

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.

Measures the mood of businesses that directly service consumers such waiters, drivers, and beauticians. Readings above 50 generally signal improvements in sentiment.

Slang for the New Zealand dollar.

A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.

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.

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

The closing of an existing position through the execution of an offsetting transaction.

An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/JPY is 117.00/05, then a limit order to buy USD would be at a price below 117.00.

The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

Also called margin. The ratio of the amount used in a transaction to the required security deposit.

Statistics that are considered to predict future economic activity.

The date for settlement or expiry of a financial instrument.

Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.

Exposure to changes in market prices.

A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

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.

Measures the total output of the manufacturing aspect of the Industrial Production figures. This data only measure the 13 sub sectors that relate directly to manufacturing. Manufacturing makes up approximately 80% of total Industrial Production.

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

The amount of currency bought or sold which have not yet been offset by opposite transactions.

An instruction to execute a trade at a specified rate.

A trade that remains open until the next business day.

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

An active trade with corresponding unrealised P&L, which has not been offset by an equal and opposite deal.

An order that will be executed when a market moves to its designated price. Normally associated with Good ’til Cancelled Orders.

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

A trade with which serves to cancel or offset some or all of the market risk of an open position.

The rate at which a dealer is willing to sell a currency. See Ask (offer) price

Measures an outlook of purchasing managers in the service sector. Such managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Readings above 50 generally indicate expansion, while reading below 50 suggest economic contraction.

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.

Describes quotes to which every market participant has equal access.

In the currency markets, describes the amount by which the forward or futures price exceed the spot price.

The netted total holdings of a given currency.

Exposure to changes in governmental policy which will have an adverse effect on an investor’s position.

The smallest unit of price for any foreign currency. Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.

Measures an individuals’ total annual gross earnings from wages, business enterprises and various investments. Personal income is the key to personal spending, which accounts for 2/3 of GDP in the major economies.

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

Buying and selling of a specified amount of currency.

A rollover is the interest paid or earned on an open position held past the close of the NY trading at 1700 ET reflecting the interest rate differential between the two currencies. The spot forex market is traded on a two-day value date. For example, for trades executed on Monday, the value date is Wednesday. However, if a position is opened on Monday and held overnight (remains open after 1700 ET), the value date is now Thursday. The exception is a position opened and held overnight on Wednesday. The normal value date would be Saturday; because banks are closed on Saturday the value date is actually the following Monday. Due to the weekend, positions held overnight on Wednesday incur or earn an extra two days of interest. Trades with a value date that falls on a holiday will also incur or earn additional interest.

The employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.

Exposure to uncertain change, most often used with a negative connotation of adverse change.

An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of Devaluation.

Measures the monthly retail sales of all goods and services sold by retailers based on a sampling of variety of different types and sizes. This data gives a look into consumer spending behavior, which is a key determinant of growth in all major economies.

A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.

The price of one currency in terms of another, typically used for dealing purposes.

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

A recovery in price after a period of decline.

A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.

Market slang for Swiss Franc.

Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor’s position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.

Purchase and sales are in balance and thus the dealer has no open position.

The overnight or rollover interest (which is earned or paid) for having open positions running up to the next trading day.

The difference between the bid and offer prices.

The purchase or sale of a foreign currency or commodity for immediate delivery (as opposed to a date in the future). Spot contracts are settled electronically.

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

A physical market in which foreign currencies and commodities are bought and sold for cash at the current market price, settled “on the spot” and delivered immediately.

A simple average of a pre – defined amount of price bars. For example, a 50 period Daily chart SMA is the average closing price of the previous 50 daily closing bars. Any time interval can be applied here.

An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.

The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.

When both a bid and offer rate is quoted for a FX transaction.

The total money value of all executed transactions in a given time period; volume.

The date on which a trade occurs.

The cost of buying or selling a financial instrument.

Measures the difference in value between imported and exported goods and services. Nations with trade surpluses (exports greater than imports), such as Japan, tend to see their currencies appreciate, while countries with trade deficits (imports greater than exports), such as the US, tend to see their currencies weaken.

Simultaneous buying and selling of a currency for delivery the following day.

A minimum change in price, up or down.

An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.

The interest rate at which US banks will lend to their prime corporate customers.

In the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.

A new price quote at a price higher than the preceding quote.

The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains’ Losses become Profits/Losses when position is closed.

Measures the total workforce that is unemployed and actively seeking employment, measured as the percentage of the labor force.

Shows the market’s expectation of 30 – day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”.

Funds a broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements.

The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date.

Chart formation that shows a narrowing price range over time, where price highs in an ascending wedge are incrementally less, or in a descending wedge, price declines are incrementally smaller. Ascending wedges typically conclude with a downside breakout, and descending wedges typically terminate with upside breakouts.