Glossary – Brokers Station

Glossary

Glossary

Account
A listing of all the financial incomes and outcomes.
Account Balance
All the money in an account.
Appreciation
The jump in the price of a currency due to favorable market conditions.
Arbitrage
Making use of countervailing prices in different markets by the buying or selling of an instrument, and then instantly going for an equal and opposite position in a close market in order to make money from the incremental differences in the price.
Ask, Offer
The price at which someone is willing to sell.
Aussie
The Australian Dollar.
Back Office
All the administrative offices supporting the realization of financial transactions and movements.
Balance of Payments
A recording of a nation`s transactions with other countries throughout a certain period of time. Goods, services and flow of capital are also counted.
Balance of Trade
The number calculated by taking out the sum of a country's imports from its exports.
Bar Chart
A chart depicting 4 points of importance: the biggest and the lowest prices, making up the vertical bar; the beginning price, which is shown by a small horizontal line on the left side of the bar; and the ending price, shown by a little horizontal line to the right of the bar.
Base Currency
The currency in which a trader keeps his accounts; also it`s the currency against which other currencies are quoted. Normally the USD is the base currency for most trades.
Basis Point
A measurement unit amounting to 1/100 of a percentage point.
Bear
A trader who is anticipating the market to go into a negative trend.
Bear Market
A market epitomized by unfavorable trading conditions and lengthy periods of falling prices.
Bid
The sum a buyer is ready to pay for an asset.
Bonds
A financial instrument used in order to raise capital. A bond will earn interest for the one who purchases it at a later point. The price of bonds is negatively correlated to the interest rates.
Broker
An individual or company, which serves as a bridge between a buyer and a seller. Usually, the broker is paid a commission for the service.
Buba
The acronym for the Central German Bank.
Bull
A trader expecting the market to expecting favorable market conditions.
Cable
A casual way to refer to the British Pound.
Candlestick Chart
A chart which visualizes the trading range and the starting and ending prices. If the starting price is higher than the ending price, then the rectangle between is shaded. If not, then it`s not shaded.
Capital Markets
Markets for average and long-term investments. Normally for period longer than one year.
Central Bank
The government institution in charge of a nation`s currency policies and other monetary related matters. The Federal Reserve serves as a central bank in the US.
Chartist
An investor who utilizes charts and graphs a lot in order to predict future price trends. Also called a Technical Trader.
Clearing
The completion of a trade.
Closed Position
Exposures in foreign currencies which are not valid anymore. (Closing a position by selling or buying currency with the goal to offset an equivalent amount of the open position).
Commission
The amount paid to a broker for his services.
Confirmation
A document of agreement between two participants in a transaction, specifying the exact terms and conditions.
Contract
The standard agreed upon trading agreement.
Counter Party
The other party in a transaction. It could be an individual or an entity.
Cross Rate
The exchange rate between two currencies.
Currency
Any form of money which is used as basis for economic transaction. It is issued by a nation`s central bank.
Currency Pair
The two currencies of a pair. One is the base currency and the other one is expressed in terms of its value against the base currency. An example is the EUR-GBP pair.
Currency Risk
The risk of financial loss as a result of market instability and fluctuating exchange rates.
Day Trading
The opening and closing of the same trading position during the same trading session.
Dealer
An individual or institution serving as a principal or counterparty to a financial agreement for exchange. The principals take a side of a position with the expectations to profit by finishing the position in a trade with a second party. Not to be confused with a broker who acts as an intermediary between a buyer and seller in return of a fee.
Deficit
A negative funds balance.
Delivery
The exchange of an asset between two parties.
Deposit
The borrowing and lending of money. The borrowing/lending rate is also called a deposit rate. Certificates of Deposit can be used as a trading asset.
Depreciation
The deterioration in the value of an asset, usually as a result of worsening economic conditions.
Derivative
A contract which changes its value depending on the value performance of a related asset.
Devaluation
The devaluation of a currency's value done by the government.
ECB
The European Monetary Union Central Bank.
Economic Indicator
An assessment measurement describing the economic conditions and climate of a country. It`s usually made by a government or a non-government institution. Such indicators are: Gross Domestic Product, Employment Rates, Trade Deficits and Industrial Production.
End of Day
When investors account for their investments. It is done in two ways - accrual and mark-to-market. The accrual method accounts income only when it is realized. It only reflects the profit or loss when the funds were actually transferred. The mark-to-market method accounts for the trader investments at the end of each day, using the closing market indicators.
Euro
The currency used in the European Union.
Execution Date
The official date of a transaction.
Federal Reserve
The Central Bank of the US.
Fixed Exchange Rate
An official exchange rate enforced by a monetary organization for one or more currencies. However, even a fixed exchange rate can have some little price fluctuations.
Flat
A trader has a flat book when he doesn`t have any positions or if all his positions are cancelling each other out.
Federal Open Market Committee
The monetary group directing the Federal Reserve.
Forex
The purchasing and selling of a currency with the goal of making a profit.
Forward
A predetermined exchange rate for a foreign exchange contract which matures at a certain specified date. This is determined by the interest rate difference of the currencies in the transaction.
Forward Points
The units added to or taken out from the exchange rate in order to determine the forward price.
Forward Rate Agreements
Transactions which enable someone to borrow or lend at a previously determined interest rate over a specific time period.
Front Office
The front office is regularly the official place where the transactions and other business related matters happen.
Fundamental Analysis
The examination of economic releases, events and other relevant data with the purpose of better forecasting future price trends.
Futures Contract
A contractual agreement for the exchange of an asset at an agreed upon price sometime in the future.
G5
