Forex: Most used terms A to Z

Accrual - The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.

Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or. Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.

Appreciation - A currency is said to 'appreciate' when it strengthens in price 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.

Ask (Offer) Price - The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.2627/32, the ask price is 1.2632; meaning you can buy one US dollar for 1.2632 Swiss francs.

At Best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.

At or Better - An order to deal at a specific rate or better.

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

Bar Chart - A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.

Base Currency - The first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.2615 then one USD is worth CHF 1.2615 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.

Bear Market - A market distinguished by declining prices.

Bid Price - The bid is the the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.2627/32, the bid price is 1.2627; meaning you can sell one US dollar for 1.2627 Swiss francs.

Bid/Ask Spread - The difference between the bid and offer price. Big Figure Quote - Dealer expression referring to the first few digits of an exchange rate. These digits are often omitted in dealer quotes.. For example, a USD/JPY rate might be 117.30/117.35, but would be quoted verbally without the first three digits i.e. "30/35".

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

Broker - 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.

Bretton Woods Agreement of 1944 - 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.

Bull Market - A market distinguished by rising prices.

Bundesbank - Germany's Central Bank.

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.

Cash Market - The market in the actual financial instrument on which a futures or options contract is based.

Central Bank - 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.

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.

Cleared Funds - Funds that are freely available, sent in to settle a trade.

Closed Position - Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will 'square' the postion.

Clearing - The process of settling a trade.

Contagion - 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'.

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

Commission - A transaction fee charged by a broker.

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

Contract - The standard unit of trading.

Counter Currency - The second listed Currency in a Currency Pair.

Counter party - One of the participants in a financial transaction.

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

Cross Currency Pairs or Cross Rate - A foreign exchange transaction in which one foreign currency is traded against a second foreign currency. For example; EUR/GBP

Currency Symbols AUD - Australian Dollar CAD - Canadian Dollar EUR - Euro JPY - Japanese Yen GBP - British Pound CHF - Swiss Franc

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

Currency Risk - the probability of an adverse change in exchange rates.

Day Trader - Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.

Dealer - An individual or firm that 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 balance of trade or payments.

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

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

Derivative - 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.

Devaluation - The deliberate downward adjustment of a currency's price, normally by official announcement.

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.

End Of Day Order (EOD) - An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 5PM ET.

European Monetary Union (EMU) - 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.

EURO - the currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).

European Central Bank (ECB) - the Central Bank for the new European Monetary Union.

Federal Deposit Insurance Corporation (FDIC) - The regulatory agency responsible for administering bank depository insurance in the US.

Federal Reserve (Fed) - The Central Bank for the United States.

First In First Out (FIFO) - Open positions are closed according to the FIFO accounting rule. All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.

Flat/square - 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.

Foreign Exchange - (Forex, FX) - the simultaneous buying of one currency and selling of another.

Forward - 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.

Forward Points - The pips added to or subtracted from the current exchange rate to calculate a forward price.

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

Futures Contract - 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.

FX - Foreign Exchange.

G7 - The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.

Going Long - The purchase of a stock, commodity, or currency for investment or speculation.

Going Short - The selling of a currency or instrument not owned by the seller.

Gross Domestic Product - Total value of a country's output, income or expenditure produced within the country's physical borders.

Gross National Product - Gross domestic product plus income earned from investment or work abroad.

Good 'Til Cancelled Order (GTC) - An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.

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

"Hit the bid" - Acceptance of purchasing at the offer or selling at the bid.
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Inflation - An economic condition whereby prices for consumer goods rise, eroding purchasing power.

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

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

Intervention - Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

Kiwi - Slang for the New Zealand dollar.

Leading Indicators - Statistics that are considered to predict future economic activity.

Leverage - Also called margin. The ratio of the amount used in a transaction to the required security deposit.

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

Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 117.00/05, then a limit order to buy USD would be at a price below 102. (ie 116.50)

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

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

Long position - A position that appreciates in value if market prices increase. When the base currency in the pair is bought, the position is said to be long.

Lot - A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.

Margin - The required equity that an investor must deposit to collateralize a position.

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.

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

Market Risk - Exposure to changes in market prices.

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

Maturity - The date for settlement or expiry of a financial instrument.

Net Position - The amount of currency bought or sold which have not yet been offset by opposite transactions.

Offer (ask) - The rate at which a dealer is willing to sell a currency. See Ask (offer) price

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

One Cancels the Other Order (OCO) - A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.

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

Open position - An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.

Over the Counter (OTC) - Used to describe any transaction that is not conducted over an exchange.

Overnight Position - A trade that remains open until the next business day.

Order - An instruction to execute a trade at a specified rate.

Pips - The smallest unit of price for any foreign currency. Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.

Political Risk - Exposure to changes in governmental policy which will have an adverse effect on an investor's position.

Position - The netted total holdings of a given currency.

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

Price Transparency - Describes quotes to which every market participant has equal access.

