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Forex Glossary

Traders often chat with one another about a variety of topics related to financial markets, giving their perspectives and discussing trading ideas and current moves on the markets. While communicating with each other they often use slang to express their thoughts in a shorter form. Some of the most popular slang is listed below.

Choose a starting letter

A B C D E F G H I J K L M N O P Q R S T U V W Y Z

A

API / API Trading: Application Programming Interface / Trading done through an API

Appreciation: A currency strengthening in response to market demand

Arbitrage: The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets. Arbitrage exists as a result of market inefficiencies. People who engage in arbitrage are called arbitrageurs

Ask (Offer) Price: The price at which sellers are willing to sell a currency pair

Aussie: Slang term used to refer to the Australian dollar.

AUD: Australian Dollar

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B

Balance of payments: The difference between the amount of exports and imports of a country in a specified period of time. A negative balance of payments means that more money is flowing out of the country than coming in.

Bank of Japan (BOJ): Japan's Central bank

Bank of Canada (BOC): Canada's Central bank

Bank of England (BOE): England's Central bank

Base currency: The first currency listed in a currency pair.

Basis point: A unit that is equal to 1/100th of 1% (0.01%)

Bear Market: A market in which prices decline sharply in a contest of widespread pessimism.

Bearish: A bearish investor believes that a particular security, sector, or the overall market is about to fall.

Beta: A figure that indicates the historical propensity of a stock price to move with the stock market as a whole.

Bid Price: The price a buyer is willing to pay for a security.

Book: The summary of a trader's or desk's total positions.

Breakout: The movement of a price out of an established trading range.

Bretton Woods: An agreement signed in 1944.

BRICs: An acronym for Brazil, Russian, India, and China.

Broker: A firm or an individual that acts as an intermediary, putting together buyers and sellers for a fee or commission.

Broker/Dealer: An individual or firm in the business of buying and selling securities for itself and others.

Bollinger Band: A technical analysis tool that can be used to measure the highness or lowness of the price relative to previous trades.

Bullish: A bullish investor believes that a particular security, sector, or the overall market is about to rise.

Bull Market: A market characterized by rising prices.

Bull Trap: Any technically unconfirmed move to the upside that encourages investors to be bullish. Usually precedes important declines and often fools those who do not wait form confirmation by other indicators.

Bundesbank: Germany's Central bank, also called Buba.

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C

Cable: Term used to refer to the GBP/USD rate.

CAD: Canadian Dollar.

Call Option: An agreement that gives an investor the right, but not the obligation, to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.

Candlestick Chart: A candlestick chart is a style of bar-chart used primarily to describe price movements of a security, derivative, or currency over time. Candlesticks are usually composed of the body (black or white), and an upper and a lower shadow (wick): the area between the open and the close is called the real body, price excursions above and below the real body are called shadows. The wick illustrates the highest and lowest traded prices of a security during the time interval represented. The body illustrates the opening and closing trades. If the security closed higher than it opened, the body is white or unfilled, with the opening price at the bottom of the body and the closing price at the top. If the security closed lower than it opened, the body is black, with the opening price at the top and the closing price at the bottom.

Carry Trade: A carry trade is a strategy in which an investor borrows money at a low interest rate in order to invest in an asset that is likely to provide a higher return.

CBOE: Chicago Board Options Exchange, world's largest options exchange.

CBOT: Chicago Board of Trade, world's oldest futures and options exchange.

Cost of Carry: Expenses incurred for helding a position.

Central Bank: A nation's principal monetary authority which regulates the money supply and credit, issues currency, and manages the rate of exchange.

CFDs: Contracts for difference.

CFTC: U.S. Commodity Futures Trading Commission, an independent agency of the United States government that regulates futures and option markets.

CHF: Swiss Franc.

CME: Chicago Mercantile Exchange.

CNY: China Yuan Renminbi.

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

Contagion: A negative occurrence in one market, industry, or country that impacts other markets, industries, or countries.

Commission: Transaction fee charged by a broker.

