invest - Your Day Trading: 01/01/2009

Forex Trading - Abbreviations

A
All or None - A limit price order that instructs the broker to go ahead
with the whole order at the price or not at all
Andrews Method - A technique, developed by Dr. Alan Andrews, for
identifying the upper and lower parallel lines of a trend
Appreciation - A currency appreciates when the price rises or
strengthens
Ask (Offer) - The price at which a dealer/trader is willing to sell a
currency. Also, the price at which a trader can buy a currency
Ask Price (Ask Rate) - The lowest price at which a currency is offered
for sale
Aussie - Market term for the Australian Dollar

B
Back Office - The department in the back office who deal with financial
transactions
Bar chart - A chart showing the currency prices with each bar showing
the opening, closing, high and low prices for a specific time
Base currency - The first currency in a currency pair
Bear Market - A market where prices are constantly declining
Bid - The price at which a dealer/trader is willing to purchase currency.
Also, the price at which a trader can sell a currency
Big figure - The first few digits of an exchange rate. In some cases
the digits rarely change and therefore are omitted in dealer
quotes. Eg. EUR/JPY 148.20/148.25 would be quoted as 20/25
Book - A summary of a traders/desks total positions
Broker - Company/individual acting as a middle man between the
buyer and seller, for a fee/commission
Bull market - A market where prices rise constantly

C
Cable - Market term for the British pound/US Dollar
Central Bank - Organisation that manages their countrys monetary
policy
Call Rate - Overnight interbank interest rate
Candlestick chart - The chart shows the trading range for the day and
the opening and closing of prices; the range is shaded in the form
of a candlestick
Clearing - Process of settling a trade
Commission - Transaction fee charge by the broker
Contract - Standard trading lot, usually 100,000 units of the base
currency
Country Risk - Risk associated with cross-border transactions
determined by legal or political activy
Cover - Close out a foreign currency trading position
Cross Rate - The exchange rate between two currencies where the
currency pair in the country that the original quote came from
Currency - Money issued by the government or central bank

D
Day Trading - Opening and Closing positions on the same day
Dealer - Person who acts as the middleman for the transaction,
placing the buying or selling order
Deficit - Negative balance of trade
Delivery - A forex trade where an actual delivery of currencies traded
is made
Depreciation - Decline in the value of currency
Devaluation - The deliberate adjustment of a currencys value usually
by the Central bank or government
Downtrend - When the price moves consistently downwards
Dow Theory - Used by analysts to check the direction of the market
prices. Originated by Charles Dow

E
Economic Indicator - A measure of strength or weakness of a
country's economy, eg. employment rates, inflation and so on
Euro - Currency of the European Monetary Union
European Monetary Union - Setup to establish a single European
currency (the Euro)
Exchange Rate - The value of one currency quoted in terms of
another currency
F
Foreign Exchange / Forex / FX - The buying of one currency and
selling of another
Forward - A deal that will commence, on an agreed date, in the future
Forward Points - The pips or points added or subtracted from the
current exchange rate to calculate a forward price
Fundamental Analysis - The analysis of economical or political
information to determine future movements in the financial market

G
Gross Domestic Product (GDP) - The measure of a countrys economic
growth
Good Till Cancelled (GTC) - A trading order that remains with dealer
until the trader cancels it

H
Hedging - An investment that reduces the volatility of your portfolio
value by undertaking one investment activity to protect against
loss in another
High / Low - Highest traded price and lowest trading price for the
current trading day

I
Inflation - Where there is a rise in consumer goods and services,
thereby reducing purchasing power
Initial margin - The deposit required by a broker for a trader to
execute currency trades
Interbank rates - The forex rates that international banks quote
other large international banks

K
Kiwi - Market term for the New Zealand Dollar

L
Leverage - The ability to trade with borrowed funds. The trader can
then gain more profit but also lose more
Limit Order - An order to buy below a specified price (enter market)
or to sell above a specified price (exit market)
Long (position) - To buy a currency expecting to sell it at a higher
price
Lot - Standard trading contract, usually 100,000 units of base
currency