The 5 biggest industrial countries - US, Germany, Japan, France, United Kingdom.
G7
The 7 biggest industrial countries in the world - US, Germany, Japan, France, United Kingdom, Canada, Italy.
Gross Domestic Product
The total amount of a nation`s output, income and production manufactured within its legal borders.
Gross National Product
The sum of everything earned or made by a country`s legal citizens, even if it`s not within the country`s physical borders.
Good-Till-Cancelled
An order for a Dealer to purchase or sell at a predetermined price. It remains active until accomplished or revoked.
Hedge
A position or a number of positions whose aim is to prevent any major losses in case of unforeseen events.
High/Low
The biggest and lowest daily values of a given trading asset.
International Monetary Fund
A global organization with 184 member countries. It was created with the purpose of stimulating international monetary cooperation and stability.
Inflation
An economic situation described by increasing prices of consumer goods and a following the decrease of purchasing power.
Initial Margin
The initial deposit of collateral used as a warranty in order to enter into a position.
Interbank Rates
The Foreign Exchange rates at which big global banks quote other large global banks.
Intervention
An intentional change to the rate of a currency by the central bank.
Kiwi
An unofficial word for the currency of New Zealand.
Leading Indicators
Economic indicators which help determine future economic trends (Unemployment, Consumer Price Index, Producer Price Index, Retail Sales, Personal Income, Prime Rate, Discount Rate, and Federal Funds Rate).
Leverage
The ratio of the security deposit quoted in a transaction (sometimes called margin).
Limit Order
An order which puts a ceiling and floor to the price in a transaction.
Liquidation
Ending an existing position by opening an offsetting one.
Liquidity
The market`s potential for tolerating large transactions with little or no impact on the general price level.
Long
It enables buying more of an asset than it is available on the market. If the market prices increase, there is also a jump in the value of the asset.
Long Position
A position which goes up in value parallel to the increase in market value (when the base currency in a pair is purchase it is said that the position is long).
Loonie
The one dollar Canadian coin.
Lot
A unit used for determining the proportions of a deal.
Margin
It refers to how much equity an investor needs to collateralize a position.
Market Maker
A dealer who quotes both the bidding and asking prices and is in a position to make a two-sided market deal for any asset.
Market Order
An order to buy or sell at the most lucrative price when the order gets to the market.
Money Markets
Short-term investments made by banks and other financial organizations. Some examples include: Deposits, Certificates of Deposit, Repurchase Agreements, Overnight Index Swaps and Commercial Paper. This type of investment is said to be safe and liquid.
Monetary Policy Committee
A central bank committee whose purpose is to take care of monetary policy problems and difficulties.
Open Order
An order which is carried out when a market reaches its designated level; normally related to Good-Till-Cancelled Orders.
Open Position
An active trade which hasn`t been profitable or losing yet and has not been offset by an equal or offsetting deal.
Option
An agreement which enables the owner to buy or sell an asset at an agreed upon price a specific timeframe. (There are two option types – call and put; a call lets the holder buy while a put lets him sell).
Order
An order is a confirmation issued from a customer to a broker, empowering him to make a trade. An order can be issued at a specific price or at the market level. Also, it can be active until filed or until the end of the day.
Overnight Position
A trade which stays open until the next trading day comes.
Points, Pips
The most minimal possible movement of the exchange rate.
Position
An investment term referring to a trader`s readiness to buy or sell. It can refer to how much currency the trader owns or owes.
Premium
The amount of points added to the spot price in order to calculate a forward`s or a future`s price.
Profit/Loss
The real profit or loss resulting from investment on Closed Positions, plus the theoretical unrealized profit or loss on any Open Positions that have been Mark-to-Market.
Quote
A ranging market price, portraying the largest bid or lowest ask price quotable on a security at any point in time.
Rally
A steady settlement of the price after a prolonged period of downward moving market trends.
Range
The difference between the highest and lowest values of a futures contract recorded on a specific day.
Rate
The value of a currency in terms of another currency.
Re-purchase
A deal about the selling and re-purchasing of the same asset, at a predetermined time in the future. The kind of transaction happens on the short-term money market.
Resistance
A technical analysis term about the price which a currency cannot go beyond. Repeated and failed attempts for the price to go higher will in most cases create a pattern in the shape of a straight line.
Risk Management
Diminishing the amount risk by utilizing financial analysis and other trading methods.
Roll-Over
Moving the closure of a deal to another value date.
Settlement
The swapping of consideration for financial instruments as soon as a transaction is over. (The settlement of a currency trade doesn`t actually have to involve the physical exchange of two currencies).
Short
Going `short` means selling an asset which you don`t actually owe, with expectations that its value will decline so that it could be bought back at a better price.
Short Position
An investment position which makes money when there is a negative market movement (also when the base currency in a pair is sold, the position is said to be short).
Spot
A transaction that is made instantly, but the money will be transferred in two days.
Spot Price
The current market price.
Spread
The value difference between the bid and the offer. It`s used for the evaluation market liquidity (smaller spreads usually signal for high liquidity).
Stop Loss Order
An order to buy or sell at a specified.
Support Levels
A technique for seeing a specific price top and bottom at which the exchange rate will get settled automatically.
Swap
The instant sale and buying of equal amount of currency at a forward exchange rate.
Technical Analysis
The detailed analysis of market trends and economic news, along with historical prices and averages. The goal is to gain insight into future price movements.
Tick
The smallest movement the price can make. Both positive and negative.
Two Way Price
The bid and ask rate quoted for a Forex investment.
Value Date
The point in time when the parties of a transaction should fulfil their end of the deal.
Volatility
An indicator of a market or a security's price changes over time. It is calculated with the standard deviation.
Volume
The amount of securities bought and sold within a certain timeframe.