Counterparty: The other partecipant in a financial transaction.

Correlation: A statistical term that.

CPI: Core Price Index, monthly measure of the change in the prices of a defined basket of consumer goods.

Currency: Any form of money, coin and paper money, issued by a central bank or a government.

Currency Pair: The two currencies in a foreign exchange transaction. The first currency of a currency pair is called the base currency, and the second currency is called the quote/counter currency.

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D

Day Trader: A trader who tries to profit from short-term price movements, often taking and closing a position within the same trade day.

Dealer: A firm or an individual that acts as a principal and stands ready to buy and sell for its own account.

Deficit: A negative balance of trade or payments.

Deflation: The opposite of inflation. A decrease in the price of goods and services in an economy.

Demo account: A demo account is a practice account that allows investors to understand the trading platform and the market.

Depreciation: The loss of value of a country's currency with respect to another one.

Derivative: A financial contract whose value is based on an underlying asset such as a stock or bond, a commodity, a market index etc.

Devaluation: A decrease in the exchange rate for a currency as a result of central bank intervention. The opposite of Revaluation.

Dividend: A share of the profits received by a stockholder.

Dovish: A docile, gentle tone. Statements perceived to be dovish can give indications of weakness in a currency or in a monetary policy.

Dow Jones: One of the most closely watched and important stock market indexes.

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E

ECN: Electronic Communication Network. An electronic system that brings buyers and sellers together for the electronic execution of trades.

Economic calendar: A calendar used by traders for the purpose of tracking the occurrence of market-moving events.

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

EFSF: European Financial Stability Facility, a special purpose vehicle (SPV) financed by members of the eurozone to combat the European sovereign debt crisis.

ETF: Exchange Traded Funds.

Euro: The official currency of the eurozone. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

European Central Bank (ECB): The Central Bank of the European Union. It administers the monetary policy of the 17 EU Eurozone member states.

Exotic Currency: A thinly traded currency.

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F

Federal Reserve (Fed): The Central Bank of United States.

First in first out (FIFO): All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.

FOMC: Federal Open Market Commitee.

Foreign Exchange (Forex): An over-the-counter market where buyers and sellers conduct foreign exchange transactions.

Forward Contract: A non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed today.

Fundamentals: The macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.

Fundamental Analysis: Analysis based on economic and political factors.

Futures Contract: A standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date.

FX: Abbreviation for Foreign Exchange (Forex).

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G

G7: The meeting of the finance ministers from a group of seven industrialized nations.

G8: A forum, created by France in 1975, for the governments of seven major economies: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.

G20: A group of finance ministers and central bank governors from 20 major economies: 19 countries plus the European Union, which is represented by the President of the European Council and by the European Central Bank.

GBP: Great Britain Pound.

Gold: A precious metal.

Gold Standard: A monetary system in which the standard economic unit of account is a fixed mass of gold.

Gross Domestic Product (GDP): The market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living, even if it is now often replaced by the Gini Index.

Gross National Product (GNP): The market value of all products and services produced in one year by labor and property supplied by the residents of a country.

Good Till Cancelled Order (GTC): An order that will stay in the market until you cancel it and it is the default order duration type.

GTD (Good Till Date): An order that will stay in the market until a date you specify.

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H

Hawkish: An aggressive tone.

Head and Shoulder: A technical analysis term used to describe a chart formation.

Hedge: The purchase or sale of options or futures contracts as a temporary substitute for a transaction to be made at a later date. Usually it involves opposite positions in the cash or futures or options market.

Hedge funds: Funds available only to sophisticated investors like wealthy individuals and institutions that utilise wide range of investment strategies and methods.

Hedging: A hedging transaction is one whose main aim is to protect an asset or liability against a fluctuation in the foreign exchange rate rather than profit from the exchange rate fluctuations.

Hyperinflation: A period of extreme inflation.

HKD: Hong Kong Dollar.

HUF: Hungarian Forint.

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I

IDR: Indonesian Rupiah.