M
Major Currency - A more frequently traded currency, for example,
USD, GBP, EUR and JPY
Margin - The amount of deposit that a broker requires a trader to
keep in their account to cover losses
Margin Call - This happens when a broker needs you to put additional
funds into your account to bring the margin up to the required
minimum level
Market maker - A dealer or broker who is prepared to buy or sell at
stated prices
Market Order - An order from the trader to buy or sell at the best
price available
Market timing - Using technical tools to time exit and entry moves
Market trend - The direction in which currency prices are moving at
the time
Minor Currency - A lesser traded currency, for example, PLN, SGD
and THB

O
Order Cancels the Other (OCO) - When executed, an order that
cancels another
Offer (Ask) - The price at ehich a dealer/trader is willing to sell a
currency
Open Order - An order that is executed when a certain price is
reached
Open position (trade) - A deal that has not yet been settled or
reversed by payment
Over The Counter (OTC) - Transaction that is carried out over the
counter and not over an exchange
Overnight - A trade that remains open until the next trading day

P
Pegging - Technique to stabilize a countrys currency by making it
fixed to the exchange rate of another country
Pip (point) - The smallest move an exchange can make. Normally
0.0001 but in a few cases it is 0.1
Position - Referes to the amount of currency owned or owed by a
trader
Pound - Market term for the British Pound Sterling
Pricing currency - The second currency in a currency pair

Q
Quote - A price quote that shows the bid price and ask (offer) price
Quoting currency - The second currency in a currency pair

R
Rate - Price of one currency in terms of another
Revaluation - Opposite of devaluation. Ussually involves the central
bank increasing the exchange rate for a currency
Risk Capital - The amount of money a trader has in their account
Risk Management - Technique to monitor and control risk
Roll-over - Where a deal is rolled over to another date. The cost
involves the difference of interest rates between the two
currencies

S
Sell - Selling a base currency in terms of the pricing
(quoting) currency
Sell Order - An order to sell a base currency in terms of the pricing
(quoting) currency
Sell Limit Order - An order placed above the current market price,
where the sell limit attempts to sell at a higher price
Short (position) - To sell a currency expecting to buy at a lower price
(appreciates in value if market price declines)
Spot Price - Current exchange rate of a currency
Spread - The difference between the bid and offer (ask) price
Sterling - Market term for the British Pound Sterling
Stop Order - Used to buy or sell when a particular price is reached
Stop loss Order - An order to buy or sell when a particular price is
reached often used to minimize losses
Swap - When one currency is temporarily swapped for another, then
the currency is held and exchanged later. The swap is calculated
by the difference in interest rates
Swissy - Market term for the Swiss Franc

T
Technical Analysis - Technical study of currency price behaviour
Tick - Market term for a Pip or a Point
Ticker - Scrolling graph or scrolling quotes
Tomorrow to Next - The simultaneous buying and selling of currency
for delivery the following day and selling the next
Trading platform - Online software used for currency trading
Trend - When the price moves consistently in one direction

U
Uptrend - When the price moves consistently upwards

V
Value date - The settlement date of a spot or forward deal (usually
two business days forward)
Volatility - Measure of market movement over time

W
Whipsaw - Market term used to describe a very volatile market where
a sharp price movement in one direction is followed by a sharp
reversal

Y
Yard - Market term for a billion

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Arbitrage
Dealing in two or more markets at the same time (or in similar products in the same market) to take advantage of temporary mispricing in order to make a profit.

At-the-Money
In options, when the strike price equals the price of the underlying contract.

Bear
A person who believes that prices will decline.

Bear Market
A market characterized by declining prices.

Bid
The rate at which a dealer is willing to buy the vase currency.

Big Figure
The first three digits of an exchange rate, e.g. USD 1.62 per pound or DEM 1.49 per dollar.

Bull
A person who believes that prices will rise.

Bull Market
A market characterized by rising prices.

