Forex Glossary

This is the glossary of terms frequently in Forex . You will see the word in English with its translation into Spanish and what is its meaning:

Appreciation (Assessment): It is said that a currency is "seen" when it increases its value based on market demand.

Arbitrage (Arbitration): consisting of buy or sell a security by the reverse operation immediately on another market in order to benefit from the difference in contributions between two squares operation.

Around : colloquial term used by operators to indicate when the forward premium / discount is near parity. For example, "two-two around" would be understood as 2 pips of difference between the purchase price and current market sale.

Ask Rate (Quote for sale): The price at which an instrument for sale (like the difference between buying and selling prices) is offered

Asset Allocation (Asset Allocation) investment practice consisting of the distribution of assets in different markets for diversification purposes of risk management and / or obtain the expected performance based on the objectives of the investor.

Back Office : departments and related to the settlement of financial transactions processes.

Balance of Trade (trade balance) - The value of a country 's exports minus the value of its imports.

Base Currency (Base Currency): Generally speaking, the currency in which the investor or issuer maintains its book of accounts. In forex trading, it is usually considered the US dollar currency "base" for quotes; ie quotes are expressed as a unit of $ 1 USD per the other currency quoted in the pair. The main exceptions to this rule are the British pound of England, the euro and the Australian dollar.

Bear Market (Bear market): A market characterized by falling prices.

Bid / Ask Spread (difference between purchase price and sale): Difference between buying and selling prices; most commonly used way to measure market liquidity.

Big Figure : An expression used by the broker (dealer or trader) that refers to the first digit of the exchange rate. These digits do not change frequently in normal market fluctuations and, therefore, are eliminated quotes from agents, especially during periods of high market activity. For example, the exchange rate USD / Y might be 107.30 / 107.35, but the agents did not mention the first three digits, ie, they will say "30/35".

Book (Book): In an area purchasing professional selling, the book summarizes the total positions of an operator or money table.

Broker (Broker): A person or company acting as an intermediary between buyers and sellers and receives a fee or commission for the transaction. On the other hand, a "dealer" or "trader" (agent trader) commits capital and takes a position, hoping to get a difference (profit) by closing the position in a subsequent transaction with another party.

Bretton Woods Agreement of 1944 (Bretton Woods Agreement of 1944): Agreement establishing fixed exchange rates for major currencies, provided for the central bank intervention in currency markets, and set the price of gold at US $ 35 per ounce. This agreement was in force until 1971, when President Nixon left him without effect and established a floating exchange rate for the major currencies.

Bull Market (Bull Market): A market characterized by high prices.

Bundesbank : Central Bank of Germany.

Cable (Cable): colloquial term used by operators to refer to the exchange rate of the pound sterling and the dollar. He is so called because the exchange rate was originally transmitted by transatlantic cable from the mid-19th century.

Candlestick Chart (Candlestick chart): graph indicating the operating range of the day as the opening and closing prices. If the opening price is higher than the closing price, the rectangle between the purchase price and closing is shaded. If the closing price is higher than the opening price, such unshaded area appears.

Central Bank (Central Bank): governmental or quasi - governmental institution that manages the monetary policy of a country. For example, the central bank of the United States is the Federal Reserval (Federal Reserve) and the German central bank Bundesbank.

Chartist : A person who studies the tables and graphs of historical data to uncover trends and anticipate trend changes. It is also known as Technical Operator (Technical Trader).

Clearing (Offset): The process of settlement of a transaction.

Contagion (Contagion) - The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in its currency, the rupee. Then the contagion affected other currencies of emerging Asian countries and later reached Latin America, and is now known as the "Asian Contagion".

Commission (Commission): Fees charged by the broker operation.

Confirmation (Confirmation) - A exchanged by the parties of a transaction document, which confirms the terms of the transaction.

Contract (Unit or batch) - standard unit operations.

Counterparty (Counterpart): One of the parties involved in a financial transaction.

Country Risk : risk associated with a transaction between countries including, without limitation, legal and political conditions.

Cross Rate (cross rate): Exchange rate between two currencies considered non -standard in the country where the currency pair traded. For example, in the US, the GBP / JPY will be considered a cross rate, whereas in UK or Japan will be one of the major currency pairs traded.

Currency (Currency): All kinds of money issued by a government or central bank and used as legal tender and trade base.

Examples:

USD - Dollar 
JPY - Japanese Yen 
EUR - Euro 
GBP - British Pound 
CHF - Swiss Franc 
AUD - Australian Dollar 
CAD - Canadian Dollar 
NZD - New Zealand Dollar

Currency Risk (Currency Risk): The risk of incurring losses resulting from an adverse change in exchange rates.

