Forex Glossary

Futures and Forex Glossary Dictionary WXYZ

September 23, 2009 | scorpion
Warehouse Receipt

A document guaranteeing the quality and quantity of the underlying asset in a futures contract.


The right to buy stock (usually preferred stock) from the issuer.

Weak Dollar

When the U.S. Dollar weakens against a basket of currencies.

Futures and Forex Glossary Dictionary V

September 23, 2009 | scorpion

Determining the value of a security, commodity or other asset.

Value Date

Same as settlement date. The date at which physical delivery of a forex spot transaction takes place.

Variable Limit

When there are periods of extreme volatility on an exchange this system allows for greater than usual price movements even they are above the daily limits.

Futures and Forex Glossary Dictionary U

September 23, 2009 | scorpion
Unconvertible Currency

A currency that is not traded on the forex market but used only for domestic purposes.

Uncovered Option

A short call or put option, where the option is not covered by a purchase or sale of the underlying asset.

Underlying Futures Contract

The futures contract which is specified as the underlying asset that an option gives the holder the right to buy or sell.

Futures and Forex Glossary Dictionary T3

September 23, 2009 | scorpion

The buying and selling of a currency pair.

Transaction Cost

The cost associated with buying or selling a currency pair.

Transaction Date

The date on which a position is opened or closed.

Futures and Forex Glossary Dictionary T2

September 23, 2009 | scorpion
Tier One

The highest possible credit strength rating, give by the Bank of International Settlements.

Time Value

The value that an option has besides intrinsic value. Time value represents the value that an option will have from the possibility of an increase in value of the underlying asset (or decrease in case of a put option). As the option gets closer to expiration date, time value decreases.

Futures and Forex Glossary Dictionary T1

September 23, 2009 | scorpion
Take Profit Order

A limit order set to close a position if the price reaches a predetermined level in order to realize profits.

Take Profits

Closing a position with unrealized profits.

Take The Offer

A verbal agreement to accept a dealer's offer on the trading floor during open outcry. See Also: Open Outcry

Futures and Forex Glossary Dictionary S3

September 23, 2009 | scorpion

When the central bank retracts the money supply to increase the price of money. See Also: Monetary Policy

Stable Market

A market that is large enough to accommodate heavy trading without too big swings. An example would be the EUR/USD forex market.


When the central bank makes a foreign exchange intervention but offsets the change to the monetary base by selling or buying domestic assets.

Futures and Forex Glossary Dictionary S2

September 23, 2009 | scorpion
Short Covering

Closing a short position by buying the exact same amount of a currency pair that was previously sold short.

Short Position

Selling a security. Short selling is selling a borrowed asset with the intent to buy it back at a lower price.

Futures and Forex Glossary Dictionary S1

September 23, 2009 | scorpion
Same Day Transaction

Opening and closing a position on the same day.

Samurai Market

Slang term for the Japanese stock market.


A forex trader that makes many small trades a day. A scalper is a forex trader that chooses to follow a strategy of doing several smaller trades with less risk than fewer but bigger trades.

Futures and Forex Glossary Dictionary R2

September 23, 2009 | scorpion
Retail FX Market

The part of the forex market aimed at individuals and offered by brokers.

Retail Sales

Sales of retail goods in a country or region. In the United States the retail sales report is released monthly for the previous month by the Census Bureau and the Department of Commerce .

Retail Side

The retail industry that delivers services, goods and commodities directly to the consumer market as opposed to wholesaling.

Futures and Forex Glossary Dictionary R1

September 23, 2009 | scorpion
Rainbow Option

A type of option where there is more than one underlying asset. For the option to be profitable, all underlying assets must be in the money. See Also: Options


A period of trading that makes the price surge upwards.


The price of a currency against another. The rate is measured as how many units of the second currency you get with one unit of the first currency.

Futures and Forex Glossary Dictionary Q

September 23, 2009 | scorpion
Quantitative analysis

Mathematical analysis of price movements using advanced mathematical and statistical models and tools. See Also: Technical Analysis

Quantitative Easing

Increasing the money supply  (by the central bank) to encourage spending. Well known examples are the Bank of Japan's attempts to curb deflation in the early 2000's and the Federal Reserve's actions since the credit crunch and subsequent housing crisis. See Also: Monetary Easing

Futures and Forex Glossary Dictionary P3

September 23, 2009 | scorpion
Price gap

When the price of a security jumps to a higher or lower level without any overlapping trading.

