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.
- A market
distinguished by declining prices.
- The rate at
which a trader is willing to buy a
- The difference
between the bid and offer price, and
the most widely used measure of market
- Dealer expression referring to the first few digits of an exchange rate. These digits rarely change in normal market fluctuations, and therefore are omitted in dealer quotes, especially in times of high market activity. For example, a USD/Yen rate might be 107.30/107.35, but would be quoted verbally without the first three digits (i.e. “30/35”).
- 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.
Bull Market - A market
distinguished by rising prices.
Bundesbank - Germany’s Central Bank.
Cable - Trader jargon referring to the British Pound/US
Dollar exchange rate. So called because
the rate was originally transmitted
via a transatlantic cable beginning
in the mid 1800’s.
Chart - A chart that indicates the trading range for a time period, 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.
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.
- An individual who uses charts and
graphs and interprets historical data
to find trends and predict future
movements. Also referred to as Technical
Clearing - The process of settling a trade.
- 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’.
- A transaction
fee charged by a broker.
- A document exchanged by counterparts
to a transaction that states the terms
of said transaction.
- The standard unit of trading.
- One of the participants in a financial
- Risk associated
with a cross-border transaction, including
but not limited to legal and political
- The exchange rate between any two currencies that are considered non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/JPY quote would be considered a cross rate, whereas in UK or Japan it would be one of the primary currency pairs traded.
- Any form of money issued by a government
or central bank and used as legal
tender and a basis for trade.
- the probability
of an adverse change in exchange rates.
- Refers to
positions which are opened and closed
on the same trading day.
- An individual who acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
- A negative balance
of trade or payments.
- An FX trade where both sides make
and take actual delivery of the currencies
- A fall in the value of a currency
due to market forces.
- 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.
- The deliberate downward adjustment
of a currency’s price, normally
by official announcement.
- A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
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.
Monetary Union (EMU)
- The principal goal of the EMU is to establish a single European currency called the Euro, which officially replaced the national currencies of the member EU countries in 2002. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain, Greece and Portugal.
- The currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).
Central Bank (ECB)
- the Central Bank for the new European
Deposit Insurance Corporation (FDIC)
- The regulatory agency responsible
for administering bank depository
insurance in the US.
Central Bank for the United States.
Fib - Slang for Fibonacci. A Fib level is a percentage level of a measured range.
- 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.
FX) - the simultaneous buying of one
currency and selling of another.
- 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.
- The pips
added to or subtracted from the current
exchange rate to calculate a forward
of economic and political information
with the objective of determining
future movements in a financial market.
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.
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.
- A position or combination of positions
that reduces the risk of your primary
- An economic condition whereby prices
for consumer goods rise, eroding purchasing
- The initial deposit of collateral required to enter into a position as a guarantee on future performance.
- The Foreign Exchange rates at which large international banks quote other large international banks.
- A term used by “River Traders” to identify the market going against the overall trend (reversal).
- Statistics that are considered to predict future economic activity.
- The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.
- 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 102.00/05, then a limit order to buy USD would be at a price below 102. (ie 101.50)
- The ability of a market to accept large transactions with minimal to no impact on price stability.
- The closing of an existing position through the execution of an offsetting transaction.
- A position that appreciates in value if market prices increase.
- The required equity that an investor must deposit to collateralize a position.
- 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.
- A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.
- 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.
Offer - The rate at which a dealer is willing to sell a currency.
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 when 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 - A deal not yet reversed or settled with a physical payment.
Over the Counter (OTC) - Used to describe any transaction that is not conducted over an exchange.
Overnight - A trade that remains open until the next business day.
Pips - 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.
Quote - An indicative market price, normally used for information purposes only.
Rate - The price of one currency in terms of another, typically used for dealing purposes.
RCU/RCD - An acronym for River Channel Up/River Channel Down. A proprietary software program and CFG signature trade that determines channels in the market.
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.
River Channel - The area enclosed by the red (fast) line and blue (slow) line.
River Oscillator Indicator - A proprietary momentum device used for measuring historical data feed and calibrated closely to historical Fibonacci ratios that are derived from mathematical equations for the purpose of predicting market moves either up or down.
River Trader - One who trades in the direction of an established river using channel indicators that are in agreement with the overall trend. This elite group of Forex traders follows the rules of trend trading, trusting signals and ignoring fundamentals and always trade with protection.
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.
S90/Crossover - A system that predicts targets for profit and invasion.
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.
- A trader who buys or sells expecting to make profit from market fluctuations.
- The current market price. Settlement of spot transactions usually occurs within two business days.
- The difference between the bid and offer prices.
- Slang for the 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.
- A term 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.
- A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.
- An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.
Tomorrow Next (Tom/Next)
- Simultaneous buying and selling of a currency for delivery the following day.
Trading Day - A trading session in which the market opens and closes at approximately the same price and may move 20 to 80 pips.
Transaction Cost - the cost of buying or selling a financial instrument.
The date on which a trade occurs.
Trending Day - A trading session in which the market moves 80 to 300 pips upward or downward.
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.
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.
World’s Money - A term used by professional traders denoting a stop order that has been moved so that profit is guaranteed.
Yard - Slang for a billion.