Forex Glossary A

Account: A record of transactions of goods and services owed by one person to another (Go to our forex account section).

Accrual: The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.

Actualize: The underlying assets or instruments which are traded in the cash market.

ADX: Measures the strength of a prevailing currency trend and whether or not there is direction in the forex market. Plotted from zero on up, usually a reading above 25 can be considered directional.

Adjustable Peg: Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency, often the dollar, but where the rate may be changed from time to time. This was the basis of the Bretton Woods Agreement. See peg, and crawling peg.

Adjustment: Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate.

Agent Bank: 1) A bank acting for a foreign bank. 2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.

Agio: Difference in the value between currencies. Also it’s used to describe percentage charges for conversion from paper money into cash, or from a weak currency into a strong currency.

Aggregate Demand: Total demand for goods and services in the economy, consisting of government spending, private/consumer and business investment.

Aggregate risk: Size of exposure of a bank to a single customer for both forex spot and forward contracts.

Aggregate Supply: Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.

All or None: A limit price order that instructs the broker to fill the whole order at the stated price or not at all.

Aggressor: A trader dealing on an existing price in the market.

Appreciation: A currency is said to 'appreciate ' when it strengthens in price in response to market demand.

American Option: An option which may be exercised at any valid business date through out the life of the option.

Arbitrage: Profiting from differences in the price of a single currency pair that is traded on more than one market (Increase the value of assets).

Around: Used in quoting forward "premium / discount".

Ascending Triangles: A bullish continuation pattern that is shaped like a right triangle consisting of two or more equal highs forming a horizontal line at the top.

Asset Allocation: The diversification of one's assets into different sectors, such as real estate, stocks, bonds, and forex, to optimize growth potential and minimize risk.

Asset Swap: An interest rate swap used to alter the cash flow characteristics of an institution's assets in order to provide a better match with its liabilities.

Ask: The price at which a currency pair or security is offered for sale; the quoted price at which an investor can buy a currency pair. This is also known as the 'offer', 'ask price', and 'ask rate'.
Asset: An item having commercial or exchange value.

At Best: An instruction given to a dealer to buy or sell at the best rate that is currently available in the market.

At or Better: An order to deal at a specific rate or better.

At-the-Money: An option whose strike/exercise price is equal to or near the current market price of the underlying instrument.

At Par Forward Spread: When the forward price is equivalent to the spot price.

At the Price Stop-Loss Order: A stop-loss order that must be executed at the requested level regardless of market conditions.

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

Authorized Dealer: A financial institution or bank authorized to deal in foreign exchange.

Average Rate Option: A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period, sometimes called an "Asian option".

Forex Glossary A

Account: A record of transactions of goods and services owed by one person to another (Go to our forex account section).

Accrual: The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.

Actualize: The underlying assets or instruments which are traded in the cash market.

ADX: Measures the strength of a prevailing currency trend and whether or not there is direction in the forex market. Plotted from zero on up, usually a reading above 25 can be considered directional.

Adjustable Peg: Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency, often the dollar, but where the rate may be changed from time to time. This was the basis of the Bretton Woods Agreement. See peg, and crawling peg.

Adjustment: Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate.

Agent Bank: 1) A bank acting for a foreign bank. 2) In the Euro market - the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.

Agio: Difference in the value between currencies. Also it’s used to describe percentage charges for conversion from paper money into cash, or from a weak currency into a strong currency.

Aggregate Demand: Total demand for goods and services in the economy, consisting of government spending, private/consumer and business investment.

Aggregate risk: Size of exposure of a bank to a single customer for both forex spot and forward contracts.

Aggregate Supply: Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.

All or None: A limit price order that instructs the broker to fill the whole order at the stated price or not at all.

Aggressor: A trader dealing on an existing price in the market.

Appreciation: A currency is said to 'appreciate ' when it strengthens in price in response to market demand.

American Option: An option which may be exercised at any valid business date through out the life of the option.

Arbitrage: Profiting from differences in the price of a single currency pair that is traded on more than one market (Increase the value of assets).

Around: Used in quoting forward "premium / discount".

Ascending Triangles: A bullish continuation pattern that is shaped like a right triangle consisting of two or more equal highs forming a horizontal line at the top.

Asset Allocation: The diversification of one's assets into different sectors, such as real estate, stocks, bonds, and forex, to optimize growth potential and minimize risk.

Asset Swap: An interest rate swap used to alter the cash flow characteristics of an institution's assets in order to provide a better match with its liabilities.

