Glossary

Accrual – The distribution of premiums and discounts on forward exchange transactions that relate directly to depositswap (interest arbitrage) deals, over the period of each deal.

Adjustment – A government action normally followed by a change domestic economic policy usually to correctpayment imbalances or to announce a change in a nation’s official rate.

Analyst – A financial professional who has expertise in evaluating investments, financial markets, industries, andsectors. An analyst is able to aggregate market data in order to issue buy, sell and hold recommendations for clients.

Appreciation – A financial product is said to have ‘appreciated’ when it has strengthened in price from market demands.

Arbitrage – The simultaneous purchase or sale of a financial product with the intention of taking advantage of minorprice differences that occur when comparing different markets.

ADP Nonfarm Employment Change – Measures the change in number of employed people during the previousmonth, excluding the farming industry. ADP, a leading provider of employment solutions for businesses, releases thisindicator two days before the official Bureau of Labor Statistics (BLS) employment report. While the indicator has onlybeen in existence since early 2007, it’s shown some predictive value in regard to the BLS report.

Auction – Sale of an item to the highest bidder. (1) A method commonly used in exchange control regimes for theallocation of foreign exchange. (2) A method for allocating government paper, such as US Treasury Bills. Smallinvestors are given preferential access to the bills. The average issuing price is then computed on the basis of thecompetitive bids accepted. In some circumstances for government auctions it is the yield rather than the price which is bid.

Average Rate Option – A contract where the exercise price is based on the difference between the strike price andthe average spot rate over the contract period. Sometimes called an “Asian option”.

Asian central banks – Is a reference to the collective central banks from the leading Asian “Tiger” economies. Asthese countries economies have grown these banks have become increasingly active in major currency exchangethrough management of growing pools of foreign currency reserves via trade surpluses. Their market share issubstantial, and has been known to influence short-term currency prices .

Asian session – 23:00 – 08:00 (Tokyo).

Ask (Offer) price – The price which a market is prepared to sell a product. Prices are quoted two-way as Bid/Ask.The Ask price is also known as the Offer.

In FX trading, the Ask price represents the price a trader can buy the base currency, shown to the right in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the Ask price is 1.4532, meaning you can buy one US dollar for 1.4532 Swiss francs.

In CFD trading, the Ask also represents the price at which a trader can buy the product. For example, in the quotefor UK OIL 111.13/111.16, the product quoted is UK OIL and the Ask price is £111.16 for one unit of the underlyingmarket.

AUS 200 – the Australian Securities Exchange (ASX 200) is an index of the top 200 companies (by marketcapitalization) listed on the Australian stock exchange.

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 for a specific price or better.

Aussie – refers to the AUD/USD pair.

Balance of trade – The value of a nation’s exports minus its imports.

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

Barrier level – A certain price of great importance included in the structure of a Barrier Option. If a Barrier Level priceis reached, the terms of a specific Barrier Option call for a series of events to occur.

Barrier option – Any number of different option structures (such as knock-in, knock-out, no touch, double-no-touch-DNT) that attaches great importance to a specific price trading. In a no-touch barrier, a large defined payoutis awarded to the buyer of the option by the seller if the strike price is not ‘touched’ before expiry. This creates an incentive for the option seller to drive prices through the strike level and creates an incentive for the option buyer todefend the strike level.

Base currency – The first currency in a currency pair. It shows how much the base currency is worth as measuredagainst the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215. In the FX market, the US Dollar is normally considered the ‘base’ currency for quotes, meaning that quotes areexpressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are theBritish Pound, the Euro and the Australian Dollar.

Base rate – The lending rate of the central bank of a given country.

Basing – A method used in technical analysis – a chart pattern that shows when demand and supply of a product arealmost equal. It results in a narrow trading range and the merging of support and resistance levels.

Basis point – A unit of measurement used to describe the minimum change in the price of a product.

Bearish / Bear market – Negative for price direction; favoring a declining market. For example, “We are bearishEUR/USD” means that we think the Euro will weaken against the dollar.

Bears – Traders who expect prices to decline and may be holding short positions.

Bid price – The price at which the market is prepared to buy a product. Prices are quoted two-way as Bid/Ask.

In FX trading, the Bid represents the price at which a trader can sell the base currency, shown to the left in a currencypair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the Bid price is 1.4527, meaning you can sell one US Dollar for 1.4527 Swiss francs.

In CFD trading, the Bid also represents the price at which a trader can sell the product. For example, in the quote forUK OIL 111.13/111.16, the Bid price is £111.13 for one unit of the underlying market.*

Bid/ask spread – The difference between the Bid and the Ask (Offer) price.

Big figure – Refers to the first 3 digits of a currency quote, such as 117 USD/JPY or 1.26 in EUR/USD. If the pricemoves by 1.5 big figures, it has moved 150 pips.

BIS – Bank for International Settlements located in Basel, Switzerland, is literally the central bank for central banks.The BIS frequently acts as the market intermediary between national central banks and the market. The BIS has become increasingly active as central banks have increased their currency reserve management. When the BIS isreported to be buying or selling at a level, it is usually for a central bank and thus the amounts can be large. The BISis used to avoid market error when buying or selling interest for official government intervention.

Black box – The term used for systematic, model-based or technical traders.

Blow off – The upside equivalent of capitulation. When shorts throw in the towel and cover any remaining shortpositions.

BOC – Bank of Canada, the central bank of Canada.

BOE – Bank of England, the central bank of the UK.

BOJ – Bank of Japan, the central bank of the Japan.

Bollinger bands – A tool used by technical analysts. A band plotted two standard deviations on either side of asimple moving average, which often indicates support and resistance levels.

Bond – A name for debt which is issued for a specified period of time.

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

British Retail Consortium (BRC) shop price index – A British measure of the rate of inflation at various surveyedretailers. This index only looks at price changes in goods purchased in retail outlets.

Broker – An individual or firm that acts as an intermediary, bringing buyers and sellers together for a fee orcommission. 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.

Buck – Market slang for 1 million units of a dollar-based currency pair or for the US dollar in general.

Bullish / Bull market – Favoring a strengthening market and rising prices. For example, “We are bullish EUR/USD”means that we think the Euro will strengthen against the dollar.

Bulls – Traders who expect prices to rise and who may be holding long positions.

Bundesbank – Germany’s central bank.

Buy – Taking a long position on a product.

Buy dips – Looking to buy 20-30-pip/point pullbacks in the course of an intra-day trend.

Cable – The GBP/USD pair. the rate was originally transmitted to the US via a transatlantic cable during the mid1800’s when the GBP was the currency of international trade.

CAD – The Canadian dollar, also known as Loonie.

Call option – A currency trade which exploits the interest rate difference between two countries. By selling a currencywith a low rate of interest and buying a currency with a high rate of interest, the trader will receive the interestdifference between the two countries while this trade is open.

Canadian Ivey Purchasing Managers (CIPM) index – A monthly gauge of Canadian business sentiment issued bythe Richard Ivey Business School.

Candlestick chart – A chart that indicates the trading range for the day as well as the opening and closing price. Ifthe 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.

Capitulation – A point at the end of an extreme trend when traders who are holding losing positions exit thosepositions. This usually signals that the expected reversal is just around the corner.

