Forex Terms

A glossary of forex related terms.

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There are 27 entries in the glossary.
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Term	Definition
Federal Reserve (Fed)	The Central Bank of the United States.
Ask Price	The price at which traders are willing to sell a currency pair.
Bear	Someone who believes the prices/market will decline.
Bear Market	A market in which prices decline sharply against a background of widespread pessimism (opposite of Bull Market).
Bid / Ask Spread	The quote at which currency traders are willing to buy or sell a currency pair.
Bid Price	The price at which traders are willing to buy a currency pair.
Bretton Woods Accord of 1944	An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and set the price of gold at US $35 per ounce. The agreement lasted until 1971. See More on Bretton Woods.
Bull	A trader who believes the prices/market will rise.
Bull Market	A market characterised by rising prices. Price increase at the market over a longer period.
Cable	Dealers slang for the Sterling/US Dollar exchange rate. (GBP/USD)
Call Rate	The overnight interbank interest rate.
Cash Market	The market for the purchase and sale of physical currencies.
Commission	A fee charged by the forex broker for executing your trade, this is a one time fee per trade. Most forex brokers charge NO commission.
Cross Rate	An exchange rate between two currencies, usually constructed from the individual exchange rates of the two currencies, measured against the United States dollar.
Currency Risk	The risk of incurring losses resulting from an adverse change in exchange rates.
Day Trading	Refers to opening and closing the same position or positions within one day's trading.
EMS	Abbreviation for European Monetary System, an agreement between member nations of the European Union to maintain an alignment between the exchange rates of their respective currencies.
European Monetary Union	The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. Currently, the Euro exists only as a banking currency and for paper financial transactions and foreign exchange. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.
Forex Broker	An agent or firm who handles investors' orders to buy and sell currency at the forex market. Forex Brokers usually don't charge commissions but are compensated for their services through the spread between the bid/ask prices.
Fundamental Analysis	Thorough analysis of economic and political data with the goal of determining future movements in a financial market.
Pip (or Point)	The term used in currency market to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY).
Risk Capital	The amount of money that an individual can afford to invest, which, if lost would not affect their lifestyle.
Rollover	Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies.
US Prime Rate	The rate at which US banks will lend to their prime corporate customers.
Value Date	Settlement date of a spot or forward deal.
Variation Margin	An additional margin requirement that a broker will need from a client due to market fluctuation.
Whipsaw	A condition in a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
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