Profit /Loss or "P/L" - The actual "realized" gain or loss resulting fromtrading activities on Closed Positions, plus the theoretical "unrealized" gain or loss on Open Positions that have been Mark-to-Market.

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

Rally - A recovery in price after a period of decline.

Range - The difference between the highest and lowest price of a future recorded during a given trading session.

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

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

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

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

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

Roll-Over - 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.

Round trip - Buying and selling of a specified amount of currency.

Settlement - 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.

Short Position - An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.

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

Spread - The difference between the bid and offer prices.

Square - Purchase and sales are in balance and thus the dealer has no open position.

Sterling - slang for British Pound.

Stop Loss Order - 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.

Support Levels - 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.

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

Swissy - Market slang for Swiss Franc.

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

Tick - A minimum change in price, up or down.

Tomorrow Next (Tom/Next) - Simultaneous buying and selling of a currency for delivery the following day.

Transaction Cost - the cost of buying or selling a financial instrument.

Transaction Date - The date on which a trade occurs.

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

Two-Way Price - When both a bid and offer rate is quoted for a FX transaction.

Unrealized Gain/Loss - The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains' Losses become Profits/Losses when position is closed.

Uptick - a new price quote at a price higher than the preceding quote.

Uptick Rule - 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.

US Prime Rate - The interest rate at which US banks will lend to their prime corporate customers.

Value Date - 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.

Variation Margin - 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.

Volatility (Vol) - A statistical measure of a market's price movements over time.

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

Yard - Slang for a billion.

Currency Updates

The pound declined in the end of this week, after the Bank of England affirmed that it will expand the current asset purchasing program in order to assure Britain’s financial system sustainability.

After reaching a nine-month high versus the greenback and gaining consistently versus the euro, the pound lost sharply towards the end of the week as the Bank of England stated that it will proceed its asset purchase program, mentioning that quantitative easing is still necessary to assure stability in the British economy. During this week, the pound traded above 1.70 versus the greenback, being the first time it crossed this mark in 2009, as signs of economic recovery raised investor’s confidence to purchase attractive pound-priced assets, but several factors still weighed on the pound’s outlook, halting a 3-week rally towards the end of the week.

Even if this week global economic reports and figures helped traders to invest further in riskier assets, the specific situation in the British financial system still remains rather complicated, as the Bank of England indicated this Friday, considering the current situation as fragile, which caused a mass evasion of capital from Great Britain’s equities markets this Friday, affecting the pound directly.

GBP/USD ended the week at 1.6685 after crossing the 1.70 mark one day earlier.
The U.S. dollar pared this week’s losses versus the euro as employers cut less-than-expected jobs in the country, adding optimism to the world’s wealthiest economy.
The dollar reached a seven-week high versus the yen and gained versus most of the 16 main traded currencies as a report in the U.S. indicated that fewer jobs were cut in July than in June, suggesting that employment conditions are improving in the North America, which reflected positively for the greenback outlook, making the U.S. currency to end the first week gaining versus the euro, after 2 consecutive weeks of losses.

EUR/USD traded at 1.4160 as of 18:56 GMT after being traded at 1.4381 hours earlier.
The U.S. dollar pared most of this week’s losses versus its Canadian counterpart as a report today indicated that the number of job cuts in Canada was higher than what economists predicted.

After trading at a 10-month high in the beginning of the week, the Canadian dollar reverted its winning streak and declined even further today as a government report indicated that employment figures shrank much beyond economists forecasts, making the loonie to be traded at a one-week low after the report was published. Commodities and stocks decline influenced by weaker corporate and banking earnings pushed the Canadian currency down this week, as traders fled riskier assets to seek safety in more conservative investments like bonds and currencies like the Japanese yen and the U.S. dollar.

The Canadian dollar was overpriced and today’s job data was the perfect excuse for traders to profit and make the loonie to return to more realistic levels, according to currency specialists. This week, even the Bank of Canada showed concerns regarding the loonie’s rapid rise, and today’s movement could be even be considered adequate for the Canadian economy.
USD/CAD declined sharply after the employment report being traded at 1.0836, a significant rise from yesterday’s rate of 1.0735.

Forex News: Central Bank Statements Set the Tone for Trading

The GBP dropped by about 150 pips versus the Dollar after the Bank of England (BOE), against investors' expectations, decided to raise its quantitative easing program by 50B Pounds. The BOE also kept the official bank rate at 0.50% and while stating that the country is on the path to recovery the fundamentals are still fragile.

The EUR also lost some ground against the Dollar ahead of the ECB statement and Friday's U.S Non-Farm Employment Change. As expected the ECB kept the interest rate unchanged at 1.00%. The release had little affect on the EUR as investors await the ECB statement at 12:30 GMT, which will provide an in-depth look into the Euro-Zone economy.