Carry trade – A trade strategy that captures the difference in the interest rates earned from being long a currency thatpays a relatively high interest rate and short another currency that pays a lower interest rate. For example: NZD/JPYhas been a famous carry trade for some time. NZD is the high yielder and JPY is the low yielder. Traders looking totake advantage of this interest rate differential would buy NZD and sell JPY, or be long NZD/JPY. When NZD/JPYbegins to downtrend for an extended period of time, most likely due to a change in interest rates, the carry trade issaid to be ‘unwinding’.

Cash market – The market in the actual underlying markets on which a derivatives contract is based.

Cash price – The price of a product for instant delivery; i.e. the price of a product at that moment in time.

CBs – Abbreviation referring to central banks.

Central bank – A government or quasi-governmental organization that manages a country’s monetary policy. Forexample, the US central bank is the Federal Reserve and the German central bank is the Bundesbank.

CFDs – A Contract for Difference (or CFD) is a type of derivative that gives exposure to the change in value ofan underlying asset (such as an index or equity). It allows traders to leverage their capital (by trading notional amounts far higher than the money in their account) and provides all the benefits of trading securities, withoutactually owning the product. In practical terms, if you buy a CFD at $10 then sell it at $11, you will receive the $1 difference. Conversely, if you went short on the trade and sold at $10 before buying back at $11, you would pay the$1 difference.

Chartist – An individual, also known as a technical trader, who uses charts and graphs and interprets historical datato find trends and predict future movements.

Choppy – Short-lived price moves with limited follow-through that are not conducive to aggressive trading.

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

Clearing – The process of settling a trade.

Closed position – Exposure to a financial contract, such as currency, that no longer exists. A position is closed byplacing an equal and opposite deal to offset the open position. Once closed, a position is ‘squared’.

Closing – The process of stopping (closing) a live trade by executing a trade that is the exact opposite of the opentrade.

Closing price – The price at which a product was traded to close a position. It can also refer to the price of the lasttransaction in a day trading session.

Collateral – An asset given to secure a loan or as a guarantee of performance.

Commission – A fee that is charged for buying or selling a product.

Commodity currencies – Currencies from economies whose exports are heavily based in natural resources, oftenspecifically referring to Canada, New Zealand, Australia and Russia.

Components – The dollar pairs that make up the crosses (i.e. EUR/USD + USD/JPY are the components of EUR/JPY). Selling the cross through the components refers to selling the dollar pairs in alternating fashion to create a cross position.

COMPX – Symbol for NASDAQ Composite Index.

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

Consolidation – A period of range-bound activity after an extended price move.

Construction spending – Measures the amount of spending towards new construction, released monthly by the U.S.Department of Commerce’s Census Bureau.

Contagion – The tendency of an economic crisis to spread from one market to another.

Contract – The standard unit of forex trading.

Contract note – A confirmation sent that outlines the exact details of the trade.

Contract size – The notional number of shares one CFD represents.

Controlled risk – A position which has a limited risk because of a Guaranteed Stop.*

Convergence of MAs – A technical observation that describes moving averages of different periods moving towardseach other, which generally forecasts a price consolidation.

Corporate action – An event that changes the equity structure (and usually share price) of a stock. For example,acquisitions, dividends, mergers, splits and spin offs are all corporate actions.

Corporates – Refers to corporations in the market for hedging or financial management purposes. Corporates are notalways as price-sensitive as speculative funds and their interest can be very long-term in nature, making corporateinterest less valuable to short-term trading.

Counter currency – The second listed currency in a currency pair.

Counterparty – One of the participants in a financial transaction.

Country risk – Risk associated with a cross-border transaction, including but not limited to legal and politicalconditions.

CPI – A measure of inflation – short for Consumer Price Index.

Crater – The market is ready to sell-off hard.

Cross (e.g. Yen cross) – A pair of currencies that does not include the US Dollar.

Crown currencies – Refers to CAD (Canadian Dollar), Aussie (Australian Dollar), Sterling (British Pound) and Kiwi (New Zealand Dollar) – countries of the Commonwealth.

CTAs – Refers to commodity trading advisors, speculative traders whose activity can resemble that of short-term hedge funds; frequently refers to the Chicago-based or futures-oriented traders.

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.

Currency symbols – A three-letter symbol that represents a specific currency, for example USD (US Dollar).

Current account – The sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). The balance of trade is typically the key component to the current account.

Day trading – Making an open and close trade in the same product in one day.

Deal – A term that denotes a trade done at the current market price. It is a live trade as opposed to an order.

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.

Dealing spread – The difference between the buying and selling price of a contract.

Defending a level – Action taken by a trader, or group of traders, to prevent a product from trading at a certain price or price zone, usually because they hold a vested interest in doing so, such as a barrier option.

Deficit – A negative balance of trade or payments.

Delisting – Removing a stock’s listing on an exchange.

Delivery – A trade where both sides make and take actual delivery of the product traded.

Delta – The ratio between the change in price of a product and the change in price of its underlying market.

Department of Communities and Local Government (DCLG) UK house prices – A monthly survey produced by the DCLG that uses a very large sample of all completed house sales to measure the price trends in the UK real estate market.

Depreciation – The decrease in value of an asset over time.

Derivative – A financial contract whose value is based on the value of an underlying asset. Some of the most common underlying assets for derivative contracts are indices, equities, commodities and currencies.

Devaluation – When a pegged currency is allowed to weaken or depreciate based on official actions; the opposite of a revaluation.

Discount rate – Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank.

Divergence – In technical analysis, a situation where price and momentum move in opposite directions, such as prices rising while momentum is falling. Divergence is considered either positive (bullish) or negative (bearish); both kinds of divergence signal major shifts in price direction. Positive/bullish divergence occurs when the price of a security makes a new low while the momentum indicator starts to climb upward. Negative/bearish divergence happens when the price of the security makes a new high, but the indicator fails to do the same and instead moves lower. Divergences frequently occur in extended price moves and frequently resolve with the price reversing direction to follow the momentum indicator.

Divergence of MAs – A technical observation that describes moving averages of different periods moving away from each other, which generally forecasts a price trend.

Dividend – The amount of a company’s earning distributed to its shareholders – usually described as a value per share.

DJIA or Dow – Abbreviation for the Dow Jones Industrial Average or US30.

Dove – Dovish refers to data or a policy view that suggests easier monetary policy or lower interest rates. The opposite of hawkish.

Downtrend – Price action consisting of lower-lows and lower-highs.

DXY$Y – Symbol for US Dollar Index.

ECB – European Central Bank, the central bank for the countries using the Euro.

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 that remains open until the end of the trading day, typically at 5pm / 17:00 New York.

EST/EDT – The timezone of New York City, which stands for United States Eastern Standard Time/Eastern Daylight time.

ESTX50 – A name for the Euronext 50 index.

EURO – The currency of the Eurozone.

European Monetary Union (EMU) – An umbrella name for the group of policies that aims to coordinate economic and fiscal policies across EU Member States.

European session – 07:00 – 16:00 (London).

Eurozone labor cost index – Measures the annualized rate of inflation in the compensation and benefits paid to civilian workers and is seen as a primary driver of overall inflation.

Eurozone Organization for Economic Co-operation and Development (OECD) leading indicator – A monthly index produced by the OECD. It measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices and interest rate spreads.

