Total amount of exposure a bank has with a customer for both spot and forward contracts.
The simultaneous buying and selling of foreign exchange for the sake of realizing profits from discrepancies between exchange rates prevailing in the market at the same time in different markets.
The price/rate that a seller is prepared to sell at.
is the currency against which exchange rates are generally quoted in a given country.
A trader going short or advocating this action in the expectation of depreciation of a currency.
The price that a buyer is prepared to purchase at the price of the currency.
The difference between the buy (bid) and sell (offer) price of a currency or financial instrument.
A quantitative method which combines a moving average with the instrument’s volatility. The bands were designed to gauge whether the prices are high or low on a relative basis. They are plotted two standard deviations above and below a simple moving average. The bands look like an expanding and contracting envelope model.
A trader going long or advocating this action in the expectation that the currency will appreciate.
is gold and silver that is officially recognized as being at least 99.5% pure and is in the form of bars or ingots.
Rate at which a bank is prepared to buy foreign exchange. Also known as the Bid Rate.
A type of chart which consists of four major prices: high, low, open, close. The body of the candlestick bar is formed by the opening and closing prices.
Exchange rate quoted by the trading banks each day for small foreign exchange transactions.
A contract for difference (CFD) is essentially a contract between an investor and an investment bank or a spread-betting firm. At the end of the contract, the parties exchange the difference between the opening and closing prices of a specified financial instrument, including shares or commodities.
An individual who studies graphs and charts of historical data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.
Closing a position refers to executing a transaction that is the exact opposite of an open position.
The agreed exchange rate at which the currency pair may be exchanged on the settlement date.
is a basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services.
The exchange rate between two currencies, e.g., AUD/USD.
The type of money that a country uses. It can be traded for other currencies on the foreign exchange market, so each currency has a value relative to another.
In international finance “the dollar” is always the U.S. dollar. All other “dollar” currencies should be described specifically. i.e. The Australian Dollar.
Derivatives are financial products that derive their value from the price of an underlying asset. Derivatives are often used by traders as a device to speculate on the future price movements of an asset, whether that be up or down, without having to buy the asset itself.
The expression of the value of one currency in terms of another. For example, in the exchange rate AUD/USD0.8950, one Australian dollar is equal to 89.50 United States cents (AUD1.0000 = USD0.8950).
The date at which an option transaction is expired which is usually 2 business days before the settlement date.
In trading, equity can mean several different things. However, it usually comes down to the ownership of an asset without any debt involved.
is an abbreviation for the term “foreign exchange”. The foreign exchange market is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines the foreign exchange rate. It includes all aspects of buying, selling and exchanging currencies at current or determined prices.
Leverage is having the ability to control a large amount of money using very little of your own money and borrowing the rest. For example, to control a $100,000 position, your broker will set aside $1,000 from your account. Your leverage, which is expressed in ratios, is now 100:1.
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.
A dealer is said to make a market when they quote bid and offer prices at which they stand ready to buy and sell.
The daily adjustment of an account to reflect accrued profits and losses often required to calculate variations of margins.
A market maker is a person or firm authorised to create and maintain a market in an instrument.
An order to buy or sell a financial instrument immediately at the best possible price.
Margin is the amount of money needed as a “good faith deposit” to open a position with your broker. It is used by your broker to maintain your position. Your broker basically takes your margin deposit and pools them with everyone else’s margin deposit and uses this one “super margin deposit” to be able to place trades within the interbank network.
is the term for when a broker requests an increase maintenance margin from a trader, in order to keep a leveraged trade open.
The current or prevailing spot exchange rate in the foreign exchange market.
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 way of smoothing a set of data, widely used in price time series.
An active trade that has yet to be closed.
Quantitative methods designed to provide signals regarding the overbought and oversold conditions.
Stands for over-the-counter, and refers to a trade that is not made on a formal exchange. It is often also referred to as off-exchange trading.
An entry order is one that is used to enter a trade at a specified price level. If the currency pair never reaches that price level then the entry order is not executed.
The most common increment of currencies is known as the “pip.” Most currency pairs are quoted to four decimal places (0.0001 in case of EUR/USD, GBD/USD, USD/CHF and 01 in case of USD/JPY). For instance, if the EUR/USD moves from 1.28015 to 1.28025, then this represents a one pip movement. For Japanese Yen pairs, 1 pip is the second decimal place of a quotation. If USD/JPY moved from 109.105 to 109.115, then this represents a one pip movement.
is a document that summarizes the spread, leverage, instruments and trading hours (For our product sheet please click here).
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.
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.
Rollover is the interest paid or earned by a trader for holding a position overnight. Since every currency trade involves borrowing one currency to buy another, interest rollover charges are part of FX trading. Interest is paid on the currency that is borrowed and earned on the one that is bought.
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 difference between the ask (buy)and bid (sell) price.
A stop loss is an instruction to close out a trade at a price worse than the current market level and, as the name suggests, is used to help minimise losses.
is a specific point at which all of a trader’s active positions in the foreign exchange market are closed automatically by their broker, because of a decrease in their margin levels, meaning that they can no longer support the open positions.
A forex swap rate is defined as an overnight or rollover interest (that is earned or paid) for holding positions overnight in foreign exchange trading.
is an instruction to close out a trade at a price that is better than the current market level and is used to help lock in price targets.
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.