Cable
Dealer's slang for the UK sterling/US dollar exchange rate.

Call
An option that gives the buyer the right to long a position in the underlying contract at a specific price; the call writer (seller) may be assigned a short position in the underlying contract if the buyer exercises his call.

Call Rate
The overnight interest rate.

Cash Market
The market for the purchase and sale of physical currencies.

Convertible Currency
Currency which can be exchanged for other currencies of gold without authorization from the central bank.

Counterparties
The parties on either side of a transaction.

Cross Rate
Exchange rate that does not involve the US dollar.

Currency Clause
A clause in an export contract in which the sum payable is denominated in the buyer's currency; but the amount payable will vary with the exchange rate for the buyer's currency against the seller's currency.

Day Trading
Refers to opening and closing the same position or positions within one day's trading.

Delta
For options, also called the neutral hedge ratio. Expresses the expected change in the option price, given a one-unit change in the price of the underlying contract.

Derivative
Financial instruments, such as futures and options, which derive their value from underlying securities including bonds, bills, currencies, and equities.

Discount
Cheaper than the spot price, e.g. forward discount.

Dollar Rate
When a variable amount of a foreign currency is quoted against one unit of the US dollar, regardless of where the dealer is located or in what currency he is requesting a quote. The major exception is the UK sterling/US dollar rate cable which is quoted as units of the US dollar to UK sterling.

EMS
European Monetary System

ERM
Exchange Rate Mechanism

Eurobond
Marketable debt security issued outside the country in whose currency the debt is denominated.

Eurodollar
A dollar deposit acquired by a person or bank not residing in the United States and held outside the United States and therefore not subject to US reserve restrictions.

European Currency Unit
The currency unit in the EMS, where the unit is defined by the sum of quantities of each of the national currencies of the members of the EMS, so the value of the ECU changes in terms of third currencies, such as e.g. the US dollar.

Exchange Control
Government regulations restricting or forbidding certain types of foreign currency transactions including purchases from abroad, payment abroad of interest or dividends, and investing abroad.

Exchange Rate Depreciation
Currency which loses in value against one or more other currencies, especially if this happens in response to natural supply rather than by an official devaluation.

Exchange Rate Risk
The potential loss that could be incurred from a movement in exchange rates.

Exposure
A financial risk facing a business, which can be categorized according to its cause or source. Currency exposures are exposures to exchange rate risk.

Fed
Abbreviation for Federal Reserve System of the United States. In the domestic context Fed usually refers to its board of governors or to the Federal Reserve Bank of New York; in the foreign exchange context it usually refers to the latter.

Federal Open Market Committee
Key decision making committee of the Federal Reserve System. The minutes of its meeting are published about a month later, and show the current stance of US monetary policy.

Figure
Dealers' slang meaning "00" and denoting and.

Fixed Exchange rate
Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower intervention points.

Flat/Square
Where a client has not traded in that currency or where an earlier deal is reversed thereby creating a neutral (flat) position.

Floating Exchange Rate
When the value of a currency is decided by supply and demand.

Forex
An abbreviation for foreign exchange also FX.

Forward Points
The interest rate differential between two currencies expressed in exchange rate points. These forward points are added to or subtracted from the spot rate to give the forward or outright rate.

Forward Rate
The rate at which a foreign exchange contract is struck today for settlement at a specified future date.

Fundamental Analysis
Analysis based on economic factors.

Future
A contract giving the obligation to buy or sell an asset at a set date in the future.

GTC "Good Till Cancelled"
An order left with a dealer to buy or sell at a fixed price. It holds until cancelled.

Hard Currency
A currency whose value is expected to remain stable or increase in terms of other currencies.

Hedging
A hedging transaction is one which protects an asset or liability against a fluctuation in the foreign exchange rate.

IMF
International Monetary Fund

Initial Margin
The deposit required before a client can transact a deal.

