Knowledge Center

A

ADJUSTMENT

An action carried out by a central bank when it is necessary to fix payment imbalances or issues with the rate of a nation’s currency.

ARBITRAGE

It is a strategy in which an asset is bought and sold simultaneously in different markets to take advantage of the price imbalance.

ASK

The price at which a customer can buy a currency pair. Also referred to as the ‘offer,’ ‘ask price,’ or ‘ask rate.’

ASSET

An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit or profit. In Forex, assets may relate to currencies being held.

AUSSIE

Australian dollar

B

BALANCE OF PAYMENTS

All the payments made between the residents of a country and the rest of the world over a period of time, such as a quarter, or a year are recorded under the balance of payments

BAND

It is the range a currency is allowed to move against another currency based on pre-existing conditions imposed by the local government. It is also known as Trading Band.

BANK RATE

The interest rate at which the central bank lends to domestic banks. Bank rates influence lending rates of commercial banks.

BASE CURRENCY

Base currency is the first currency appearing in a currency pair quotation. In USD/JPY, for example, USD is the base currency. The base currency always comes first in the pair.

BASKET

A basket is a collection of multiple securities - stocks, currencies, etc. which have a similar theme or share certain criteria.

BEAR MARKET

A bear market is when a market experiences prolonged price declines. A bear market can last for weeks or months.

BID

The highest price a buyer will pay to buy a specified number of shares of a stock at any given time.

BID/ASK SPREAD

Bid-Ask Spread is the difference in pips between ask (offer/sell) price and bid (purchase/buy) price

BOLLINGER BANDS

A bollinger band is a technical analisys tool showing the prices and volatility of a financial instrument over time.

BULL MARKET

A bull market is when prices are in an upward trend. A bear market can last for weeks or months.

BUY SIGNAL

This is a signal that will be determined by the technical analysis a trader uses. When certain conditions are met, this signal will indicate that it is a good time to buy. You can observe a buy signal when analyzing chart patterns or they can be automatically calculated by trading platforms.

C

CALL RATE

The rate of interest on call loans. These are loans that are due for payment on demand.

CANDLESTICK CHART

Is a style of financial chart used to describe price movements. They are used by traders to determine possible price movement based on past patterns

CASH

This is a kind of exchange transaction that is settled on the same day that it is made. This is a term that is usually only used in American markets.

CENTRAL BANK

This is a country’s principal economic institution that provides funds for the government and commercial banking system. It also sets interest rates and other monetary policy as well as issuing currency.

CENTRAL RATE

This is an exchange rate for a currency in relation to the European currency unit. Each currency can move across a small range against the central rate.

CONTRACT

This is where an agreement is put in place to buy or sell a certain amount of a particular currency or option for a defined period of time at some point in the future.

CONVERSION

This is the process that sees an asset or liability priced in one currency exchanged for an asset or liability in a different currency.

CONVERTIBLE CURRENCY

This is a currency that can be freely converted into another currency and for any purpose without the need for authorization from the relevant central bank.

CROSS RATE

This is an exchange rate that is worked out by the rates of two currencies being computed against a third, usually the US dollar.

CURRENCY PAIR

The two currencies that constitute a foreign exchange rate. The EUR/USD currency pair is considered the most liquid currency pair in the world.

D

DAY TRADER

The goal is to profit from very short-term price movements. A day trader is somebody who buys and sells an asset within the same day. This type of trading is most commonly done in the forex market.

DAY TRADING

This is the activity that is carried out by those traders who buy and sell positions within the same day. Day trading can be a very profitable undertaking, but it also comes with high risk and uncertainty.

DELIVERY DATE

The day when a stock, bond, or option trade must be settled. In FX this is usually referred to as the value date.

DEPRECIATION

When a currency or other asset goes down in value.

DOJI

This is a commonly seen pattern that is used in technical analysis. Its candlestick formation is very small as it tracks open and close prices that are almost equal. In Japanese, "doji" means "the same thing", referring to the rarity of having the open and close price be exactly the same.

E

ENTRY LIMIT

An order to buy a currency or other asset at a future price that the trader sets. If the market moves in the opposite direction it’s possible that the order will not be realized.