The NY market opens today with the publication of the U.S Unemployment claims as well as the ECB statement at 12:30 GMT, which promises to lead to a very volatile market. After Wednesday's disappointing ISM Nom-Manufacturing PMI release, traders are staying cautions with their riskier bets, any worse than expected data might lead to a return of risk aversion and a bullish sentiment on the USD and JPY

FAP Turbo Review

Fap Turbo is a forex trading robot designed to automate currency trading. There has already been a lot of scam in the name of forex robots. Steve Carletti claims "fap turbo" to be capable of doubling the money invested almost every month. The updated trading account statements on the sales page seem quite interesting.

Although fap turbo expert advisor (EA) is said to have been developed by 3 guys named Mike, Steve Carletti and Ulrich, I was informed about this product by Marcus B Leary (forex autopilot) and Andreas Kirchberger (forex-killer) through e-mail. FAP-turbo is similar to forex-autopilot, but with several modifications such as fixed stop loss and use of scalper strategy to make it better than forex-autopilot.

If you choose to use the hosting services, then the robot will trade for you without you having to keep your computer on all the time - but it will cost extra. In the member's area, you will find your license key to activate the robot, video tutorials explaining the account set-up process using Meta trader 4. Also included are videos to use fap turbo in a scalper strategy and long term strategy. FAQ section and support section are also available here. As stated in their website, long term strategy will work only on EUR-USD (€ - $) pair while the scalping short term strategy works on 4 pairs: EUR-GBP, GBP-CHF, EUR-CHF and USD-CAD.

I do not think fap turbo is a scam. Scalper closes position swiftly and trades only within a certain time frame and only for a few hours (PM - GMT). The short term strategy is designed to trade 1 to 5 times a day with a profit target of 6 to 15 pips. This is unlike most other scalper based system. There have been no trades on Fridays yet. Not long ago, a new version named "fapturbo44pro" was released for experienced traders. Both the version - original fap turbo (fapt36) and the fapturbo44pro - are the same. With this "pro" version, you can simply change the default settings, such as setting your own trading time-period, changing the default take profit and stop loss values for scalper trading, etc. After you download fap turbo, you can download the pro version later on from the members' area at no extra cost.

Update: On May 14, 2009, Fap Turbo version 47 was released with several new features such as automated GMT offset by comparing your broker time with the Global GMT server time. The full list of modifications is available at the fap turbo members' forum. Also, the long term strategy can now be applied for any time frame.

Other traders are also seeing winning trades for the most part. Some traders had to wait for quite some time before the EA actually started live trading. Its when the conditions are met that fap-turbo starts working.

One should never rely on reviews,positive or negative.

Test it yourself. You can try fap turbo it comes with 60 days full money back guarantee.

Forex: Instruments

Financial Instruments
Spot (Single Payment Option Transaction)

A Spot transaction is a direct exchange between two currencies. Based on volume, Spots are the most widely used financial instrument in the Forex market. Along with the timeframe of the transaction, two other benefits of Spot transactions are: there is no interest used in the transaction, and it is a cash transaction without the need for a contract.

Forward

This transaction locks in the price at which an investor can buy or sell a currency on a future date. In a forward contract, the contract holders are required to buy or sell the currency at a specified price, at a specified quantity and on a specified future date. Future
Futures are forward transactions with a specified period of delivery and contract size. The average term of a Futures contract is 3 months. Futures are standardized, include an interest amount, and are traded on an exchange.

Currency Swap
A Currency Swap is the exchange of principal and interest in one currency for the same in another currency. It is the most widespread type of forward transaction. I contrast to futures contracts, currency swaps are not standardized and not traded on an exchange.

Exchange Traded Fund

An ETF is a security that tracks an index, like the S&P 500 and the stock market, but trades like a stock on an exchange.

Forex Trading : Most Traded Currencies

Currencies and Currency Pairs

Most Traded Currencies (Forex symbol)

Euro (EUR)
3. Japanese yen (JPY)
4. Pound sterling (GBP)
5. Swiss franc (CHF)
6. Australian dollar (AUD)
7. Canadian dollar (CAD)
8. Swedish krona (SEK)
9. Hong Kong dollar (HKD)
10. Norwegian krone (NOK)
11. New Zealand dollar (NZD0)
12. Mexican Peso (MEX)

Major Currency Pairs

"Majors" trades account for roughly 90 percent of the volume of Forex trading.

The Majors are:

AUD/USD "Aussie"
EUR/USD "Euro"
GBP/JPY "Geppy"
GBP/USD "Cable"
NZD/USD "Kiwi"
USD/CAD "Loonie"
USD/CHF "Swissy"
USD/JPY "Gopher"

Top Currency Traders (Share of the market before economic shakedown in fall '08)

1. Deutsche Bank 21.70%
2. UBS AG 15.80%
3. Barclays Capital 9.12%
4. Citi 7.49%
5. Royal Bank of Scotland 7.30%
6. JPMorgan 4.19%
7. HSBC 4.10%
8. Goldman Sachs 3.47%
9. Morgan Stanley 2.86%