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Forex Glossary

A - H C - E F - L M - Q R - S T - Y


C

Cable Refers to the Sterling/US Dollar exchange rate. Derived from mid-1800s practice of New York sending sterlings dollar rate to London via a transatlantic cable.
Candlestick Chart 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.
Chartist An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.
Clearing The process of settling a trade.
Commission A fee charged by a broker for executing a trade.
Contract The standard unit of trading.
Counter currency

The second currency in a currency pair.

Counterparty One of the participants in a financial transaction.
Cross Rate

An exchange rate between two non-US dollar currencies. For example: EUR/GBP. Trading between two non-US dollar currencies usually occurs by first trading one currency against the US Dollar and then trading the US Dollar against the second non-US dollar currency.

Currency Any form of money issued by a government or central bank and used as legal tender and a basis for trade.
Currency pair The two currencies that make up a foreign exchange rate. For example, EUR/USD is a currency pair.
Currency Risk The probability of an adverse change in exchange rates.


D

Day Trader / Day Trading

Opening and closing the same position or positions within the same trading session. Speculators trying to take advantage of market movements in very short time periods buying a currency and then selling it again may happen within hours or even minutes. Day traders are attracted to currency trading because of the size, liquidity, volatility, and accessibility of the market.

Dealer 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.
Deficit A negative trading or payment balance.
Delivery A trade where both sides make and take actual delivery of the currencies traded. Delivery is not the norm in FX trading. More commonly, an FX trade involves cash settlement of the difference between spot and delivery prices. Spot refers to any delivery within two business days. Forward refers to delivery beyond two days and usually quoted one year out in increments of 30 days (i.e. 1 month, 2 month, etc.).
Deposit  The money placed at a trading account available for further operations.
Directional Forecast A projection of bid/ask prices for a currency pair for a point in the future. The forecast displays the most likely future direction of prices. This direction reflects the latest price fluctuations as they are influenced by economic and political events. Directional Forecasts are designed for: Investors and traders who trade small to large volumes in the foreign exchange markets daily Professionals who do business internationally and who want to minimize foreign exchange risk due to currency price fluctuations.
Dollar Rate The exchange rate of a foreign currency as quoted against the US dollar (USD). Some currencies are typically only quoted against the US dollar, such as the Algerian dinar (DZD) and the Andorran franc (ADF). The exchange rate of the Algerian dinar against the Andorran franc is thus computed from DZD-USD and ADF-USD.
Double Bottom

A figure of technical analysis of the market situation: the rate lowers to a certain level twice and then increases again.

Double Top A figure of technical market situation when the rate increases to a certain level twice and then lowers again.
Downtrend A declining trend, accompanied by diminishing maximums and/or minimums.


E

Elliott Wave theory

A method of technical analysis and price forecasting based on R. N. Elliott’s theory. The main point of it is that price movement has 5 waves in one trend direction followed by 3 correction waves.

Entry Order An order to buy/sell a currency pair when the market reaches a specified price.
Equity Value that reflects the Client’s current account status taking into consideration the operations carried out at the given moment.
EURO The currency of the European Union (EU) since January 1, 1999. The following countries have adopted the EURO in addition to maintaining their own unique currency: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain.
European Central Bank, ECB

The Central Bank for the new European Monetary Union.

European Monetary Union, EMU The principal goal of the EMU is to establish and maintain a single European currency called the Euro.
Exchange Rate The price of one country's currency expressed in another country's currency.
Exchange Rate Risk The potential loss that could be incurred from a movement in bid/ask prices, or exchange rates.
Exposure The risks that an investor accepts when holding an open position. When an investor buys EUR/USD, he exposes himself to risks associated with changes in the valuation of the EURO and/or USD markets.

 


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