Day Trading (Trading within the day) - Refers to open and closed on the same day trading positions.

Dealer (Trader) (Agent) - A person acting as principal or party to a transaction.Constituents take a position, waiting obtain a difference (gain) to close the position in a subsequent transaction with another party. A broker, instead, acts as an intermediary between buyers and sellers and receives a fee or commission.

Deficit (Deficit): A negative balance in the trade balance or payments.

Delivery (Delivery): Transaction in the currency market where both parties give and receive indeed the traded currencies.

Depreciation (Depreciation): Fall in the value of a currency due to market forces.

Derivative (Derivative) contract whose value depends on the price movements of a related or underlying security, future or physical instrument. Option is the most common derivative.

Devaluation : The deliberate downward adjustment in the value of a currency, usually caused by an official announcement.

Economic Indicator (Economic Indicator): A government issued statistic that indicates growth and current stability of the economy. The most common economic indicators are unemployment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.

European Monetary Union (EMU) : (European Monetary Union) The main objective of the EMU is to establish a single European currency called the Euro, which will replace officially the national currencies of the various Member States of the European Community in 2002 . on January 1, 1999, he began the transition stage and introduction of the Euro.This currency is now a bank currency and paper financial transactions and foreign exchange market are made in euros. This transition period will last three years, during which euro notes and coins come into circulation. On July 1, 2002, only the euro will be used as means of payment in the participating countries of the EMU; 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.

EURO (Euro): Currency of the European Monetary Union (EMU) which replaces the ECU (European currency basket).

European Central Bank (ECB) (European Central Bank): The Central Bank of the new European Monetary Union (EMU).

Federal Deposit Insurance Corporation (FDIC) : US regulatory administering insurance on bank deposits Entity.

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

Flat / square (upright): colloquial expression used by dealers to describe a position that has been completely reversed. For example, you buy $ 500,000 and then sells $ 500,000, thereby creating a neutral (equilibrium).

Foreign Exchange (Forex or FX) (Foreign Exchange Market): The simultaneous buying of one currency and selling another.

Forward (forward contract): Exchange preset to a contract for sale of foreign currency on an agreed future date, based on the differential in interest rates between the two currencies involved.

Forward points (points forward): The Pips added or removed from the current exchange rate to calculate the forward price.

Fundamental analysis (fundamental analysis): Analysis of economic and political data in order to determine future movements in the financial market.

Futures Contract (futures contract) Obligation to exchange a good or title at a specified price at a future date. The main difference between a Future and a Forward is that Futures are typically traded on the exchange (what is called ETC: negotiable contract in the bag), whereas forwards contracts are considered OTC (OTC market). An OTC is any contract NOT traded on an exchange.

Good 'Til Canceled Order (GTC) (Order valid until cancellation or execution): An order to buy or sell at a certain price. The order remains open until the client concrete or cancel the operation.

Hedge (Coverage): A position or combination of positions that reduces the risk of the main position.

Inflation (inflation): Economic situation in which there is increase in prices of consumer goods, reducing purchasing power.

Initial Margin (Initial Margin): The initial deposit of collateral required to enter a position as a guarantee of future performance.

Interbank rates (interbank rates): foreign exchange rates that large international banks quote other large international banks.

Leading Indicators (Main Indicators): Statistics that are considered to predict future economic activity.

LIBOR : The London Inter-Bank Offered Rate .: (London Interbank Offered Rate): Banks use LIBOR when they take funds from another bank.

Limit order (limit order) : Order with restrictions on the maximum price paid or the minimum price to be received. For example, if the current price of USD / YEN is 102.00 / 05, then a limit order to buy USD would be at a lower price to 102 (ie, 101.5)

Liquidity (Liquidity): The ability of a market to accept large transactions with minimal or no impact on price stability.

Liquidation (Settlement): The closing of an open operation through execution of a transaction clearing.

Long position (long position): A position that increases in value if the market price rises.

Margin call (Margin Coverage): Request by a broker or dealer for additional funds or other assets to guarantee compliance with a position adverse movements registered customer.

Market Maker (Market Maker): An agent who regularly provides quotes for buying and selling and is willing to buy and sell at the stated price.

Market Risk (Market Risk): Exposure to changes in market prices.

Mark-to-Market (market to market): The process of revaluation of all open positions at current market prices. These new prices then determine margin requirements.

Maturity (Maturity) Settlement date or expiry of a financial instrument.