EX-dividend – A share bought where the buyer forgoes the right to receive the next dividend and instead it is given to the seller.

Expiry date / price – The precise date and time when an option will expire. The two most common option expiries are 10:00am ET (also referred to as 10:00 NY time or NY cut) and 3:00pm Tokyo time (also referred to as 15:00 Tokyo time or Tokyo cut). These time periods frequently see an increase in activity as option hedges unwind in the spot market.

Exporters – Corporations who sell goods internationally, which in turn makes them sellers of foreign currency and buyers of their domestic currency. Frequently refers to major Japanese corporations such as Sony and Toyota, who will be natural sellers of USD/JPY, exchanging dollars received from commercial sales abroad.

Extended – A market that is thought to have traveled too far, too fast.

Factory orders – The dollar level of new orders for both durable and nondurable goods. This report is more in depth than the durable goods report which is released earlier in the month.

Fair value – The difference between the price of a derivative contract and the underlying cash market price. Fair value means there are no arbitrage opportunities between the two prices.

Fed – The Federal Reserve Bank, the central bank of the United States, or the FOMC (Federal Open Market Committee), the policy-setting committee of the Federal Reserve.

Fed officials – Refers to members of the Board of Governors of the Federal Reserve or regional Federal Reserve Bank Presidents.

Figure / The figure – Refers to the price quotation of ’00’ in a price such as 00-03 (1.2600-03) and would be read as ‘figure-three.’ If someone sells at 1.2600, traders would say ‘the figure was given’ or ‘the figure was hit.’

Fill – When an order has been fully executed.

Fill or kill – An order that, if it cannot be filled in its entirety, will be cancelled.

First In First Out (FIFO) – All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.

Fix – One of approximately 5 times during the FX trading day when a large amount of currency must be bought or sold to fill a commercial customer’s orders. Typically these times are associated with market volatility. The regular fixes are as follows (all times NY):

5:00am – Frankfurt

6:00am – London

10:00am – WMHCO (World Market House Company)

11:00am – WMHCO (World Market House Company) – more important

8:20am – IMM

8:15am – ECB

Flat or flat reading – Economic data readings matching the previous period’s levels that are unchanged.

Flat/square – Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 and then sold $500,000, thereby creating a neutral (flat) position.

Follow-through – Fresh buying or selling interest after a directional break of a particular price level. The lack of follow-through usually indicates a directional move will not be sustained and may reverse.

FOMC – Federal Open Market Committee, the policy-setting committee of the US Federal Reserve.

FOMC minutes – Written record of FOMC policy-setting meetings are released 3 weeks following a meeting. The minutes provide more insight into the FOMC’s deliberations and can generate significant market reactions.

Foreign exchange (forex, fx) – The simultaneous buying of one currency and selling of another. The global market for such transactions is referred to as the “forex” or “FX” market.

Foreign Position – means a position under which one party agrees to purchase from or sell to the other party an agreed amount of foreign currency.

Forex Deal – The purchase or sale of a currency against sale or purchase of another currency. The maximum time for a deal is defined when the deal opens, the deal can be closed at any moment until the expiry date and time. A deal cannot be closed on its first 3 minutes, due to technical reasons.

Forward Cover Taking – Forward contracts to protect against movements in the exchange rate.

Forward Deal – A deal with a value date greater than the spot value date.

Forward Points – The interest rate differential between two currencies expressed in exchange rate points. The forward points are added to or subtracted from the spot rate to give the forward or outright rate depending on whether the currency is at a forward premium or discount.

Forward Rate – The rate at which a foreign exchange contract is struck today for settlement at a specified future date which is decided at the time of entering into the contract. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefore the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate.

Free Reserves – Total reserves held by a bank less the reserves required by the authority.

Front Office – The activities carried out by the dealer, normal trading activities.

Fundamental Analysis – Analysis of the market based on economic and political factors.

Fundamentals – The macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.

Funds – A term for USD/CAD/Fungibles Instruments that are equivalent, substitutable and interchangeable in law. May apply to certain exchange traded currency contracts offered on a number of exchanges.

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.

FRA40 – A name for the index of the top 40 companies (by market capitalization) listed on the French stock exchange. FRA40 is also known as CAC 40.

FTSE 100 – The name of the UK 100 Index.

Fundamental analysis – The assessment of all information available on a tradable product to determine its future outlook and therefore predict where the price is heading. Often non-measurable and subjective assessments, as well as quantifiable measurements, are made in fundamental analysis.

Funds – Refers to hedge fund types active in the market; also used as another term for USD/CAD pair.

Future – An agreement between two parties to execute a transaction at a specified time in the future when the price is agreed in the present.

Futures contract – An obligation to exchange a good or instrument at a set price and specified quantity grade at a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange- Traded Contracts – ETC), versus Forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.

Futures Exchange Traded Contracts – are firm commitments to deliver( ir take delivery) a standardized amount of a product of commodity on a certain date at a predetermined price. Futures exist in currencies, money market deposits, bonds, shares and commodities. They are traded on exchanges with clearing corporations guaranteeing the contract, trades themselves done market to market.

G10- G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.

G7 – Group of 7 Nations – United States, Japan, Germany, United Kingdom, France, Italy and Canada.

G8 – Group of 8 – G7 nations plus Russia.

Gamma – The rate at which a delta changes over time or for one unit change in the price of the underlying asset.

Gap / Gapping – A quick market move in which prices skip several levels without any trades occurring. Gaps usually follow economic data or news announcements.

Gearing (also known as leverage or margin) – Gearing refers to trading a notional value that is greater than the amount of capital a trader is required to hold in his or her trading account. It is expressed as a percentage or a fraction.

GER 30 – An index of the top 30 companies (by market capitalization) listed on the German stock exchange – another name for the DAX.

Given – Refers to a bid being hit or selling interest.

Giving it up – A technical level succumbs to a hard-fought battle.

GMT – Greenwich Mean Time – The most commonly referred time zone in the forex market. GMT does not change during the year, as opposed to daylight savings/summer time.

Going long – The purchase of a stock, commodity or currency for investment or speculation – with the expectation of the price increasing.

GNP Deflator – Removes inflation from the GNP figure. Usually expressed as a percentage and based on an index figure.

GNP Gap – The difference between the actual real GNP and the potential real GNP. If the gap is negative an economy is overheated.

Going short – The selling of a currency or product not owned by the seller – with the expectation of the price decreasing.

Gold (Gold’s relationship) – Commonly accepted that gold moves in the opposite direction of the US dollar. The long-term correlation coefficient is largely negative, but shorter-term correlations are less reliable.

Gold certificate – A certificate of ownership that gold investors use to purchase and sell the commodity instead of dealing with transfer and storage of the physical gold itself.

Gold contract – The standard unit of trading gold is one contract which is equal to 10 troy ounces.

Good for day – An order that will expire at the end of the day if it is not filled.

Good ’til cancelled order (GTC) – An order to buy or sell at a specified price that remains open until filled or until the client cancels.

Good ‘till date – An order type that will expire on the date you choose, should it not be filled beforehand.

Greenback – Nickname for the US dollar.

Gross domestic product (GDP) – Total value of a country’s output, income or expenditure produced within its physical borders.