ENTRY STOP

This facility serves to protect traders from heavy losses and protects profits. This is an instruction to buy or sell when a stock or currency hits a certain price. A buy order would set a price that is higher than the current rate while a sell order would be set below the current rate.

EUR

This represents the Euro, the currency used by 19 of the 27 countries within the European Union.

EXPIRATION

Also known as the “final trading day”, traders must close their options before this day to realize their profit or loss.

F

FED FUND RATE

The fed funds rate is the interest rate that depository institutions—banks, savings and loans, and credit unions—charge each other for overnight loans. It also indicates the Federal Reserve’s view on the current state of the money supply.

FEDERAL RESERVE (FED)

Central bank of the United States.

FOMC

This is an offshoot of the Federal Reserve which dictates monetary policy in the United States.

FOREIGN EXCHANGE

The forex market is the largest, most liquid market in the world, with trillions of dollars changing hands every day. The buying and selling of one currency against another. The online trading of forex involves off-exchange transactions.

FOREIGN EXCHANGE SWAP

This is the simultaneous buying and selling of identical amounts of one currency for another, but with two different value dates. Usually carried out to secure loans in a foreign currency at more favorable interest rates.

FOREX

The term is most commonly used when referring to foreign exchange trading.

FUNDAMENTAL ANALYSIS

The use of economic and political data to work out the future movements of the markets.

FUNDAMENTALS

Interest rates, trade balance, growth rates, and fundamentals are generally the macro-economic factors that can determine price movements.

FX

An abbreviation commonly used to refer to the trading of foreign currency.

G

GOLD STANDARD

A monetary system in which the standard economic unit of account is based on a fixed quantity of gold. This system was abandoned after the Great Depression of the 1930s.

GROSS DOMESTIC PRODUCT

The GDP is a monetary measure of all the goods and services that a country produces over a specific period.

GROSS NATIONAL PRODUCT

Similar to gross domestic product but this figure also includes all income that comes from outside the country’s borders too.

H

HARD CURRENCY

A characteristic is that its value is unlikely to depreciate suddenly. Any currency that is easily traded and converted into other currencies.

HEDGING

It is an advanced risk management strategy where a trader tries to cover one position by opening another. Usually set up to protect against losses.

I

INFLATION

This is where prices rise and there is a drop in the purchasing value of money. Inflation is sometimes classified into three types: demand-pull inflation, cost-push inflation, and built-in inflation.

INITIAL MARGIN

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

J

J CURVE

The economic theory which states that a country's trade deficit will initially worsen after the depreciation of its currency.

K

KIWI

New Zealand dollar

L

LEADING INDICATORS

The statistic about economic activity that often precedes changes in growth rates and other significant price affecting trends. They “lead” to successfully meeting overall business objectives.

LEVERAGE

Investors use leverage to multiply their buying power in the market. It refers to a trader’s ability to use margin to make larger trades. Leverage can allow for bigger gains but could worsen losses.

LINE CHART

The simplest charts used to track price movements over some time. Most of the time it is used in conjunction with other charts to carry out an inter-market analysis.

LIQUIDITY

Market liquidity refers to a market's ability to allow assets to be bought and sold easily and quickly. If an asset has high liquidity it means that many people are buying and selling it.

LONG

The trader's expectation that the price will rise in the future. Long positions in a stock portfolio refer to stocks that have been bought and are owned.

LOONEY

Canadian dollar, CAD

LOT

The standardized number of units that are traded in an FX transaction. A standard lot is equal to 100,000 units of the base currency. 10,000 units are known as a Mini. 1,000 units is a Micro lot.

M

MARGIN

Margin trading refers to the practice of using borrowed funds from a broker to trade a financial asset, which forms the collateral for the loan from the broker. Margin allows you to trade with leverage and make more profit on price movements, but it could also accelerate your losses. If you made a trade with a margin of 50:1, for example, you would only need to risk $10 in order to open a $500 trade.

MARGIN CALL

A margin call is a request from your broker to increase the amount of equity in your account. This is made when a trader does not hold enough collateral to cover potential losses.