Interest Parity
The interest parity theory is if there are two financial instruments in different currencies but identical in risk and maturity (e.g. three month UK gilts and Us Treasury bills), then a difference in the interest rate on the instruments will be reflected in the premium or discount for the forward exchange rate.

In-the-Money
In call options, when the strike price is below the price of the underlying contract. In put options, when the strike price is above the price of the underlying contract. In-the-Money options are the most expensive options because the premium includes intrinsic value.

Intrinsic Value
For in-the-money call and put options, the difference between the strike price and the underlying contract price.

Leads and Lags
Process of accelerating (leads) or slowing up (lags) foreign exchange payments or receipts when a change in exchange rates is expected.

Leverage
Facility whereby a small margin deposit can control a much larger total contract value, a mechanism which determines the ability to make extraordinary profits at the same time as keeping the risk capital to a minimum.

Limit Order
An order given which has restrictions upon its execution. The client specifies a price and the order can be executed only if the market reaches that price.

Lombard Rate
German term for the rate of interest charged for loans against the security of pledged paper. Particularly used by Bundesbank, which normally maintains its Lombard rate at about 1/2% above its discount rate.

London Interbank Offered Rate (LIBOR)
The interest rate at which banks in London are prepared to lend funds to first-class banks.

Long Position
A position where the client has bought a currency he does not already own. Normally expressed in base currency terms, e.g. long US dollars (short Deutsch marks).

Margin
Cash or guarantee deposited by a client wishing to trade.

Maturity
Date for settlement

Not Held Basis Order
An order whereby the price may trade through or even better than the client's desired level, but the principal is not held responsible if the order is not executed.

Offer
The rate at which a dealer is willing to sell the base currency.

One Cancels Other (OCO) Order
Where the execution of one order automatically cancels a previous order.

Open Position
Any deal which has not been settled by physical payment or reversed by an equal and opposite deal for the same value date.

Option
The right, but not the obligation, to buy or sell an asset, such as currency, on or before a set of future date.

Out-of-the Money
Option calls with strike prices above the price of the underlying contracts, and puts with strike prices below the price of the underlying contracts.

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.

Overnight Trading
Refers to a purchase or sale between 9:00 pm and 7:00 am.

Over-the-Counter Transaction (OTC)
A transaction arranged by direct negotiation, usually by telephone, rather than on an exchange.

Point
0.0001 of a unit; for instance, if the GBP/USD is 1.5220, then 1.5219 is one point lower

Political Risk
The potential for losses arising from a change in government policy.

Premium
In options, the price of a call or a put, which the buyer initially pays to the option writer.

Price Risk (Market Risk)
The risk of a fall in the market value of a foreign investment (as measured in the domestic currency of the investor) due to an adverse change in the value of the currency of the investment.

Principal
The counterparty that sells and buys currencies for his own account as opposed to a broker who introduces a buyer to a seller and vice versa.

Purchasing Power Parity
The proposition that over the long term, changes in the exchange rate between two currencies are the result of differences in the relative rate of inflation in the two countries concerned.

Put
In options, the buyer of a put has the right to acquire a short position in the underlying contract at the strike price until the option expires; the seller (writer) of a put obligates himself to take a long position in the contract at the strike price if the buyer exercises his put.

Resistance
A price level at which you would expect selling to take place due to technical analysis. The resistance level of one currency is the support level for the other.

Risk Neutrality
An attitude that risks should neither be sought nor avoided, but should be accepted whenever they arise.

Rollover
Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies.

Settlement
Actual exchange of base currency and currency between principal and client.

Short
A market position where the client has sold a currency he does not already own. Normally expressed in base currency terms, e.g. short US dollars (long Deutsch marks).

Soft Currency
A currency which is expected to devalue or depreciate against other currencies, or whose exchange rate must be supported by central bank intervention or exchange controls.

Speculation
Buying or selling currency in expectation of an exchange rate movement, so as to make a profit, either in the same market or between two different markets, e.g. forex cash markets and derivatives markets.

Spot
Spot means that the settlement date of a deal is two business days forward.

Spread
The difference in prices between bid and offer rates.

