Dealer slang used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.
Foreign Exchange Market, FOREX
The international exchange market, the market for conversion exchange operations of specified amounts of one country’s currency into the currency of another country according to an agreed rate for a given date. Turnover in this market is approximately $1.5 trillion USD daily, making it the largest, most liquid financial marketplace.
The pre-set exchange rate for an FX contract that settles at a pre-determined future date. The forward rate is based upon the interest rate differential between the two currencies involved. Forward rates can be calculated easily given the fixed term interest rates of each currency and their current spot rates.
The PIPS added to or subtracted from the current exchange rate to calculate a forward price. If points are added, then the forward is priced at a premium. If points subtracted, then the forward is priced at a discount.
Analysis of economic, political and social data/events with the objective of forecasting future financial market movements.
A situation when the price of an instrument at opening of the trading session varies form the price at closure of the preceding one with formation of an unfilled price range.
(refer to margin trading or leverage)
To go long is to buy a currency / security for investment or speculation purposes. For example, if an investor believes that the Japanese economy is getting stronger and that, as a result, the Japanese Yen will appreciate in value, then he/she may want to buy Japanese Yen and take what is called a long position.
To go short is to sell a currency / security. For example, if an investor believes that the Japanese economy is getting weaker and that, as a result, the Japanese Yen will depreciate in value, then he/she may want to sell Japanese Yen and take what is called a short position. It is not necessary to own the quote currency prior to selling, as it is sold short.
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 policy of risk neutralization by means of opening a position in the opposite direction for the same financial asset type and with the same lot amount to the given one.
Mathematical conversion of the price and/or financial instrument amount for prediction of future price changes. On the basis of technical indicator signals, decisions when and how to open positions are made.
Economic condition where there is an increase in the price of consumer goods, thereby eroding purchasing power.
The initial deposit of collateral required to enter into a position as a guarantee on future performance.
Currency prices/rates quoted between the large international banks, typically on transactions of US $1 million or more. These rates differ and are often more favorable than those quoted for smaller, retail transactions.
Differential In FX trading, interest rate charges are determined by the difference between the interest rate on the base currency less the interest rate on quote currency. Interest rates are only paid on positions held over night.
Action by a central bank to effect the value of a particular currency by entering the market.
Ratio of the transaction to the required security deposit. Refers to margin trading or gearing. The use of credit or borrowed funds to increase ones buying power.
Letter of credit
A document issued by a bank which guarantees the payment of a customer's drafts for a specified period and up to a specified amount.
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)
Refers to the ability to buy and sell with little or no impact on price stability. The number of players in a market/security has a direct impact on this ability. The FX market is the most liquid market in the world.
A position to purchase more of an instrument than is sold, hence, an appreciation in value if market prices increase.
A unit to measure the amount of the deal. The value of the deal always corresponds to a decimal fraction of the lot.