Price limit

The high and low prices that an option or commodity is allowed to reach during a trading session. When the price limit is reached, no more trading will take place for the rest of the trading day.

Futures and Forex Glossary Dictionary P2

September 23, 2009 | scorpion
Point & Figure Chart

A type of chart that does not show the passage of time, but rather shows rising and falling prices as either circles or crosses. This type of chart is used to determine critical support and resistance levels.

Political Risk

Larger changes in a country's or region's politic situation, such as government changes or unrest that may negatively affect the economy.

Futures and Forex Glossary Dictionary P1

September 23, 2009 | scorpion
Perfect Competition

A hypothetical market situation where the following criteria is met:

1. All firms sell an identical product.
2. All firms are price takers.
3. All firms have a relatively small market share.
4. Buyers know the nature of the product being sold and the prices

Futures and Forex Glossary Dictionary O2

September 23, 2009 | scorpion

An instruction made to a broker to buy or sell an asset in the market.


Technical analysis tool that is used to determine if a currency pair or other asset is overbought or oversold. See Also: Statistical Oscillators

Futures and Forex Glossary Dictionary O1

September 23, 2009 | scorpion
Odd Lot

A lot that deviates in size from the standard lot size of 100,000 units. See Also: Lot


The Ask price. The price at which the holder of a currency is willing to sell.


A business, often a bank or financial institution, that may or may not have a presence in a country, but who's headquarters are located in another country, typically with lax tax laws and a degree of confidentiality.

Futures and Forex Glossary Dictionary N2

September 23, 2009 | scorpion
New Zealand Dollar (NZD)

The currency of New Zealand. One NZD is made up of 100 cents.

News trader

A trader who primarily trades on news releases such as economic reports and Federal Reserve announcements. News releases are usually followed by hectic trading times.

Futures and Forex Glossary Dictionary N1

September 23, 2009 | scorpion
Naked Put

Any kind of put option where the option writer isn't short in the underlying asset. Also referred to as an 'uncovered option’. See Also: Option


Futures and Forex Glossary Dictionary M3

September 23, 2009 | scorpion

If there is a dispute between two parties concerning a futures contract, the national futures association (NFA) can act as a mediator to find a solution. Mediation is the process where the two concerned parties use a third independent party (the mediator) to find a mutually agreeable solution.

Futures and Forex Glossary Dictionary M2

September 23, 2009 | scorpion
Margin Call

A Margin Call happens when a broker asks for the trader to fund his account with more cash or securities (or sell securities), so the minimum maintenance margin can be met. A margin call will happen once the value of the trading account dips below a predetermined level set by the broker. If the margin call is not met, the account may be liquidated. See Also: Maintenance Margin

Futures and Forex Glossary Dictionary M1

September 23, 2009 | scorpion

Money supply measurement which includes all cash and liquids in circulation, money in checking accounts and travelers checks.

Futures and Forex Glossary Dictionary L2

September 23, 2009 | scorpion

An account being closed due to margin calls. The account value cannot sustain a position. This most frequently happens when there is a large amount of leverage used on a losing trade.

Futures and Forex Glossary Dictionary L1

September 23, 2009 | scorpion
Forex Glossary L1 - Law of One Price

The theory that the price of an asset, commodity or security will be the same between countries when corrected for exchange rates. The law of one price is another way of describing the mechanism of purchasing power parity. See Also: Purchasing Power Parity


Futures and Forex Glossary Dictionary JKL

September 22, 2009 | scorpion
Japanese Housewives

Terminology created by financial press which refers to Japanese households who became major sellers of Yen by speculating on the carry trade. Consequently, currency price levels as forecast by financial institutions turned out to be inaccurate.

Japanese Yen (JPY)

Japanese currency unit. Related Term: Base Currency


Futures and Forex Glossary Dictionary I2

September 22, 2009 | scorpion
Interest Rate Swap

Agreement entered between counter-parties in a foreign currency transaction where one party will pay periodic interest payment on a predetermined dollar principal

International Fischer effect

The higher the inflation rate, the lower the value of the currency as propounded by the economist Irving Fisher


Futures and Forex Glossary Dictionary I1

September 22, 2009 | scorpion
Inconvertible currency

A currency that cannot be exchanged to another currency on account of foreign exchange regulations. Example: Currency of a country that depreciates drastically on account of hyperinflation.