Stop Loss Order (or Stop)
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.

Strike Price
For call options, the specified price at which the buyer has the right to purchase the underlying contract.

Structural Hedging
The process of reducing or eliminating currency exposure by matching receivables and payables in each currency or currency bloc to minimise the net exposure.

Support
Price level at which you expect buying to take place. See resistance.

Swap
An agreement between two parties to exchange a series of future payments. In a currency swap, the exchange of payments (cash flow) are in two currencies, one of which is often the US dollar.

Swift
The society for Worldwide International Fund Transfers is a multinational facility for fund transfers based in Belgium and the Netherlands.

Technical Analysis
Analysis based on market action through chart study, moving averages, volume, open interest, oscillators, formations, stochastics and other technical indicators.

Thin Trading
When the volumes of currency bought and sold are low.

Time Value
In options, the value of the premium is based on the amount of time left before the contract expires and the volatility of the underlying contract. Time value represents that portion of the premium in excess of intrinsic value. Time value diminishes as the expiration of the option draws near and/or if the underlying contract's price development becomes less volatile.

Two-Way Price
Rates for which both a bid and offer are quoted.

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

Value Date
Settlement date of a spot or forward deal.

Volatility
A measure of price fluctuation.

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FA = Forex Ambush
DE = Diamond Edition
DD = DrawDown
AT = AutoTrade
TP = Take Profit or Limit
TS = Trailing Stop
SL = Stop Loss or Stop
BBL = Be Back Later
DDC = DrawDown Collector (coming soon)
SKE = SideKick Edition (coming soon)
FXTS = FX Trading Station (from FXCM)
MT4 = MetaTrader 4
MM = Money Management
PM = Private Message (used in chat)
BE = Break Even (close with no profit nor loss)

Read more: http://www.forexambush.com/sa/faqs/104-forex-abbreviations.html#ixzz1EELESESA

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In banking practice there are special code abbreviations: for example, the exchange rate for dollar against yen refers to USD/JPY, British pound against US Dollar to GBP/USD. The first currency is referred to as the base currency and the second as quote currency:
USD / JPY = 120.25

Base currency Quote currency Rate
This abbreviation specifies how much you have to pay in quote currency to obtain one unit of the base currency (in this example, 120.25 Japanese Yen for one US Dollar). The minimum rate fluctuation is called points or pips.

Most currencies except USD/JPY, EUR/JPY and GBP/JPY where pip is 0.01 has 4th decimal system as 0.0001.

The currency pairs on Forex are quoted as bid and ask (or offer) prices:
Bid Ask
USD / JPY = 120.25 / 120.30

Bid is the rate at which you can sell the base currency, in our case it’s dollar, and buy the quote currency, i.e. Japanese Yen.

Ask (or offer) is the rate at which you can buy the base currency, in our case dollars, and sell the quote currency, i.e. Japanese Yen.

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

Margin trading assumes that Forex dealing is based on the margin, the collateral, and the provided leverage.

This means that a client places minimal cash deposit, much smaller than the underlying value of the contract, but can operate with larger amounts sufficient to enter the real market. Such credits are provided by the brokerage companies besides their informational services and make it possible for a trader to enter into positions larger than his/her account balance. This collateral is typically referred to as margin.

Leverage is the term used to describe margin requirements: the ratio between the collateral and borrowed funds 1:20, 1:40, 1:50, 1:100. Leverage 1:100 means then when you wish to open a new position, then you must have 100 times less then the contract size.

Currency Rate is the ratio of one currency valued against another value of a currency of one country. It whether depends on the demand and supply on free market or restricted by a government or by central bank.

Lot is a fixed standard currency amount for trading provided on the collateral — margin. Sometimes it is called the contract size. The 1.0 lot contract size for each currency pair is listed in Contract Specification.

Storage is the charge to rollover the position overnight. It can be both positive (credited to your account balance!) or negative (debited from you account balance) depending on the interests rate in the countries which currencies you trade.

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