Gross national product – Gross domestic product plus income earned from investment or work abroad.

Guaranteed order – An order type that protects a trader against the market gapping. It guarantees to fill your order at the price asked.

Guaranteed stop – A stop-loss order guaranteed to close your position at a level you dictate, should the market move to or beyond that point. It is guaranteed even if there’s gapping in the market.

Gunning, gunned – Refers to traders pushing to trigger known stops or technical levels in the market.

Handle – Every 100 pips in the FX market starting with 000.

Hawk– Hawkish A country’s monetary policy-makers are referred to as ‘hawkish’ when they believe that higher interest rates are needed, usually to combat inflation or restrain rapid economic growth or both.

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

Head and Shoulders – A pattern in price trends which chartist consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder, profit taking has caused the price to drop or level. The price then rises steeply again to the head before more profit taking causes the the price to drop to around the same level as the shoulder. A further modest rise or level will indicate that a further major fall is imminent. The breach of the neckline is the indication to sell.

Hard Currency – A currency whose value is expected to remain stable or increase in terms of other currencies.

Hit the bid – To sell at the current market bid.

HK40 / HKHI – A name for the Hong Kong Hang Seng Index.

Hyperinflation – Very high and self sustaining inflation levels. One definition being the period while inflation exceeds 50% until it drops below that level for 12 months.I

ICCH – International Commodities Clearing House Limited, a clearing house based in London operating world wide for many futures markets.

IFEMA – International Foreign Exchange Master Agreement.

IMF – International Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates. The IMF helps its members to tide over the balance of payments problems with supplying the necessary loans.

IMM – International Monetary Market part of the Chicago Mercantile Exchange that lists a number of currency and financial futures.

IOM – Index and Options Market part of the Chicago Mercantile Exchange.

IPI – Industrial Production Index. A coincident indicator measuring physical output of manufacturing, mining and utilities.

ISDA (International Securities Dealers Association – Organization foreign currency exchange banks have formed to regulate inter-bank markets and exchanges.

Implied Rates – The interest rate determined by calculating the difference between spot and forward rates.

In-the-Money – A call option is in-the-money if the price of the underlying instrument is higher than the exercise/strike price. A put option is in-the-money if the price of the underlying instrument is below the exercise/strike price.

Inconvertible Currency – Currency which cannot be exchanged for other currencies either because it is forbidden by the foreign exchange regulations or the currency witnesses extreme volatility that it is not perceived to be a safe haven for parking the funds.

Indicative Quote – A market-maker’s price which is not firm.

Indirect quote – Where the foreign currency is a variable amount and the domestic currency is fixed at one unit.

Inflation – Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.

Info Quote – Rate given for information purposes only.

Initial Margin – The deposit required by the Broker before a client can trade/transact a deal to have some cushion in the event of default by the party.

Interbank Rates – The forex rates large international banks quote to other large international banks. Generaly  the public and small to medium size businesses do not have access to these rates.

Interest Rate Risk – The potential for losses arising from changes in interest rates

Interest Rate Swaps – An agreement to exchange interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. The principal amount is notional as at the end of the tenure only cash flows related with the interest payments (whether payment or reciept) are exchanged.

Intervention – Action by a central bank to effect the value of its currency by entering the market.

Intraday Limit – Limit set by bank management on the size of each dealer’s Intra Day Position.

Intra Day Position – Open positions run by a dealer within the day. Usually settled by market close.

Illiquid – Little volume being traded in the market; a lack of liquidity often creates choppy market conditions.

IMM – International Monetary Market, the Chicago-based currency futures market, that is part of the Chicago Mercantile Exchange.

IMM futures – A traditional futures contract based on major currencies against the US dollar. IMM futures are traded on the floor of the Chicago Mercantile Exchange.

IMM session – 8:00am – 3:00pm New York.

Inconvertible Currency – Currency which cannot be exchanged for other currencies either because it is forbidden by the foreign exchange regulations or the currency witnesses extreme volatility that it is not perceived to be a safe haven for parking the funds.

Indicative Quote – A market-maker’s price which is not firm.

Indirect quote – Where the foreign currency is a variable amount and the domestic currency is fixed at one unit.

Inflation – Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.

Info Quote – Rate given for information purposes only.

INDU – Abbreviation for the Dow Jones Industrial Average.

Industrial production – Measures the total value of output produced by manufacturers, mines and utilities. This data tends to react quickly to the expansions and contractions of the business cycle and can act as a leading indicator of employment and personal income data.

Initial margin requirement – The initial deposit of collateral required to enter into a position.

IPO – A private company’s initial offer of stock to the public – short for Initial Public Offering.

Interbank rates – The Foreign Exchange rates which large international banks quote to each other.

Interest – Adjustments in cash to reflect the effect of owning or receiving the notional amount of equity of a CFD position.

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

Introducing broker – A person or corporate entity which introduces accounts to a broker in return for a fee.

INX – Symbol for S&P 500 Index.

ISM manufacturing index – An index that assesses the state of the US manufacturing sector by surveying executives on expectations for future production, new orders, inventories, employment and deliveries. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.

ISM non-manufacturing – An index that surveys service sector firms for their outlook, representing the other 80% of the US economy not covered by the ISM Manufacturing Report. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.

J Curve – A term describing the expected effect of a devaluation on a country’s trade balance. It is anticipated that import bills rise before export orders and receipts increase.

Japanese economy watchers survey – Measures the mood of businesses that directly service consumers such as waiters, drivers and beauticians. Readings above 50 generally signal improvements in sentiment.

Japanese machine tool orders – Measures the total value of new orders placed with machine tool manufacturers. Machine tool orders are a measure of the demand for companies that make machines, a leading indicator of future industrial production. Strong data generally signals that manufacturing is improving and that the economy is in an expansion phase.

JPN225 – A name for the NIKKEI index.

Keep the powder dry – To limit your trades due to inclement trading conditions. In either choppy or extremely narrow markets, it may be better to stay on the sidelines until a clear opportunity arises.

Kiwi – Nickname for NZD/USD.

Knock-ins – Option strategy that requires the underlying product to trade at a certain price before a previously bought option becomes active. Knock-ins are used to reduce premium costs of the underlying option and can trigger hedging activities once an option is activated.

Knock-outs – Option that nullifies a previously bought option if the underlying product trades a certain level. When a knock-out level is traded, the underlying option ceases to exist and any hedging may have to be unwound.

Last dealing day – The last day you may trade a particular product.

Last dealing time – The last time you may trade a particular product.

Leading indicators – Statistics that are considered to predict future economic activity.

Level – A price zone or particular price that is significant technically or based on reported orders/option interest.

Leverage – Also known as margin, this is the percentage or fractional increase you can trade from the amount of capital you have available. It allows traders to trade notional values far higher than the capital they have. For example: leverage of 100:1 means you can trade a notional value 100 times greater than the capital in your trading account.*

Leveraged names – Short-term traders, referring largely to the hedge fund community.

Liability – Potential loss, debt or financial obligation.

LIBOR – The London Interbank Offered Rate. Banks use LIBOR as a base rate for international lending.

Limits / Limit order – An order that seeks to buy at lower levels than the current market or sell at higher levels than the current market. A limit order sets 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 the current market, e.g. 116.50.