Independent introducing broker

NYSE affiliated member who executes orders for floor brokers and others apart from his own.


Futures and Forex Glossary Dictionary H

September 22, 2009 | scorpion
Hard Currency

Currencies vested with investor confidence. Example: US$; Euro.

Head and shoulders

A currency chart formation wherein the price of the currency shows following trends.


Futures and Forex Glossary Dictionary G

September 22, 2009 | scorpion
Group of seven (G7)

Block of countries comprising G-5 countries together with Canada and Italy.

Group of Eight (G8)

Block of countries comprising G-7 countries together with Russia.


Financial leverage.


Futures and Forex Glossary Dictionary F4

September 22, 2009 | scorpion
Forward (Cash) Contract Futures

A contract of an asset to be delivered at a forthcoming date as per price and quantity specified in the contract.

Forward Point

Number of basis points either added to or deducted from the present spot rate to arrive at the forward rate.


Futures and Forex Glossary Dictionary F3

September 22, 2009 | scorpion
Flip Forex

Traders shifting from more long positions to more short positions indicating the close of a market’s bullish outlook.

Floating Exchange Rate

Market determined foreign currency exchange rate. Related Term: Exchange Rate


Futures and Forex Glossary Dictionary F2

September 22, 2009 | scorpion
Financial Bubble

Trading of financial instruments at high volumes and prices far beyond its intrinsic value. Related Term: Economic Bubble

Financial Risk

Whether the cash flow of an Issuer is sufficient to meet its obligations. Also called Additional Risk Related Term: Country Risk


Futures and Forex Glossary Dictionary F1

September 22, 2009 | scorpion
Factory Orders

An economic indicator released by the Census Bureau of the US Department of Commerce that tracks the period-to-period changes in the quantum of orders for durable and nondurable goods. Also known as Manufacturer’s shipments, Inventories and Orders Related Term: Cyclical Industry

Fast Markets

A financial market that combines high volatility and heavy trading, often a consequence of severe imbalance of trades. Fast markets have more sells than buys.


Futures and Forex Glossary Dictionary E3

September 22, 2009 | scorpion

Brick and mortar location of trading activity. Example: New York Stock Exchange.

Exchange Control

Government controls that regulate purchase of foreign currency by resident citizens and/or foreigners buying domestic currency.


Futures and Forex Glossary Dictionary E2

September 22, 2009 | scorpion
Escrow Account

An account held by a third party with respect to a transaction involving two parties and which is released by the third party to one of the other two parties on fulfillment of obligation to the satisfaction of the counterparty. Related Term: Annual Mortgage Statement


Rate of interest applicable in the Euro interbank market when a bank borrows funds from other banks within the euro zone. Related Term: Emirates Interbank Offered Rate (EIBOR)


Futures and Forex Glossary Dictionary E1

September 22, 2009 | scorpion

Government Monetary policy changes designed to increase spending by lowering interest rates or a small price decline in a currency’s value. Related Term: Federal Funds Rate

ECB Conferences

Announcements and press conferences by representatives of ECB’s governing council detailing decisions taken by them with respect to monetary policy. Related Term: Central Bank


Futures and Forex Glossary Dictionary D3

September 22, 2009 | scorpion
Discretionary Account Forex

Currency trading account in the name of an individual or entity controlled and operated by a designated person other than the owner of the said account. Also called managed account.

Discretionary Account Future

An options or futures trading account operated by a broker on behalf of the client subsequent to a discretionary disclosure agreement entered between the client and broker. Also called Managed account.


Futures and Forex Glossary Dictionary D2

September 22, 2009 | scorpion

A factor facilitating conversion of current dollar purchasing power to inflation adjusted purchasing power for purposes of price comparison in 2 different time periods.


Receipt of actual commodity or financial instrument or in the case of currency, the profit or losses credited or debited from a trading account, in settlement of a currency/financial contract.