ILS: Israeli New Shequel.

INR: Indian Rupee.

IMF: International Monetary Fund.

Inflation: A sustained increase in the general level of prices for goods and services.

Intervention: Action by a central bank to alter the value of its currency by entering the market.

In-the-money: Situation in which an option's strike price is below the current market price of the underlier (for a call option) or above the current market price of the underlier (for a put option).

IOC (Immediate Or Cancel): An order that will be executed immediately (if other order conditions are met) or cancelled.

ISDA: International Swaps and Derivatives Association.

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J

JPY: Japanese Yen.

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K

Kiwi: Slang for the New Zealand Dollar.

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L

Lagging indicators: Economic indicators that change after the overall economy has changed. In some cases a lagging indicator can become a leading indicator or vice versa. Lagging indicators are not helpful to predict future economic activity.

Leading indicators: Economic indicators used to predict future economic activity.

Leverage: The ability to control large dollar amounts of a commodity with a comparatively small amount of capital. Some brokers offer leverage starting from 1:1 up to 1:500.

LIBOR: London Interbank Offered Rates. An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. The LIBOR is fixed on a daily basis by the British Bankers' Association.

Limit order: A limit order is an order to buy below the current price, or sell above the current price. For example, if an instrument is trading at 129.34 / 129.38 and you believe the market will rise, you could place a limit order to buy at 129.28. If executed, this will give you a long position at 129.28, which is 10 pips better than if you had just used a market order. The disadvantage of the limit order is that if the instrument moves straight up from 129.34 / 129.38 your limit at 129.28 will never be filled and you will miss out on the profit opportunity even though your view on the direction was correct. Opening a position with a limit order is usually appropriate if you believe that the market will remain in a range before moving in your anticipated direction, allowing the order to be filled first.

Liquidity: The ability to sell or buy a currency pair without causing an impact on the price.

Loonie: Slang for Canadian Dollar.

Long position: The purchase of a security, currency or commodity with the expectation of an increase in the market price. The opposite of a short position.

Lot: The standard transaction size in a forex transaction.

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M

Major pairs: The most traded currency pairs in the world.

Margin: Collateral in cash or other securities the trader has to deposit with the forex broker to cover some or all of the value of traded currencies in the forex account.

Margin Call: 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.

Maturity: The date of expiry or settlement of a financial instrument.

MetaTrader 4: An online trading platform created by Metaquotes.

Monetary Policy: Actions taken by a Central Bank to influence the money supply or interest rates.

Money Supply: The total amount of money available in an economy at a specific time.

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N

NFA: National Futures Association.

NFP: Non Farm Payroll.

NZD: New Zealand Dollar.

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O

Over the Counter (OTC): Any transaction that is not conducted over an exchange.

Overnight Position: A position not closed at the end of the trading day and held overnight.

Order: An instruction to execute a trade at a specific price.

Overvalued: A security that is trading above its perceived value.

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P

Pip: Pip or point is the smallest increment in a currency pair.

POMO: Permanent Open Market Operations, The purchase or sale of Treasury securities on an outright basis to add or drain reserves available in the banking system.

Profit Taking: Closing a position in order to secure a gain.

Purchasing Power Parity (PPP): A condition between countries where an amount of money has the same purchasing power in different countries.

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Q

Quantitative Analysis: An analysis technique applying mathematics stochastic calculus to finance.

Quantitative Easing (QE): An unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has failed.

Quote: An indicative market price.

Quote Currency: The second currency quoted in a currency pair in forex.

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R

Rally: Recovery in prices after a period of sharp declines.

Range: The difference between the highest and lowest price of a currency pair during a given trading period.

Rate: Price at which a currency can be purchased or sold against another currency.

RBA: Reserve Bank of Australia.

RBNZ: Reserve Bank of New Zealand.

Recession: A general slowdown in economic activity.

Reserve Currency: A currency that is held in significant quantities by many governments and institutions as part of their foreign exchange reserves.