Momentum investor (opportunistic investor) market participant increases their exposure in the market when it is rising and reduces their exposure or sells short when the market is low.

Offer (Offer): The rate at which a dealer (trader) is willing to sell a currency.

Offsetting transaction (Transaction compensation): A transaction that serves to cancel or offset some or all of the market risk of an open position.

One Cancels the Other Order (OCO) (OCO): An order subject to conditions in which the execution of a part of the order automatically cancels the other.

Open order (Open Order): An order to buy or sell when the market moves to its designated price.

Open position (open position): Operation not been reversed by an operation or canceled by delivery.

Over the Counter (OTC) Market (OTC): Used to describe any transaction that is not carried out through a stock exchange.

Overnight : An operation that remains open until the next business day.

Pips : Digits are added or subtracted from the fourth decimal place, ie 0.0001. Also called Points.

Political Risk (Political Risk): Exposure to changes in government policy that adversely affect the interests of investors.

Position (Position): Total holding obtained a certain currency

Premium (Prima): In the Forex markets, describes the amount by which the price of forward or future exceeds the current market price.

Price Transparency (Price transparency): All market participants have equal access to the description of contributions.

Quote (Quote): indicative market price, normally used for informational purposes only.

Rate (Exchange rate): The price of one currency in terms of another, typically used for trading purposes.

Resistance (Resistance Level): A term used in technical analysis indicating a specific level of price at which, according to analysis, people will sell.

Reassessment (Recovery): Increase in the exchange rate for a currency as a result of central bank intervention. The opposite of Devaluation.

Risk (Risk): Exposure to some change, typically used with negative connotation of adverse change.

Risk Management (Risk Management): Use of financial analysis and trading techniques to reduce and / or control exposure to various types of risks.

Roll-Over (Renegotiation): The process by which the settlement of a transaction is extended to a later time. The cost of this process is based on the differential in interest rates of both currencies.

Settlement (Liquidation): The process by which a transaction is recorded in the books and records of the parties to a transaction. Settlement of currency trades may or may not involve the actual exchange of one currency for another.

Short Position (short position): investment position that benefits from a decline in market price.

Spot Price (cash price): The current market price. The settlement of cash transactions often take place within two business days.

Spread (Margin): The difference between the purchase price and selling.

Sterling (British Pound): colloquial expression that referred to British pounds.

Stop Loss Order (Order of buying and selling a certain level of contribution): Order whereby an open position is automatically liquidated upon reaching a certain level quote. It is commonly used to minimize risks to losses if the market recorded adverse to the interests of the investor movements. For example, if an investor has a long position at 156.27 USD, you may want to place a "stop loss" to 155.49, which would limit order losses should the dollar depreciate, possibly below 155.49.

Support Levels (Floor): A technique used in technical analysis that establishes a specific minimum and maximum price at which the exchange rate will be corrected automatically. It is the opposite of resistance level.

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

Swissy : colloquial word for the Swiss Franc.

Technical Analysis (Technical Analysis): The strategy to forecast prices by analyzing economic factors such as trends and average prices in the past, volumes, open interest, etc. indicators

Tomorrow Next (Tom / Next) (Morning the next day): Simultaneous buying and selling of a currency for delivery the next day.

Trader (Merchant currency): The participation of traders in the Forex market is quite similar to the broker with the difference that sometimes there are occasions where the trader operates acquisition of foreign exchange for personal gain. Traders are professionals who buy and sell currencies for their clients, but are also investors and speculators in the Forex market.

Transaction Cost (transaction cost): The cost of buying or selling a financial instrument.

Date Transaction (transaction date): Date the transaction occurs.

Turnover (Turnover): The total money of all transactions during a specific period of time;volume.

Two-Way Price (purchase price and sale): When the price of buying and selling for a forex trading transaction.

Uptick : A new price quote that is higher than the preceding quote for the same currency.

Uptick Rule : In the United States, rule that can not be sold short unless the last trade prior to the short sale was at a price lower than market price at which the sale is made overdrawn.

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

Value Date (Settlement Date): Date parts of a financial transaction agree to settle their respective obligations, ie to pay benefits. For spot currency transactions, the settlement date is often within two business days. Also known as maturity date.

Variation Margin (variation margin): Funds which the broker must ask their clients to deposit the corresponding margin. The term usually refers to additional funds that must be deposited as a result of adverse price movements.

Volatility (Vol) (volatility) A statistical measure of the price movement of a market over time.

Whipsaw : colloquial term used to refer to a highly volatile market where a sharp price movement is immediately followed by a sudden movement in the opposite direction.

Yard : colloquially to refer to one billion word.