A currency is said to 'appreciate' when it strengthens in price in response to market demand.

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.

Dealer jargon used in quoting when the forward premium/discount is near parity. For example, "two-two around" would translate into 2 points to either side of the present spot.

The rate at which a financial instrument is offered for sale (as in bid/ask spread).

Investment practice that divides funds among different markets to achieve diversification for risk management purposes and/or expected returns consistent with an investor's objectives.

The departments and processes related to the settlement of financial transactions.

The value of a country's exports minus its imports.

In general terms, the base currency is the currency in which an investor or issuer maintains its book of accounts. 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 market distinguished by declining prices.

The difference between the bid and offer price, and the most widely used measure of market liquidity.

Dealer expression referring to the first few digits of an exchange rate. These digits rarely change in normal market fluctuations, and therefore are omitted in dealer quotes, especially in times of high market activity. For example, a USD/Yen rate might be 107.30/107.35, but would be quoted verbally without the first three digits i.e. "30/35".

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

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.

A market distinguished by rising prices.

Germany's Central Bank.

Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 1800's.

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.

A government or quasi-governmental organization 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.

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

The process of settling a trade.

A transaction fee charged by a broker.

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

The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the 'Asian Contagion'.

The standard unit of trading.

One of the participants in a financial transaction

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

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

The probability of an adverse change in exchange rates.

Refers to positions which are opened and closed on the same trading day.

An individual who 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.

A negative balance of trade or payments.

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

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

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

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

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

the Central Bank for the new European Monetary Union.

The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. On Janaury1, 1999 the transitional phase to introduce the Euro began. The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros. This transition period will last for three years, at which time Euro notes an coins will enter circulation. On July 1,2002, only Euros will be legal tender for EMU participants, the national currencies of the member countries will cease to exist. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

The regulatory agency responsible for administering bank depository insurance in the US.

The Central Bank for the United States.

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.

the simultaneous buying of one currency and selling of another.

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

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

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

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

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

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

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

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

Statistics that are considered to predict future economic activity

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

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

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

A position that appreciates in value if market prices increase

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.

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

Exposure to changes in market prices.

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

The date for settlement or expiry of a financial instrument.

A market participant who increase market exposure when the market is rising and decreases exposure or goes short when the market is declining.

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

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

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

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

A deal not yet reversed or settled with a physical payment.

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

A trade that remains open until the next business day.

A trade that remains open until the next business day.

Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.

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

The netted total holdings of a given currency.

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

Describes quotes to which every market participant has equal access

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

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

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

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

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

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

Process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies.

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.

An investment position that benefits from a decline in market price.

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

The difference between the bid and offer prices.

slang for British Pound.

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.

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.

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

Slang for Swiss Franc.

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

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

The cost of buying or selling a financial instrument.

The date on which a trade occurs.

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

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

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

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.

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

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.

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.

A statistical measure of a market's price movements over time.

slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.

Slang for a billion.