Accrued interest |
The interest deemed to be earned on a security but not yet paid to the investor. |
Appreciation |
Is when a currency’s value grows stronger. |
Arbitrage |
The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. |
Ask Rate |
The rate at which a trader can buy a currency that is for sale. |
Auction |
Refers to the public sale of Treasury securities. |
Base Currency |
The currency in which other currencies are quoted in a pair. Usually the U.S. dollar is considered the ‘Base Currency |
Bear Market |
A market in which prices are declining. |
Bid/Ask Spread |
The difference between the bid and offer price. |
Big Figure |
Refers to a term used by dealers and/or brokers. It refers to the first few digits of an exchange rate. |
Broker |
An individual/firm that bring buyers and sellers together for a fee/commission. |
Bull Market |
A market in which prices are rising. |
Clearing |
A term used to refer to a process of settling a trade. |
Commission |
The fee that is charged by a broker/dealer. |
Confirmation |
The document that states the terms of a transaction. |
Contract |
The standard unit of trading. |
Cross Rate |
The exchange rate between any two currencies that are not of the country in which the currency pair is quoted. For example, in the U.S., a GBP/JPY quote would be considered a Cross Rate. The same quote would not be a Cross Rate in either the U.K. or Japan. |
Coupon |
This a feature of a bond that denotes the amount of interest due and the date payment will be made. |
Currency |
A unit of exchange. Any form of money that has been issued by a government/central bank is a currency. Currencies are used as a medium of exchange, i.e. they are used as a basis for trades. |
Day Trading |
Trades in which positions are opened and closed on the same day. |
Dealer |
An individual/firm that take one side of a position hoping to make a profit by closing out the position in a following trade with a different trader. |
Depreciation |
A fall in the value of a currency. |
Discount |
The amount by which the par value of a security exceeds its purchase price. |
Discount Rate |
The rate of return, on an annual basis, on Treasury bills held until they mature. The discount rate is expressed in percentage terms and based on a 360-day year. |
Foreign Exchange, Forex, FX |
The simultaneous purchase or sale of one currency against the purchase or sale of another. |
Forward |
The predetermined and agreed upon exchange rate for the settling of a transaction at some agreed future date. |
Fundamental Analysis |
The analysis of economic and political information as it aims to determine future market movements |
Inflation |
An economic condition in which the prices of goods rise, hence decreasing the purchasing power of consumers. |
Risk |
An exposure to the chance of loss. |
Roll-Over |
A process in which the settlement of a transaction is pushed forward to another date. |
Secondary Market |
The financial market where securities that were previously issued by the Treasury are bought and sold. |
Short Position |
A position that increases in value if the market prices decrease. |
Spread |
Refers to the difference between the bid and offer prices for a currency pair. |
Stop Loss Order |
An order in which an open position is automatically liquidated at a specific price. Stop Loss Order minimized potential losses if the market moves in the opposite direction of the investor’s position. |
Swap |
The sale and purchase of a certain amount of a certain currency at a forward exchange rate. |
Technical Analysis |
An analysis of historical market trends in an effort to forecast future market movements |
Transaction Cost |
The cost of making a financial transaction whether it is buying or selling. |
Yield |
The annual percentage rate of return earned on a bond calculated by dividing the coupon interest rate by its purchase price. |