Futures and Forex Glossary Dictionary D1

September 22, 2009 | scorpion
Daily Cutoff

Time stipulated by a forex dealer marking the end of a particular trading day and the beginning of a new trading day in order to facilitate the recording of date of trades and to resolve settlement periods.

Day order

A foreign currency trading position, whether “buy’ or “sell” that remains live during the day but automatically closes by the end of trading day.


Futures and Forex Glossary Dictionary C5

September 22, 2009 | scorpion

Hedging a particular futures contract position in one commodity with an offsetting futures contract position in another commodity, with both commodities futures having similar price movements. The hedging instrument differs from the security being hedged. Example: Hedging crude oil futures contract with short position in natural gas.


Foreign exchange rate between two currencies other than the US dollar.


Futures and Forex Glossary Dictionary C4

September 22, 2009 | scorpion
Contract Market

A designated exchange for trading a specific option or futures contract. Example: The S&P 500 Index options and futures contracts are designated to be traded in the contract market Chicago Mercantile Exchange. Related Terms: Designated Exchange, Derivatives Transaction Execution Facility

Contract Month

A particular month in which a futures contract may be complied with by either making or accepting a delivery.


Futures and Forex Glossary Dictionary C3

September 22, 2009 | scorpion
Closing a Position

The process of squaring up a forex trade position by liquidating the buy or sell order as the case may be.

Closing Market Rate

The Market price of a currency at the end of trading hours on any trading day.

Closing Range

Futures and Forex Glossary Dictionary C2

September 22, 2009 | scorpion
Central Bank

Entity responsible for the monetary policy of a country. Also called Reserve bank Central Bank has supervisory power over other banks within the country. Related Terms: Reserve Bank

Centralized Market

A situation where all market orders are routed to one central exchange, with no competing market whatsoever. Example: The New York Stock Exchange is a centralized market where stocks and securities listed in the exchange represent the only price of the financial instrument available to investors. Related Terms: Alternative Trading System


Futures and Forex Glossary Dictionary C1

September 22, 2009 | scorpion

A popular slang for exchange rate between US dollar and British Pound. Another word for the British Pound Sterling, originating from the fact that dollars/pound sterling exchange rate used to be transmitted through transatlantic cable in the 1800s. Related Terms: Bank of England (BOE)

Call option

A call option confers on the investor to ‘call in’ or ‘buy’ a futures instrument at a stipulated price within a pre-ordained period. However it is not obligatory for the investor to do so. Related Terms: Buy-Write, Call


Futures and Forex Glossary Dictionary B2

September 22, 2009 | scorpion
Bid/Ask spread

Price differential between the bid and offer (ask) price. Also known as “Bid” Related Terms: Bid

Big figure

Indicative of initial 2 or 3 digits of currency exchange price. Example: If EUR/USD price is 0.9525/30 the big figure is 0.95.


Futures and Forex Glossary Dictionary B1

September 22, 2009 | scorpion
Back Office

Place where data pertaining to financial transactions of forex and futures is processed.


Testing a particular trading strategy on past data, to evolve a future prognosis as most technical analysis is done. This obviates the need to test a particular strategy over a forthcoming period of time as it would require more time. Related Terms: Data Mining, Autoregressive


Futures and Forex Glossary Dictionary A2

September 22, 2009 | scorpion
Asian option

As opposed to an option whose pay off is at maturity, the payoff of an Asian option depends on the average price of that asset over a certain period of time. Therefore an Asian option precludes losses from arising due to volatility. Also called Average option Related Terms: Average option, American option


The agreeable price at which a security is offered for sale by a seller. Ask quote also indicates the amount of security that the seller is prepared to sell at that price. Also called the “offer” price Related Terms: Offer Price, Ask Size, Bid


Futures and Forex Glossary Dictionary A1

September 22, 2009 | scorpion
Absolute Rate

Also called an absolute swap yield. It is expressed in percentage terms. It combines the reference rate such as LIBOR with the fixed portion of an interest - rate swap. Related Terms: Absolute Swap Yield, LIBOR

Adjustable Peg

Fixing of a country’s exchange rate in tandem with a stronger currency such as the US dollar. Example: Value of the Chinese Yuan fixed by the Chinese Central Bank in relation to the US dollar. Related Terms: Crawling Peg


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