Limited Convertibility – When residents of a country are prohibited from buying other currencies even though non-residents may be completely free to buy or sell the national currency and the foreign institutional investors also have the liberty to buy and sell shares on the stock exchange of that country.

Liquid market – A market which has sufficient numbers of buyers and sellers for the price to move in a smooth manner.

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

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

London session – 08:00 – 17:00 (London).

Long position – A position that appreciates in value if market price increases. When the base currency in the pair is bought, the position is said to be long. This position is taken with the expectation that the market will rise.

Longs – Traders who have bought a product.

Loonie – Nickname for USD/CAD.

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

MO – Amount of cash in circulation. UK figure.

M1

Cash in circulation plus demand deposits at commercial banks. There are variations between the precise definitions used by national financial authorities.

M2

Includes demand deposits, time deposits and money market mutual funds excluding large CDs.

M3

In the UK it is M1 plus public and private sector time deposits and sight deposits held by the public sector.

M4

In the US it is M2 plus negotiable CDs.

MITI

Japanese Ministry of International Trade & Industry.

MM

Money Markets

Make a Market – A dealer is said to make a market when he quotes both the bid and offer prices at which he stands ready to buy and sell.

Managed Float – When the monetary authorities intervene regularly in the market to stabilise the rates or to push the exchange rate in a required direction. Also called a dirty float.

Margin Call – A demand for additional funds to cover positions

Margin – Collateral that the holder of a position in securities, options, Forex or futures contracts, has to deposit to cover the credit risk of his counterparty. Other definitions to MARGIN, used in other areas are:

(1) Difference between the buying and selling rates, also used to indicate the discount or premium between spot or forward.

(2) For options, the sum required as collateral from the writer of an option.

(3) For futures, a deposit made to the clearing house on establishing a futures position account.

(4) The percentage reserve required by the US Federal Reserve to make an initial credit transaction.

Marginal Risk – The risk that a customer goes bankrupt after entering into a forward contract. In such an event the issuer must close the commitment running the risk of having to pay the marginal movement on the contract.

Mark – To – Market – The profits and/or losses are tallied at the end of the session according to the closing prices of the security and the account is “marked to the market” daily. The party will be called upon to make good the losses if there has been an adverse movement in the prices and it can book the profits in case there has been a favorable movement in the prices.

Market Value – Market value of a forex position at any time is the amount of the domestic currency that could be purchased at the then market rate in exchange for the amount of foreign currency to be delivered under the forex Contract.

Macro – The longest-term trader who bases their trade decisions on fundamental analysis. A “macro” trade’s holding period can last anywhere from around 6 months to multiple years.

Manufacturing production – Measures the total output of the manufacturing aspect of the Industrial Production figures. This data only measures the 13 sub sectors that relate directly to manufacturing. Manufacturing makes up approximately 80% of total Industrial Production.

Margin – The required collateral that an investor must deposit to hold a position.

Margin call – A request from a broker or dealer for additional funds or other collateral on a position that has moved against the customer.

Market capitalization – The total value of a listed company – share price multiplied by the number of shares issued.

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

Market order – An order to buy or sell at the current price.

Market risk – Exposure to changes in market prices.

Mark-to-market – Process of re-evaluating all open positions in light of current market prices. These new values then determine margin requirements.

Maturity – The date for settlement or expiry of a financial product.

Medley report – Refers to Medley Global Advisors, a market consultancy that maintains close contacts with central bank and government officials around the world. Their reports can frequently move the currency market as they purport to have inside information from policy makers. The accuracy of the reports has fluctuated over time, but the market still pays attention to them in the short-run.

Models – Synonymous with black box. Systems that automatically buy and sell based on technical analysis or other quantitative algorithms.

MoM – Abbreviation for month over month, which is the change in a data series relative to the prior month’s level.

Momentum – A series of technical studies (e.g. RSI, MACD, Stochastics, Momentum) that assesses the rate of change in prices.

Momentum players – Traders who align themselves with an intra-day trend that attempts to grab 50-100 pips.

Mutual fund

An open-end investment company. Equivalent to unit trust.

NAS100 – A name for the NASDAQ 100 index.

Net position – The amount of currency bought or sold which has not yet been offset by opposite transactions.

New York session – 8:00am – 5:00pm (New York time).

No touch – An option that pays a fixed amount to the holder if the market never touches the predetermined Barrier Level.

Nickel – US term for five basis points.

Nostro Account – A foreign currency current account maintained with another bank. The account is used to receive and pay currency assets and liabilities denominated in the currency of the country in which the bank is resident.

Not Held Basis Order – An order whereby the price may trade through or better than the client’s desired level, but the principal is not held responsible if the order is not executed.

Note – A financial instrument consisting of a promise to pay rather than an order to pay or a certificate of indebtedness.

NYA.X – Symbol for NYSE Composite Index.

Off-Shore – The operations of a financial institution which although physically located in a country, has little connection with that country’s financial systems. In certain countries a bank is not permitted to do business in the domestic market but only with other foreign banks. This is known as an off shore banking unit.

Offer – The rate at which a dealer is willing to sell the base currency.

Official Settlements Account – A US balance of payments measure based on movement of dollars in foreign official holdings and US reserves. Also referred to as reserve transaction account.

Old Lady – Old lady of Threadneedle Street, a term for the Bank of England.

One Cancels Other Order – Where the execution of one order automatically cancels a previous order also referred to as OCO or “One cancels the other”.

Open Market Operations – The central bank operations in the markets to influence exchange and interest rates.

Open Position – Any deal which has not been settled by physical payment or reversed by an equal and opposite deal for the same value date. It can be termed as a high risk, high return proposition.

Option Class – All options of the same type – calls or puts -listed on the same underlying instrument.

Option Series – All options of the same class having the same exercise/strike price and expiration date.

Option – A contract conferring the right but not the obligation to buy (call) or to sell (put) a specified amount of an instrument at a specified price within a predetermined time period.

Out-of-the-Money – A put option is out-of-the-money if the exercise/strike price is below the price of the underlying instrument. A call option is out-of-the money if the exercise/strike price is higher than the price of the underlying instrument.

Outright Deal – A forward deal that is not part of a swap operation.

Outright Forward – Foreign exchange transaction involving either the purchase or the sale of a currency for settlement at a future date.

Outright Rate – The forward rate of a foreign exchange deal based on spot price plus forward discount/premium.

Over The Counter (OTC) – A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange trading floor. These markets have not been very popular because of the risks both the parties face in case the other party fails to honour the contract. They were never part of the Stock Exchange since they were seen as “unofficial”.

Overheated (Economy) – Is an economy on a high growth rate trajectory placing pressure on the production capacity resulting in increased inflationary pressures and higher interest rates.

Overnight Limit – Net long or short position in one or more currencies that a dealer can carry over into the next dealing day. Passing the book to other bank dealing rooms in the next trading time zone reduces the need for dealers to maintain these unmonitored exposures.

Offer (also known as the Ask price) – The price at which the market is prepared to sell a product. Prices are quoted two-way as Bid/Offer. The Offer price is also known as the Ask. The Ask represents the price at which a trader can buy the base currency, which is shown to the right in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the ask price is 1.4532, meaning you can buy one US dollar for 1.4532 Swiss francs.