MARKET ORDER

A market order is an order to buy or sell a stock at the market's current best available price.

N

NET WORTH

The total value of the assets a company or person owns minus the liabilities.

NASDAQ

An online global marketplace where all the tech giants are listed.

O

OFFER

The proposal made by a buyer or seller to buy or sell an asset. It is also the best price at which it is possible to buy.

OFF-QUOTE

Off-quote can occur if there is a lack of liquidity in the market you would like to trade. It could also occur at times of exceptionally high volatility in the market. This means that there have been no new prices on the selected instrument for some time, and these last prices can no longer be treated as market prices.

OPEN POSITION

This is a trade that has been established, a live trade. It could be a buy or sell, a long or a short.

OVER THE COUNTER (OTC)

This is any kind of transaction that is not carried out at a physical stock exchange.

OVERNIGHT

A trade that takes place outside of trading hours, carries over from one day to the next.

P

PEGGED

Pegged price is the price at which a commodity has been fixed by agreement. This is where two currencies are matched in their movements.

PIP

Pip is the abbreviation for 'point in percentage'. In the forex, market pips are measured in decimals (0.0001). If the AUDUSD price changes from 0.64800 to 0.64810, we say that the variation of 0.00010 USD is 1 pip.

POSITION

A position is established when an investor executes a trade that does not offset an existing position. The position is the state of a committed trade.

Q

QUOTE CURRENCY

This is the second currency that is quoted in a pair. In EUR/USD, the quote currency is USD. The quote currency is also known as the secondary currency or the counter currency.

QUALIFIED ANNUITY

Contributions to a qualified annuity are made with pre-tax dollars.

R

RALLY

A rally usually involves rapid or substantial upside moves over a relatively short period after a decline.

RANGE

The difference between the high and low price of an asset over a certain period.

RATE

The rate is the price of one currency when compared against another.

RESISTANCE

This is a point where analysts would expect selling to take place. Resistance takes place when an uptrend is expected to pause temporarily, due to a concentration of supply.

RISK CAPITAL

The amount of capital that should never jeopardize a trader’s overall financial stability.

RISK MANAGEMENT

Identifying, analyzing, accepting, or mitigating the uncertainty in investment decisions.

ROLLOVER

Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies, the swap is also called Tomorrow Next, Tom-Next or T/N.

S

SECURITY DEPOSIT

The amount of deposit you need to put down in order to open a position.

SHORT

In a short position, the trader expects that the price will decrease in the future. A short position is the opposite of a long position.

SLIPPAGE

This refers to the difference that can sometimes be found in pip value between the moment in which a market order is placed and the moment it is filled.

SOFT MARKET

A scenario in which there are more sellers than buyers. This usually results in rapid price drops. The term soft market is most frequently applied to the insurance industry.

SPREAD

This is the difference betwen the buy and sell price.

SPOT TRADE

A spot trade (spot transaction) refers to the purchase or sale of a foreign currency, financial instrument, or commodity for instant delivery at early as possible.

SPIKE

Sudden high fluctuations or big drops in price.

SPREAD

This is the difference between the bid and the ask price.

STERLING

Great Britain Pound, also known as "cable" in forex.

SUPPORT

Support occurs when a downtrend is expected to pause due to a concentration of demand. It is the opposite of resistance.

STOPOUT

When the ratio between equity and the required margin level falls under a certain percentage set by the Broker a StopOut is initiated. It automatically closes all open positions and it is an action taken to minimize losses.

SWAP

The difference between the central banks’ interest rates for each currency in a pair, as well as the broker’s commission, when positions are left open overnight. The swap might be positive or negative depending on the interest rate changes.

SWISSY

Term used for the Swiss franc in forex.

T

TECHNICAL ANALYSIS

Technical analysis attempts to predict future price movements.

THIN MARKET

A period of time that is characterized by a low number of buyers and sellers.

TICK

A tick is the minimum incremental amount at which an asset changes in price. It can be either up or down.

TRADE DATE

The date (day, month, year) that a trade takes place.

