Record of all transactions.

Same as balance.

An individual employed to act on behalf of another (the principal).

The sum of government spending, personal consumption expenditures, and business expenditures.

A limit price order that instructs the broker to fill the whole order at the stated price or not at all.

A currency is said to appreciate when price rises in response to market demand; an increase in the value of an asset.

Taking advantage of countervailing prices in different markets by the purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market to profit from small price differentials.

The amount of shares being offered for sale at the ask rate.

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

Investment practice that distributes funds among different markets (Forex, stocks, bonds, commodity, real estate) to achieve diversification for risk management purposes and/or expected returns consistent with the outlook of the investor, or investment manager.

Person who is allowed to transact business and execute documents on behalf of another person because one holds power of attorney.

The departments and processes related to the settlement of financial transactions (i.e. written confirmation and settlement of trades, record keeping).

Amount of money in an account.

A record of a nation’s claims of transactions with the rest of the world over a particular time period. These include merchandise, services and capital flows.

The currency in which an investor or issuer maintains its book of accounts; the currency that other currencies are quoted against. In the Forex market, 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 difference between the spot price and the futures price.

One hundredth of a percent.

An investor who believes that prices/the market will decline.

A market distinguished by a prolonged period of declining prices accompanied with widespread pessimism.

The price that a buyer is prepared to purchase at; the price offered for a currency.

See spread

Dealer phrase 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″.

Bonds are tradable instruments (debt securities) which are issued by a borrower to raise capital. They pay either fixed or floating interest, known as the coupon. As interest rates fall, bond prices rise and vice versa.

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

An individual, or firm, that acts as an intermediary, putting together buyers and sellers usually 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.

An investor who believes that prices/the market will rise.

A market distinguished by a prolonged period of rising prices. (Opposite of bear market)

The central bank of Germany

Trader jargon for the British Pound Sterling referring to the Sterling/US Dollar exchange rate. Term began due to the fact that the rate was originally transmitted via a transatlantic cable starting in the mid 1800′s.

A chart that indicates the trading ranges for the day as well as the opening and closing price. If the close price is lower than the open price, the rectangle is shaded or filled. If the open price is higher than the close price, the rectangle is not filled.

Markets for medium to long term investment (usually over 1 year). These tradable instruments are more international than the ‘money market’ (i.e. Government Bonds and Eurobonds).

A government or quasi-governmental organization that manages a country’s monetary policy a prints a nation’s currency. For example, the US central bank is the Federal Reserve, others include the ECB, BOE, BOJ.

An individual who uses charts and graphs and interprets historical data to find trends and predict future movements, as well as, aid in technical analysis.

The process of settling a trade.

To eliminate an investment from one’s portfolio by either buying back a short position or selling a long position.

Fee broker charges for a transaction.

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

The tendency of an economic crisis to spread from one market to another. In 1997, financial instability in Thailand caused high volatility in its domestic currency, the Baht, which triggered a contagion into other East Asian emerging currencies, and then to Latin America. It is now referred to as the Asian Contagion.

The standard unit of trading on certain exchanges.

A currency which can be exchanged freely for other currencies at market rates, or gold.

The cost associated with borrowing money in order to maintain a position. It is based on the interest parity, which determines the forward price.

The participant, either a bank or customer, with whom the financial transaction is made.

The risk associated with government intervention (does not include central bank intervention). Examples are legal and political events such as war, or civil unrest.

Due to the large size of certain financial transactions that change hands, it is essential to check that the counter parties have room for the trade. Once the price has been agreed the credit is checked. If the credit is bad then no trade takes place. Credit is very important when trading, both in the Inter-bank market and between banks and their customers.

Arrangements that exist to maximize free credit and speed the dealing process by reducing the need to constantly re-check credit. Large banks and trading institutions may have agreements to net outstanding deals.

Opening and closing the same position or positions within the same trading session.

One who acts as a principal or counterpart to a transaction; places the order to buy or sell.

A negative balance of trade (or payments); expenditures are greater than income/revenue.

An actual delivery where both sides transfer possession of the currencies traded.

The borrowing and lending of cash. The rate that money is borrowed/lent at is known as the deposit rate (or depo rate). Certificates of Deposit (CD’S) are also tradable instruments.

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

Trades that are constructed or derived from another security (stock, bond, currency, or commodity). Derivatives can be both exchange and non-exchange traded (known as Over the Counter or OTC). Examples of derivative instruments include Options, Interest Rate Swaps, Forward Rate Agreements, Caps, Floors and Swap options.

A statistic that indicates current economic growth and stability issued by the government or a non-government institution (i.e. Gross Domestic Product (GDP), Employment Rates, Trade Deficits, Industrial Production, and Business Inventories).

A market in which the current price reflects all available information from past prices and volumes.

Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader’s book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.

Projected yearly earnings.

The currency of the European Monetary Union (EMU) which replaced the European Currency Unit (ECU).

The Central Bank for the 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. Currently, the Euro exists only as a banking currency and for paper financial transactions and foreign exchange. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

See Currency Risk.

The risk on a company’s cash flow stemming from foreign exchange fluctuations.