Ask: The price at which a currency pair or security is offered for sale; the quoted price at which an investor can buy a currency pair. This is also known as the 'offer', 'ask price', and 'ask rate'.
Asset: An item having commercial or exchange value.

At Best: An instruction given to a dealer to buy or sell at the best rate that is currently available in the market.

At or Better: An order to deal at a specific rate or better.

At-the-Money: An option whose strike/exercise price is equal to or near the current market price of the underlying instrument.

At Par Forward Spread: When the forward price is equivalent to the spot price.

At the Price Stop-Loss Order: A stop-loss order that must be executed at the requested level regardless of market conditions.

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

Authorized Dealer: A financial institution or bank authorized to deal in foreign exchange.

Average Rate Option: A contract where the exercise price is based on the difference between the strike price and the average spot rate over the contract period, sometimes called an "Asian option".

Forex History

FOREX (Foreign Exchange) is the largest financial market in the world, and includes trading between large banks, (Central banks, Commercial Banks, Investments Banks) currency speculators, multinational corporations, governments, and other financial markets and institutions.

The average daily trade in the global FOREX and related markets currently is over US$ 3 trillion where all the transactions achieved over the counter (OTC) that there is no specific place for trading.

It began with gold exchange between countries. As a country's economy strengthened, its imports would increase until the country ran down its gold reserves, which were required to support its currency. As a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities would hit bottom, appearing attractive to other nations, who would rush in and amid a buying frenzy inject the economy with gold until it increased its money supply, driving down interest rates and restoring wealth into the economy. Such boom-bust patterns abounded throughout the gold standard until World War I temporarily discontinued trade flows and the free movement of gold.

The Bretton Woods Agreement in 1944, fixed national currencies against the dollar, and set the dollar at a rate of USD 35 per ounce of gold. The agreement was aimed at establishing international monetary steadiness by preventing money from taking flight across countries, and to curb speculation in the international currency market. Due to the World War II, the economy of many nations has suffered. During the sixties, however, national economies moved in different directions which paved way to its collapse.

The Agreement was finally abandoned in 1971, and the US dollar would no longer be convertible into gold. By 1973, currencies of major industrialized nations became more freely floating, controlled mainly by the forces of supply and demand which acted in the foreign exchange market. Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s, giving rise to new financial instruments, market deregulation and trade liberalization.

In the 1980s, cross-border capital movements accelerated with the advent of computers and technology, extending market continuum through Asian, European and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s, to more than $1.5 trillion.

While FOREX has been traded since the beginning of financial markets, on-line retail trading has only been active since about 1996.

The FOREX market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.

Forex History

FOREX (Foreign Exchange) is the largest financial market in the world, and includes trading between large banks, (Central banks, Commercial Banks, Investments Banks) currency speculators, multinational corporations, governments, and other financial markets and institutions.
The average daily trade in the global FOREX and related markets currently is over US$ 3 trillion where all the transactions achieved over the counter (OTC) that there is no specific place for trading.

It began with gold exchange between countries. As a country's economy strengthened, its imports would increase until the country ran down its gold reserves, which were required to support its currency. As a result, the money supply would diminish, interest rates escalate and economic activity slowed to the point of recession. Ultimately, prices of commodities would hit bottom, appearing attractive to other nations, who would rush in and amid a buying frenzy inject the economy with gold until it increased its money supply, driving down interest rates and restoring wealth into the economy. Such boom-bust patterns abounded throughout the gold standard until World War I temporarily discontinued trade flows and the free movement of gold.

The Bretton Woods Agreement in 1944, fixed national currencies against the dollar, and set the dollar at a rate of USD 35 per ounce of gold. The agreement was aimed at establishing international monetary steadiness by preventing money from taking flight across countries, and to curb speculation in the international currency market. Due to the World War II, the economy of many nations has suffered. During the sixties, however, national economies moved in different directions which paved way to its collapse.
The Agreement was finally abandoned in 1971, and the US dollar would no longer be convertible into gold. By 1973, currencies of major industrialized nations became more freely floating, controlled mainly by the forces of supply and demand which acted in the foreign exchange market. Prices were floated daily, with volumes, speed and price volatility all increasing throughout the 1970s, giving rise to new financial instruments, market deregulation and trade liberalization.
In the 1980s, cross-border capital movements accelerated with the advent of computers and technology, extending market continuum through Asian, European and American time zones. Transactions in foreign exchange rocketed from about $70 billion a day in the 1980s, to more than $1.5 trillion.
While FOREX has been traded since the beginning of financial markets, on-line retail trading has only been active since about 1996.
The FOREX market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.