TRAILING STOP

This is a stop-loss price set above or below the current price that can be adjusted as the price moves.

TRANSACTION

Monetary exchange for a good or service.

TRANSACTION DATE

Same as trade date.

TREND

Trends can refer to both upward and downward movements in price. A minor trend would be one that takes place over a month. Intermediate would stretch from 1 to 6 months.

TREND LINE

Curves or straight lines, drawn to track price trends. Rising peaks and troughs will follow uptrends. Falling peaks and troughs will signal a downtrend.

U

UPTICK

This is a transaction for an instrument that is carried out at a higher price than the previous trade.

V

VOLATILITY

A tendency to change quickly and unpredictably. Volatility is a measure of the level of movements within a market or asset.

W

WORKING DAY

Business day. In the event where one country’s bank is closed, FX trades in the closed bank’s currency cannot be made.

X

XENOCURRENCY

A currency deposited or exchanged in a market outside its country of origin.

X-EFFICIENCY

The level of efficiency maintained by companies under conditions of imperfect competition like in the case of a monopoly.

Y

YIELD

The earnings generated by an investment over a period of time.

YARD

The term refers to one billion.

Z

ZERO COST DOLLAR

A zero cost collar strategy is used to hedge against volatility in an underlying asset's prices.

ZERO-BETA PORTFOLIO

The zero-beta portfolios have no market exposure which makes them unlikely to attract investor interest in bull markets.

Glossary

A

ADJUSTMENT

An action carried out by a central bank when it is necessary to fix payment imbalances or issues with the rate of a nation’s currency.

ARBITRAGE

It is a strategy in which an asset is bought and sold simultaneously in different markets to take advantage of the price imbalance.

ASK

The price at which a customer can buy a currency pair. Also referred to as the ‘offer,’ ‘ask price,’ or ‘ask rate.’

ASSET

AUSSIE

Australian dollar

B

BALANCE OF PAYMENTS

All the payments made between the residents of a country and the rest of the world over a period of time, such as a quarter, or a year are recorded under the balance of payments

BAND

It is the range a currency is allowed to move against another currency based on pre-existing conditions imposed by the local government. It is also known as Trading Band.

BANK RATE

The interest rate at which the central bank lends to domestic banks. Bank rates influence lending rates of commercial banks.

BASE CURRENCY

Base currency is the first currency appearing in a currency pair quotation. In USD/JPY, for example, USD is the base currency. The base currency always comes first in the pair.

BASKET

A basket is a collection of multiple securities - stocks, currencies, etc. which have a similar theme or share certain criteria.

BEAR MARKET

A bear market is when a market experiences prolonged price declines. A bear market can last for weeks or months.

BID

The highest price a buyer will pay to buy a specified number of shares of a stock at any given time.

BID/ASK SPREAD

Bid-Ask Spread is the difference in pips between ask (offer/sell) price and bid (purchase/buy) price

BOLLINGER BANDS

A bollinger band is a technical analisys tool showing the prices and volatility of a financial instrument over time.

BULL MARKET

A bull market is when prices are in an upward trend. A bear market can last for weeks or months.

BUY SIGNAL

C

CALL RATE

The rate of interest on call loans. These are loans that are due for payment on demand.

CANDLESTICK CHART

Is a style of financial chart used to describe price movements. They are used by traders to determine possible price movement based on past patterns

CASH

This is a kind of exchange transaction that is settled on the same day that it is made. This is a term that is usually only used in American markets.

CENTRAL BANK

CENTRAL RATE

This is an exchange rate for a currency in relation to the European currency unit. Each currency can move across a small range against the central rate.

CONTRACT

This is where an agreement is put in place to buy or sell a certain amount of a particular currency or option for a defined period of time at some point in the future.

CONVERSION

This is the process that sees an asset or liability priced in one currency exchanged for an asset or liability in a different currency.

CONVERTIBLE CURRENCY

This is a currency that can be freely converted into another currency and for any purpose without the need for authorization from the relevant central bank.

CROSS RATE

This is an exchange rate that is worked out by the rates of two currencies being computed against a third, usually the US dollar.