In CFD trading, the Ask represents the price a trader can buy the product. For example, in the quote for UK OIL 111.13/111.16, the product quoted is UK OIL and the ask price is £111.16 for one unit of the underlying market.

Offered – If a market is said to be trading ‘offered’, it means a pair is attracting heavy selling interest, or offers.

Offsetting transaction – A trade that cancels or offsets some or all of the market risk of an open position.

On top – Attempting to sell at the current market order price.

One cancels the other order (OCO) – A designation for two orders whereby if one part of the two orders is executed, then the other is automatically cancelled.

One touch – An option that pays a fixed amount to the holder if the market touches the predetermined Barrier Level.

Open order – An order that will be executed when a market moves to its designated price. Normally associated with Good ’till Cancelled Orders.

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

Option – A derivative which gives the right, but not the obligation, to buy or sell a product at a specific price before a specified date.

Order – An instruction to execute a trade.

Order book – A system used to show market depth of traders willing to buy and sell at prices beyond the best available.

Over the counter (OTC) – Used to describe any transaction that is not conducted via an exchange.

Overnight position – A trade that remains open until the next business day.

PPI – Producer Price Indices. See wholesale price indices.

Package Deal – When a number of exchange and /or deposit orders have to be fulfilled simultaneously.

Par

(1) The nominal value of a security or instrument.

(2) The official value of a currency.

Parities – The value of one currency in terms of another.

Parity

(1) Foreign exchange dealer’s slang for your price is the correct market price.

(2) Official rates in terms of SDR or other pegging currency.

Permitted Currency – Is a foreign currency which is freely convertible i.e a currency which is permitted by the rules and regulations of the country concerned to be converted into major reserve currencies and for which a fairly active and liquid market exists for dealing against the major currencies.

Pip – See point. (0.0001 of a unit).

Point

(1) 100th part of a per cent, normally 10,000 of any spot rate. Movement of exchange rates are usually in terms of points.

(2) One percent on an interest rate e.g. from 8-9%.

(3) Minimum fluctuation or smallest increment of price movement.

Political Risk – The potential for losses arising from a change in government policy or due to the risk of expropriation (nationalisation by the government ).

Position – The netted total exposure in a given currency. A position can be either flat or square (no exposure), long (more currency bought than sold), or short ( more currency sold than bought).

Premium

(1) The amount by which a forward rate exceeds a spot rate.

(2) The amount by which the market price of a bond exceeds its par value.

(3) Options, the price a put or call buyer must pay to a put or call seller for an option contract.

(4) The margin paid above the normal price level.

Prime Rate

(1) The rate from which lending rates by banks are calculated in the US.

(2) The rate of discount of prime bank bills in the UK.

Principal – A dealer who buys or sells stock for his/her own account.

Profit Taking – The unwinding of a position to realize profits.

Purchasing Power Parity – Model of exchange rate determination stating that the price of a good in one country should equal the price of the same good in another country after adjusting for the changes in the price due to the change in exchange rate. Also known as the law of one price.

Put Call Parity – The equilibrium relationship between premiums of call and put options of the same strike and expiry.

Put Option – A put option confers the right but not the obligation to sell currencies, instruments or futures at the option exercise price within a predetermined time period.

Paid – Refers to the offer side of the market dealing.

Pair – The forex quoting convention of matching one currency against the other.

Paneled – A very heavy round of selling.

Parabolic – A market that moves a great distance in a very short period of time, frequently moving in an accelerating fashion that resembles one half of a parabola. Parabolic moves can be either up or down.

Partial fill–  Where only part of an order has been executed.

Patient – Waiting for certain levels, or news events to hit the market before entering a position.

Personal income – Measures an individual’s total annual gross earnings from wages, business enterprises and various investments. Personal income is the key to personal spending, which accounts for 2/3 of GDP in the major economies.

Pips – The smallest unit of price for any foreign currency, pips refer to digits added to or subtracted from the fourth decimal place, i.e. 0.0001.

Political risk – Exposure to changes in governmental policy which may have an adverse effect on an investor’s position.

Portfolio – A collection of investments owned by an entity.

Position – The net total holdings of a given product.

Premium – The amount by which the forward or futures price exceeds the spot price.

Price transparency – Describes quotes to which every market participant has equal access.

Profit – The difference between the cost price and the sale price, when the sale price is higher than the cost price.

Pullback – The tendency of a trending market to retrace a portion of the gains before continuing in the same direction.

Purchasing managers index (PMI) – An economic indicator which indicates the performance of manufacturing companies within a country.

Purchasing managers index services (France, Germany, Eurozone, UK) – Measures the outlook of purchasing managers in the service sector. Such managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries and inventories. Readings above 50 generally indicate expansion, while readings below 50 suggest economic contraction.

Put option – A product which gives the owner the right, but not the obligation, to sell it at a specified price.

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

Quantitative easing – When a central bank injects money into an economy with the aim of stimulating growth.

Quarterly CFDs – A type of future with expiry dates every three months (once per quarter).*

Recession – A decline in business activity. Often defined as two consecutive quarters with a real fall in GNP.

Reserve Currency – A currency held by a central bank on a permanent basis as a store of international liquidity, these are normally Dollar, Deutschemark, and Sterling..

Reserves – Funds held against future contingencies, normally a combination of convertible foreign currency, gold, and SDRs. Official reserves are to ensure that a government can meet near term obligations. They are an asset in the balance of payments.

Resistance – A price level at which the selling is expected to take place.

Retail Price Index – Measurement of the monthly change in the average level of prices at retail, normally of a defined group of goods.

Reuter Dealing – A system for screen based trading that has been in operation since the early 1980s. It now has a matching optional enhancement known as Dealing 2000-2.

Revaluation – Increase in the exchange rate of a currency as a result of official action.

Risk Premium – Additional sum payable or return to compensate a party for adopting a particular risk.

Risk management – The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to foreign exchange involves, among others, consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.

Risks – There are risks associated with any market. It means variance of the returns and the possibility that the actual return might not be in line with the expected returns. The risks associated with trading foreign currencies are: market, exchange, Interest rate, yield curve, volatility, liquidity, forced sale, counterparty, credit, and country risk.

Rolling over – The substituting of a far option for a near option of the same underlying stock at the same strike/exercise price.

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

Range – When a price is trading between a defined high and low, moving within these two boundaries without breaking out from them.

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

RBA – Reserve Bank of Australia, the central bank of Australia.

RBNZ – Reserve Bank of New Zealand, the central bank of New Zealand.

Real money – Traders of significant size including pension funds, asset managers, insurance companies, etc. They are viewed as indicators of major long-term market interest, as opposed to shorter-term, intraday speculators.

Realized profit / loss – The amount of money you have made or lost when a position has been closed.

Retail investor – An individual investor who trades with money from personal wealth, rather than on behalf of an institution.

Retail sales – Measures the monthly retail sales of all goods and services sold by retailers based on a sampling of different types and sizes. This data provides a look into consumer spending behavior, which is a key determinant of growth in all major economies.

Revaluation – When a pegged currency is allowed to strengthen or rise as a result of official actions; the opposite of a devaluation.

Rights issue – A form of corporate action where shareholders are given rights to purchase more stock. Normally issued by companies in an attempt to raise capital.