Resistance: A technical analysis term that refers to a price level in a stock, currency or commodity where selling pressure is likely to exceed the buying pressure, forming a top or ceiling that blocks further upside movements in the instrument. The opposite of Support.

Retail Foreign Exchange Dealer (RFED): An individual or organization which acts, or offers to act, as a counterparty to an off-exchange foreign currency transaction with a person who is not an eligible contract participant.

Retail Sales: A measure of consumer spending over a given period of time.

Revaluation: An increase in the exchange rate for a currency as a result of central bank intervention. The opposite of Devaluation.

Rollover: The net interest return on a currency position held by a trader.

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S

SEC: Security and Exchange Commission.

SEK: Swedish Krona.

Settlement: Actual physical exchange of one currency for another.

SGD: Singapore Dollar.

Short position: The sale of a borrowed security, currency or commodity with the expectation of a decline in the market price. The opposite of Long Position.

Short Squeeze: When prices of a stock, currency or commodity futures contracts start to move up sharply forcing shorters to cover.

Slippage: The difference between the expected price of a trade and the price at which the trade has been executed.

Spot Contract: An agreement to buy or sell an asset today.

Spot Market: 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.

Spot Price: The current market price.

Spread: The difference between the bid and offer prices.

Stagflation: Slow economic growth accompanied by a high rate of inflation.

Sterling: Slang for Great Britain Pound.

Stop loss: A stop-loss order ensures a particular position is automatically liquidated at a predetermined price in order to limit potential losses should the market move against a trader's position.

STP: Straight Through Processing.

Strike price: The price at which an option contract can be exercised. In case of a call option, the option owner can purchase the underlying security or commodity, in case of a put option he can sell it.

Support: A technical analysis term that refers to a price level in a stock, currency or commodity where buying pressure is likely to exceed the selling pressure, forming a bottom or floor that blocks further downside movements in the instrument. The opposite is Resistance.

Swap: A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.

SWIFT: Society for Worldwide Interbank Financial Telecommunication.

Swissy: Slang for the Swiss Franc.

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T

Technical Analysis: The study of the price that reflects the supply and demand factors of a currency. Common methods are flags, trend-lines spikes, bottoms, tops, pennants, patterns and gaps.

Thin Market: A market characterized by low liquidity.

Tick: The minimum price movement of a security.

Trend: The direction of a price movement.

TRY: Turkish New Lira.

Turnover: The total money value of all executed transactions in a given time period.

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U

Underlying Asset: The underlying asset of a derivative is an asset, basket of assets, index or even another derivative, on which the price of the derivative depends.

Undervalued: A security that is trading below its perceived value. Opposite of Overvalued.

Unemployment rate: The percentage of the total labor force that is unemployed but actively seeking an occupation.

Uptick: A transaction occuring at a price above the price of the last transaction. In the United States, the uptick rule has been reintroduced in 2009 after the subprime crisis. The uptick rule refers to a trading restriction that disallowed short selling of securities except on an uptick.

USD: United States Dollar.

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V

Volatility: How much a price fl Germany's Central bank, also called Buba. uctuates over a period of time.

VIX: A popular measure of the implied volatility of S&P 500 index options.

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W

World Bank: An international financial institution that provides loans to developing countries. One of the five institutions created at the Bretton Woods Conference in 1944.

World Trade Organization (WTO): An organization that intends to supervise and liberalize international trade. WTO replaced the General Agreement on Tariffs and Trade (GATT).

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Y

Yard: Slang for a billion.

Yield:The rate of return of an investment, expressed as a percentage.

Yield Curve: A curve that shows the relationship between yields and maturity dates of similar bonds at a given point in time.

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Z

Zero Coupon Bond: A bond which pays no coupons, is sold at a deep discount to its face value, and matures at its face value.

ZEW Economic Sentiment: The indicator reflects the difference between the share of analysts that are optimistic and the share of analysts that are pessimistic for the expected economic development in Germany in six months. The survey also asks for the expectations for the Euro-zone, Japan, Great Britain and the U.S.A.