CURRENCY PAIR

The two currencies that constitute a foreign exchange rate. The EUR/USD currency pair is considered the most liquid currency pair in the world.

D

DAY TRADER

The goal is to profit from very short-term price movements. A day trader is somebody who buys and sells an asset within the same day. This type of trading is most commonly done in the forex market.

DAY TRADING

DELIVERY DATE

The day when a stock, bond, or option trade must be settled. In FX this is usually referred to as the value date.

DEPRECIATION

When a currency or other asset goes down in value.

DOJI

E

ENTRY LIMIT

An order to buy a currency or other asset at a future price that the trader sets. If the market moves in the opposite direction it’s possible that the order will not be realized.

ENTRY STOP

EUR

This represents the Euro, the currency used by 19 of the 27 countries within the European Union.

EXPIRATION

Also known as the “final trading day”, traders must close their options before this day to realize their profit or loss.

F

FED FUND RATE

FEDERAL RESERVE (FED)

Central bank of the United States.

FOMC

This is an offshoot of the Federal Reserve which dictates monetary policy in the United States.

FOREIGN EXCHANGE

FOREIGN EXCHANGE SWAP

FOREX

The term is most commonly used when referring to foreign exchange trading.

FUNDAMENTAL ANALYSIS

The use of economic and political data to work out the future movements of the markets.

FUNDAMENTALS

Interest rates, trade balance, growth rates, and fundamentals are generally the macro-economic factors that can determine price movements.

FX

An abbreviation commonly used to refer to the trading of foreign currency.

G

GOLD STANDARD

A monetary system in which the standard economic unit of account is based on a fixed quantity of gold. This system was abandoned after the Great Depression of the 1930s.

GROSS DOMESTIC PRODUCT

The GDP is a monetary measure of all the goods and services that a country produces over a specific period.

GROSS NATIONAL PRODUCT

Similar to gross domestic product but this figure also includes all income that comes from outside the country’s borders too.

H

HARD CURRENCY

A characteristic is that its value is unlikely to depreciate suddenly. Any currency that is easily traded and converted into other currencies.

HEDGING

It is an advanced risk management strategy where a trader tries to cover one position by opening another. Usually set up to protect against losses.

I

INFLATION

This is where prices rise and there is a drop in the purchasing value of money. Inflation is sometimes classified into three types: demand-pull inflation, cost-push inflation, and built-in inflation.

INITIAL MARGIN

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

J

J CURVE

The economic theory which states that a country's trade deficit will initially worsen after the depreciation of its currency.

K

KIWI

New Zealand dollar

L

LEADING INDICATORS

The statistic about economic activity that often precedes changes in growth rates and other significant price affecting trends. They “lead” to successfully meeting overall business objectives.

LEVERAGE

LINE CHART

The simplest charts used to track price movements over some time. Most of the time it is used in conjunction with other charts to carry out an inter-market analysis.

LIQUIDITY

Market liquidity refers to a market's ability to allow assets to be bought and sold easily and quickly. If an asset has high liquidity it means that many people are buying and selling it.

LONG

The trader's expectation that the price will rise in the future. Long positions in a stock portfolio refer to stocks that have been bought and are owned.

LOONEY

Canadian dollar, CAD

LOT

The standardized number of units that are traded in an FX transaction. A standard lot is equal to 100,000 units of the base currency. 10,000 units are known as a Mini. 1,000 units is a Micro lot.

M

MARGIN

MARGIN CALL

A margin call is a request from your broker to increase the amount of equity in your account. This is made when a trader does not hold enough collateral to cover potential losses.

MARKET ORDER

A market order is an order to buy or sell a stock at the market's current best available price.

N

NET WORTH

The total value of the assets a company or person owns minus the liabilities.

NASDAQ

An online global marketplace where all the tech giants are listed.

O

OFFER

The proposal made by a buyer or seller to buy or sell an asset. It is also the best price at which it is possible to buy.

OFF-QUOTE

OPEN POSITION

This is a trade that has been established, a live trade. It could be a buy or sell, a long or a short.

OVER THE COUNTER (OTC)

This is any kind of transaction that is not carried out at a physical stock exchange.