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.

Rollover – A rollover is the simultaneous closing of an open position for today’s value date and the opening of the same position for the next day’s value date at a price reflecting the interest rate differential between the two currencies.

In the spot forex market, trades must be settled in two business days. For example, if a trader sells 100,000 Euros on Tuesday, then the trader must deliver 100,000 Euros on Thursday, unless the position is rolled over. As a service to customers, all open forex positions at the end of the day (5:00 PM New York time) are automatically rolled over to the next settlement date. The rollover (or swap) adjustment is simply the accounting of the cost-of-carry on a day-to-day basis..

Round trip – A trade that has been opened and subsequently closed by an equal and opposite deal.

Running profit / loss – An indicator of the status of your open positions; that is, unrealized money that you would gain or lose should you close all your open positions at that point in time.

RUT – Symbol for Russell 2000 Index.

SITC – Standard International Trade Classification. A system for reporting trade statistics in a common manner.

SOFFEX – Swiss Options and Financial Futures Exchange, a fully automated and integrated trading and clearing system.

Selling Rate – Rate at which a bank is willing to sell foreign currency.

Settlement Date – It means the business day specified for delivery of the currencies bought and sold under a forex contract.

Settlement – Actual physical exchange of one currency for another.

Short – A market position where the client has sold a currency he does not already own. Usually expressed in base currency terms.

Soft Market – More potential sellers than buyers, which creates an environment where rapid price falls are likely.

Stable Market – An active market which can absorb large sale or purchases of currency without having any major impact on the interest rates.

Stagflation – Recession or low growth in conjunction with high inflation rates.

Standard and Poors (S&P) – A US firm engaged in assessing the financial health of borrowers. The firm also has generated certain stock indices i.e. S&P 500.

Sterilization – Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the forex market.

Sterling – British pound, otherwise known A market position where the client has sold a currency he does not already own. Usually expressed in base currency terms.

More potential sellers than buyers, which creates an environment where rapid price falls are likely.

An active market which can absorb large sale or purchases of currency without having any major impact on the interest rates.

Recession or low growth in conjunction with high inflation rates.

A US firm engaged in assessing the financial health of borrowers. The firm also has generated certain stock indices i.e. S&P 500.

Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the forex market.

– British pound, otherwise knownnas cable.

Stop Loss Order – Order given to ensure that, should a currency weaken by a certain percentage, a short position will be covered even though this involves taking a loss. Realize profit orders are less common.

Stop Out Price – US term for the lowest accepted price for Treasury Bills at auction.

Straddle – The simultaneous purchase/sale of both call and put options for the same share, exercise/strike price and expiry date.

Strike Price – Also called exercise price. The price at which an option holder can buy or sell the underlying instrument.

Strip – A combination of two puts and one call.

Structural Unemployment – Unemployment levels inherent in an economic structure.

Support Levels – A price level at which the buying is expected to take place.

Swap – The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.

Swift – Society for Worldwide Inter-bank Financial Telecommunication is a clearing system for international trading.

Swissy – Market slang for Swiss Franc.

SEC – Securities and Exchange Commission.

Sector – A group of securities that operate in a similar industry.

Sell – Taking a short position in expectation that the market is going to go down.

Settlement – The process by which a trade is entered into the books, recording the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.

SHGA.X – Symbol for Shanghai A Index.

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.

Short squeeze – A situation in which traders are heavily positioned on the short side and a market catalyst causes them to cover (Buy) in a hurry, causing a sharp price increase.

Short-covering – After a decline, traders who earlier went short begin buying back.

Shorts – Traders who have sold, or shorted, a product, or those who are bearish on the market.

Sidelines, sit on hands – Traders staying out of the markets due to directionless, choppy, unclear market conditions are said to be ‘on the sidelines’ or ‘sitting on their hands’.

Simple Moving Average (SMA) – A simple average of a pre-defined number of price bars. For example, a 50 period daily chart SMA is the average closing price of the previous 50 daily closing bars. Any time interval can be applied.

Slippage – The difference between the price that was requested and the price obtained typically due to changing market conditions.

Slippery – A term used when the market feels like it is ready for a quick move in any direction.

Sloppy – Choppy trading conditions that lack any meaningful trend and/or follow-through.

SNB – Swiss National Bank, the central bank of Switzerland.

Sovereign names – Refers to central banks active in the spot market.

Spot market – A market whereby products are traded at their market price for immediate exchange.

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

Spot trade – The purchase or sale of a product for immediate delivery (as opposed to a date in the future). Spot contracts are typically settled electronically.

Spread – The difference between the bid and offer prices.

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

SPX500 – A name for the S&P index.

Sterling – Nickname for GBP/USD. Also known as Pound or British Pound.

Stock exchange – A market on which securities are traded.

Stock index – The combined price of a group of stocks – expressed against a base number – to allow assessment of how the group of companies is performing relative to the past.

Stop loss hunting – When a market seems to be reaching for a certain level that is believed to be heavy with stops. If stops are triggered, then the price will often jump through the level as a flood of stop-loss orders are triggered.

Stop order – A stop order is an order to buy or sell once a pre-defined price is reached. When the price is reached, the stop order becomes a market order and is executed at the best available price. It is important to remember that stop orders can be affected by market gaps and slippage, and will not necessarily be executed at the stop level if the market does not trade at this price. A stop order will be filled at the next available price once the stop level has been reached. Placing contingent orders may not necessarily limit your losses.

Stop entry order – This is an order placed to buy above the current price, or to sell below the current price. These orders are useful if you believe the market is heading in one direction and you have a target entry price.

Stop loss order – This is an order placed to sell below the current price (to close a long position), or to buy above the current price (to close a short position). Stop loss orders are an important risk management tool. By setting stop loss orders against open positions you can limit your potential downside should the market move against you. Remember that stop orders do not guarantee your execution price – a stop order is triggered once the stop level is reached, and will be executed at the next available price.

Stops building – Refers to stop-loss orders building up; the accumulation of stop-loss orders to buy above the market in an upmove, or to sell below the market in a down move.

Strike price – The defined price at which the holder of an option can buy or sell the product.

Support – A price that acts as a floor for past or future price movements.

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.

Suspended trading – A temporary halt in the trading of a product.

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

SWISSIE – The nickname for USD/CHF.

T-Bill – Treasury Bill.

TIBOR – Tokyo Interbank Offered Rate.

TIFFE – Tokyo International Financial Futures Exchange.

Technical Analysis – The study of the price that reflects the supply and demand factors of a currency. Common methods are flags, trend-lines spikes, bottoms, tops, pennants, patterns and gaps.

Technical Correction – An adjustment to price not based on market sentiment but technical factors such as volume and charting.

Terms of Trade – The ratio between export and import price indices.

Theta – A measure of the sensitivity of the price of an option to a change in its time to expiry.

Thin Market – A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.

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 and selling for the next day or vice versa.

Trade Date – The date on which a trade occurs.

Tranche – A portion of a deal or structured financing, specifically used for borrowings from the IMF.

Transaction Date – The date on which a trade occurs.

Transaction Exposure – Potential profit and loss generated by current foreign exchange transactions

Transaction – The buying or selling of securities resulting from the execution of an order.