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

The Central Bank of the United States.

An official exchange rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates fluctuate between definite upper and lower bands, leading to intervention.

This type of transaction pays an agreed interest rate that remains constant for the term of the deal. Fixed interests are many times found in bonds, as well as, a fixed rate mortgage.

To be neither long nor short is the same as to be flat or square. One would have a flat book if he has no positions or if all the positions cancel each other out.

As opposed to a fixed rate, the interest rate on this type of deal will fluctuate with market rates or benchmark rates. One example of a floating rate interest is a standard mortgage.

The simultaneous buying of one currency and selling of another in an over-the-counter market. Most major FX is quoted against the US Dollar.

The front office usually comprises of the trading room and other main business activities.

Thorough analysis of economic and political data with the goal of determining future movements in a financial market.

Good-Till-Cancelled. An order left with a Dealer to buy or sell at a fixed price. The GTC will remain in place until executed or cancelled.

An investment position or combination of positions that reduces the volatility of your portfolio value. One can take an offsetting position in a related security. Instruments used are varied and include forwards, futures, options, and combinations of all of them.

Usually the highest traded price and the lowest traded price for the underlying instrument for the current trading day.

An economic condition where there is an increase in the price of consumer goods, thereby eroding purchasing power.

An exchange of two debt obligations that have different payment streams. The transaction usually exchanges two parallel loans; one fixed the other floating.

Interest rates may be determined by a simple rule using the bid and offer spread on an fx rate. If the rate quoted is in foreign (non US) terms and the offered price is higher than the bid, then the interest rate in that nation is higher than the rate in the base nation for the particular time in question. If quoted in American terms, the opposite is true. Example – USD/ JPY quoted 105.75 to 105.65. Because the offered price is lower than the bid, then you know that rates are lower in Japan than in the US.

The body that sets terms and conditions for derivative trades is The International Swaps and Derivatives Association.

Stands for London Interbank Offer Rate. The interest rate that the largest international banks will lend to each other.

The London International Financial Futures Exchange. Consists of the three largest UK futures markets.

A position to purchase more of an instrument than is sold, hence, an appreciation in value if market prices increase.

Customers must deposit funds as collateral to cover any potential losses from adverse movements in prices.

Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader’s book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.

Risk relating to the market in general and cannot be diversified away by hedging or holding a variety of securities.

The date a debt becomes due for payment.

Amount of assets which exceed liabilities; May also be known as stockholders equity or net assets. For an individual – the total value of all possessions such as houses, stocks, bonds, and other securities, minus all outstanding debts, such as mortgage and loans.

Products such as Interest Rate Swaps and Forward Rate Agreements are examples of ‘off balance sheet’ products. Also, financing from other sources other than equity and debt are listed.

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

An order to buy or sell when a market moves to its designated price.

A trade that remains open until the next business day.

A form of price stabilization; typically used to stabilize a country’s currency by making it fixed to the exchange rate with another country.

The term used in currency market to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY).

An indicative market price; shows the highest bid and/or lowest ask price available on a security at any given time.

The price of one currency in terms of another.

One using an accrual type accounting system has an “unrealized profit” until he sells his shares. Upon the sale of one’s shares, the profit becomes “realized.”

A term used in technical analysis indicating a specific price level at which a currency will have the inability to cross above. Recurring failure for the price to move above that point produces a pattern that can usually be shaped by a straight line.

The revaluation rates are the market rates used when a trader runs an end-of-day to establish profit and loss for the day.

Exposure to uncertain change, the variability of returns significantly the likelihood of less-than-expected returns.

The amount of money that an individual can afford to invest, which, if lost would not affect their lifestyle.

To hedge one’s risk they will employ financial analysis and trading techniques.

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

The finalizing of a transaction, the trade and the counterparts are entered into the books.

To go ‘short’ is to have sold an instrument without actually owning it, and to hold a short position with expectations that the price will decline so it can be bought back in the future at a profit.

An investment position that results from short selling. Benefits from a decline in market price because the position has not been covered yet.

A transaction that occurs immediately, but the funds will usually change hands within two days after deal is struck.

An order to buy/sell at an agreed price. One could also have a pre-arranged stop order, whereby an open position is automatically liquidated when a specified price is reached or passed.

The current market price. Spot transaction settlements usually occurs within two business days.

The difference between the bid and offer (ask) prices; used to measure market liquidity. Narrower spreads usually signify high liquidity.

A term used in technical analysis indicating a specific price level at which a currency will have the inability to cross below. Recurring failure for the price to move below that point produces a pattern that can usually be shaped by a straight line.

A swap occurs when one currency is temporarily exchanged for another, then the currency is held and exchanged later after a fixed period of time. To calculate the swap take the interest rate differential between the two underlying currencies, thus it may be used for speculative purposes to exploit anticipated movement in the interest rates.

Another term for the Great British Pound.

An effort to forecast future market activity by analyzing market data such as charts, price trends, and volume.

Minimum price move.

Shows current and/or recent history of a currency either in the format of a graph or table.

A term used to describe a condition in a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.