OVERNIGHT

A trade that takes place outside of trading hours, carries over from one day to the next.

P

PEGGED

Pegged price is the price at which a commodity has been fixed by agreement. This is where two currencies are matched in their movements.

PIP

POSITION

A position is established when an investor executes a trade that does not offset an existing position. The position is the state of a committed trade.

Q

QUOTE CURRENCY

This is the second currency that is quoted in a pair. In EUR/USD, the quote currency is USD. The quote currency is also known as the secondary currency or the counter currency.

QUALIFIED ANNUITY

Contributions to a qualified annuity are made with pre-tax dollars.

R

RALLY

A rally usually involves rapid or substantial upside moves over a relatively short period after a decline.

RANGE

The difference between the high and low price of an asset over a certain period.

RATE

The rate is the price of one currency when compared against another.

RESISTANCE

This is a point where analysts would expect selling to take place. Resistance takes place when an uptrend is expected to pause temporarily, due to a concentration of supply.

RISK CAPITAL

The amount of capital that should never jeopardize a trader’s overall financial stability.

RISK MANAGEMENT

Identifying, analyzing, accepting, or mitigating the uncertainty in investment decisions.

ROLLOVER

Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies, the swap is also called Tomorrow Next, Tom-Next or T/N.

S

SECURITY DEPOSIT

The amount of deposit you need to put down in order to open a position.

SHORT

In a short position, the trader expects that the price will decrease in the future. A short position is the opposite of a long position.

SLIPPAGE

This refers to the difference that can sometimes be found in pip value between the moment in which a market order is placed and the moment it is filled.

SOFT MARKET

A scenario in which there are more sellers than buyers. This usually results in rapid price drops. The term soft market is most frequently applied to the insurance industry.

SPREAD

This is the difference betwen the buy and sell price.

SPOT TRADE

A spot trade (spot transaction) refers to the purchase or sale of a foreign currency, financial instrument, or commodity for instant delivery at early as possible.

SPIKE

Sudden high fluctuations or big drops in price.

SPREAD

This is the difference between the bid and the ask price.

STERLING

Great Britain Pound, also known as "cable" in forex.

SUPPORT

Support occurs when a downtrend is expected to pause due to a concentration of demand. It is the opposite of resistance.

STOPOUT

SWAP

SWISSY

Term used for the Swiss franc in forex.

T

TECHNICAL ANALYSIS

Technical analysis attempts to predict future price movements.

THIN MARKET

A period of time that is characterized by a low number of buyers and sellers.

TICK

A tick is the minimum incremental amount at which an asset changes in price. It can be either up or down.

TRADE DATE

The date (day, month, year) that a trade takes place.

TRAILING STOP

This is a stop-loss price set above or below the current price that can be adjusted as the price moves.

TRANSACTION

Monetary exchange for a good or service.

TRANSACTION DATE

Same as trade date.

TREND

Trends can refer to both upward and downward movements in price. A minor trend would be one that takes place over a month. Intermediate would stretch from 1 to 6 months.

TREND LINE

Curves or straight lines, drawn to track price trends. Rising peaks and troughs will follow uptrends. Falling peaks and troughs will signal a downtrend.

U

UPTICK

This is a transaction for an instrument that is carried out at a higher price than the previous trade.

V

VOLATILITY

A tendency to change quickly and unpredictably. Volatility is a measure of the level of movements within a market or asset.

W

WORKING DAY

Business day. In the event where one country’s bank is closed, FX trades in the closed bank’s currency cannot be made.

X

XENOCURRENCY

A currency deposited or exchanged in a market outside its country of origin.

X-EFFICIENCY

The level of efficiency maintained by companies under conditions of imperfect competition like in the case of a monopoly.

Y

YIELD

The earnings generated by an investment over a period of time.

YARD

The term refers to one billion.

Z

ZERO COST DOLLAR

A zero cost collar strategy is used to hedge against volatility in an underlying asset's prices.

ZERO-BETA PORTFOLIO

The zero-beta portfolios have no market exposure which makes them unlikely to attract investor interest in bull markets.