T/P – Stands for “take profit.” Refers to limit orders that look to sell above the level that was bought, or buy back below the level that was sold.

Takeover – Assuming control of a company by buying its stock.

Technicians or Techs – Traders who base their trading decisions on technical or charts analysis.

Ten (10) yr. – For example: US 10-year note – US government issued debt which is repayable in ten years.

Thin – Illiquid, slippery, or choppy market environment. A light volume market that produces erratic trading conditions.

Thirty (30) yr. – For example: UK 30-year gilt – UK government issued debt which is repayable in 30 years.

Tick (size) – A minimum change in price, up or down.

Time to maturity – The remaining time until a contract expires.

Tokyo session – 09:00 – 18:00 (Tokyo).

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

Trade balance – Measures the difference in value between imported and exported goods and services. Nations with trade surpluses (exports greater than imports), such as Japan, tend to see their currencies appreciate, while countries with trade deficits (imports greater than exports), such as the US, tend to see their currencies weaken.

Trade size – The number of units of product in a contract or lot.

Trading bid – A pair is acting strong and/or moving higher; bids keep entering the market and pushing prices up.

Trading halt – A postponement to trading that is not a suspension from trading.

Trading heavy – A market that feels like it wants to move lower, usually associated with an offered market that will not rally despite buying attempts.

Trading offered – A pair is acting weak and/or moving lower, and offers to sell keep coming into the market.

Trading range – The range between the highest and lowest price of a stock usually expressed with reference to a period of time. For example: 52-week trading range.

Trailing stop – A trailing stop allows a trade to continue to gain in value when the market price moves in a favorable direction, but automatically closes the trade if the market price suddenly moves in an unfavorable direction by a specified distance. Placing contingent orders may not necessarily limit your losses.

Transaction cost – The cost of buying or selling a financial product.

Transaction date – The date on which a trade occurs.

Trend – Price movement that produces a net change in value. An uptrend is identified by higher highs and higher lows. A downtrend is identified by lower highs and lower lows.

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

Two-way price – When both a bid and offer rate is quoted for an FX transaction.

TYO10 – Symbol for CBOE 10-Year Treasury Yield Index.

Under-Valuation – An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.

Ugly – Describing unforgiving market conditions that can be violent and quick.

UK100 – A name for the FTSE 100 index.

UK average earnings including bonus/ Excluding bonus – Measures the average wage including/excluding bonuses paid to employees. This is measured QoQ from the previous year.

UK claimant count rate – Measures the number of people claiming unemployment benefits. The claimant count figures tend to be lower than the unemployment data since not all of the unemployed are eligible for benefits.

UK HBOS house price index – Measures the relative level of UK house prices for an indication of trends in the UK real estate sector and their implication for the overall economic outlook. This index is the longest monthly data series of any UK housing index, published by the largest UK mortgage lender (Halifax Building Society/Bank of Scotland).

UK jobless claims change – Measures the change in the number of people claiming unemployment benefits over the previous month.

UK manual unit wage costs – Measures the change in total labor cost expended in the production of one unit of output.

UK OIL – A name for Brent Crude Oil.

UK producers price index input – Measures the rate of inflation experienced by manufacturers when purchasing materials and services. This data is closely scrutinized since it can be a leading indicator of consumer inflation.

UK producers price index output – Measures the rate of inflation experienced by manufacturers when selling goods and services.

Underlying – The actual traded market from where the price of a product is derived.

Unemployment rate – Measures the total workforce that is unemployed and actively seeking employment, measured as a percentage of the labor force.

University of Michigan’s consumer sentiment index – Polls 500 US households each month. The report is issued in a preliminary version mid-month and a final version at the end of the month. Questions revolve around individuals’ attitudes about the US economy. Consumer sentiment is viewed as a proxy for the strength of consumer spending.

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 the position is closed.

Uptick – A new price quote at a price higher than the preceding quote.

Uptick rule – In the US, 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.

US30 – A name for the Dow Jones index.

US OIL – A name for WTI Crude Oil.

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

Value Spot – Normally settlement is for two working days from the date the contract is entered into. Value Today Transaction is executed for same day settlement; sometimes also referred to as “cash transaction”.

Vanilla – A simple option whose terms and conditions do not include any provisions other than exercise style, expiry and strike. To compare with exotic options which have additional terms.

Variation Margin – Funds required to be deposited by a client when a price movement has caused funds to fall below the stipulated percentage of the value of the contract.

Vega – Expresses the price change of an option for a one per cent change in the implied volatility.

Velocity of Money – The speed with which money circulates or turnover in the economy. It is calculated as the annual national income: average money stock in the period.

Volatility – A measure of the amount by which an asset price is expected to fluctuate over a given period. Normally measured by the annual standard deviation of daily price changes (historic). Can be implied from futures pricing, implied volatility.

Vostro Account – A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty’s account from which funds may be paid into or withdrawn, as a result of a transaction.

Value date – Also known as the maturity date, it is 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.

Variation margin – Funds traders must hold in their accounts to have the required margin necessary to cope with market fluctuations.

VIX or Volatility index – Shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. The VIX is a widely-used measure of market risk and is often referred to as the “investor fear gauge.”

Volatility – Referring to active markets that often present trade opportunities.

Wholesale Money – Money borrowed in large amounts from banks and institutions rather than from small investors.

Wholesale Price Index – It measures changes in prices in the manufacturing and distribution sector of the economy and tends to lead the consumer price index by 60 to 90 days. The index is often quoted separately for food and industrial products.

Working day – A day on which the banks in a currency’s principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both (all relevant currency centers in the case of a cross) are open.

World Bank – A bank made up of members of the IMF whose aim is to assist in the development of member states by making loans where private capital is not available.

Writer – The seller of a position. Also known as the grantor of the trade. “Writing a Currency” is to sell it.

Wedge chart pattern – Chart formation that shows a narrowing price range over time, where price highs in an ascending wedge decrease incrementally, or in a descending wedge, price declines are incrementally smaller. Ascending wedges typically conclude with a downside breakout and descending wedges typically terminate with upside breakouts.

Whipsaw – Slang for a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.

Wholesale prices – Measures the changes in prices paid by retailers for finished goods. Inflationary pressures typically show earlier than the headline retail.

Working order – Where a limit order has been requested but not yet filled.

WSJ – Stands for The Wall Street Journal.

XAG/USD – Symbol for Silver Index.

XAU/USD – Symbol for Gold Index.

XAX.X – Symbol for AMEX Composite Index.

Yard – A billion units.

Yield – The percentage return from an investment.

Yield Curve – The graph showing changes in yield on instruments depending on time to maturity. A system originally developed in the bond markets is now broadly applied to various financial futures. A positive sloping curve has lower interest rates at the shorter maturities and higher at the longer maturities. A negative sloping curve has higher interest rates at the shorter maturities.

YoY – Abbreviation for year over year.

Yuan – The Yuan is the base unit of currency in China. The Renminbi is the name of the currency in China, where the Yuan is the base unit.

Z-Certificate – Certificate issued by the Bank of England to “discount houses” in lieu of stock certificates to facilitate their dealing in the short dated gilt edge securities.

Zero Coupon Bond – A bond that pays no interest. The bond is initially offered at a discount to its redemption value.