FXGlossary

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• ABA : See American Bankers' Association.

• ACI : See Association Cambiste International.

• API Trading : Trading that is conducted through an Application Programming Interface. APIs, such as the one available for FXTrade, enable users to build custom trading functionality into their own software systems.

• APIs : Application Programming Interface, used in forex to automate trading.

• Adjustable Peg : Exchange rate regimen where a currency's exchange rate is pegged (fixed) in relation to a stronger currency, such as the US dollar or the euro. The pegged rate is adjusted occasionally in an attempt to improve the country's competitive position. For example, China's yuan is sometimes pegged to the US dollar.

• Agent Bank : A bank acting for another bank, usually a foreign one.

• Aggregate Demand : Total demand for goods and services in the economy from within and outside its borders.

• Aggregate Risk : A bank's exposure to forex contracts from a single customer.

• Aggregate Supply : Total supply of goods and services in the economy from domestic sources (including imports).

• Agio : A fee charged to exchange money from one currency to another.

• Algorithmic Trader : An automated trader whose system is based on complex mathematical formulas.

• All-or-Nothing Option : See Binary Option.

• American Bankers' Association : Organization whose routing numbers are used for transferring funds.

• American Option : An option that can be exercised anytime during its life. The majority of exchange-traded options are American.

• Appreciation : Increase in the value of an asset or currency.

• Arbitrage : Profiting from temporary discrepancies in the price of a currency pair when it is traded on more than one market.

• Asian Option : An option that pays off according to the average prices of the underlying asset over time.

• Ask Price : See Ask.

• Ask Rate : See Ask.

• Ask : The price at which sellers are willing to sell a currency pair, also known as The Offer. Orders to buy on FXTrade are executed at the Ask Price.

• Asset Allocation : Dividing funds among many different markets for diversification purposes in order to reduce risk.

• Asset Class : An item that has value; an investment such as stocks, options, or forex.

• Asset : An item that has value.

• Association Cambiste International : An international society of foreign exchange professionals, now called The Financial Markets Association.

• At Best : An instruction given to a dealer to transact at the best rate possible.

• At or Better : Orders to deal at a specific or better rate.

• At the Money : When the strike price of the option is equal to the underlying asset's current price.

• Aussie : Traders' nickname for the Australian Dollar.

• Authorized Dealer : Depending on the regulatory body, a dealer authorized to deal in forex.

• Automated Trader : A trader who uses an automated system to input trades without any human input.

• Average Option : See Asian Option.

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• BIC : Bank Identifier Code.

• BOJ : See Bank of Japan.

• Back Office : The area within a brokerage that is responsible for settlement, transfer of funds, opening accounts, and other administrative duties.

• Balance of Payments : A term used to describe the economic transactions for a country during a given period.

• Balance of Trade : In economics, a country's exports minus its imports.

• Band : In countries where the currency is pegged, the range in which the rates are permitted to fluctuate.

• Bank Identifier Code : See Swift Code.

• Bank Note : Central bank issued paper that is considered legal tender.

• Bank Rate : The rate at which a central bank lends to members of its banking system.

• Bank Treasury : The center of operations within a bank where funds (including customer deposits and bank assets) are kept, received, disbursed, and recorded.

• Bank of Japan : The central bank of Japan.

• Banking Day : Days of the week when commercial banks are open for business in the country of the particular currency traded.

• Bar Charts : A popular format for studying the price action of currency pairs.

• Barrier Option : A type of option where the payout depends on whether or not the underlying asset reaches a predetermined price.

• Base Currency : The first currency in a currency pair. For example, in the EUR/USD pair, Euros are the base currency. The exchange rate quoted is the number of units of the second currency you will receive for one unit of the base currency.

• Base Rate : Synonymous with prime rate, but used in the UK to refer to the rate that banks lend to their best customers.

• Basis Point : One hundredth of one percent, or 0.0001.

• Basket Option : An option with an underlying asset made up of a basket of securities (stocks or commodities).

• Basket of USD Shorts : A number of operations where the USD is being sold against various currencies.

• Bear Market : An extended period where prices decline for a single security or for the market in general.

• Bear Put Spread : A type of options strategy used when an option trader expects a decline in the price of the underlying asset. This effect is achieved by purchasing put options at a specific strike price while also selling the same number of puts at a lower strike price. The maximum profit to be gained using this strategy is equal to the difference between the two strike prices, minus the net cost of the options.

• Bear Squeeze : When traders who are in a short position have to desperately cover their positions because markets are rising rapidly. See Short Squeeze.

• Bear : A trader who believes prices will fall.

• Best-Efforts Basis : An attempt to fill an order at the next available price in light of above average order flow.

• Bid Price : See Bid.

• Bid Rate : See Bid.

• Bid : The price at which buyers want to buy a currency pair. Sell orders on FXTrade are executed at the Bid Price.

• Bid/Ask Spread : See Spread.

• Big Figure : The first couple of digits of a forex rate or price which doesn't usually fluctuate.

• Binary Option : An option where the payout is predetermined and is not dependant on the price move of the underlying asset. Also known as a Digital option, and All-or-Nothing option.

• Blocks : A large amount of securities, typically at least 10,000 shares or $200,000 in bonds.

• Bollinger Bands : A technical analysis overlay that plots three bands onto the underlying price curve. One is the moving average while the other two are bands of volatility: two standard deviations above and below the moving average. Bollinger Bands are available on the FXTrade platform.

• Book : The total number of currency positions a dealer has at any given moment. Typically, the dealer aims to have a net position of zero in terms of risk. This means that for the aggregate, all customer's long and short positions balance each other out.

• Box Options : A proprietary OANDA product that lets clients trade options through a well-understood graphical user interface.

• Break Out : See Break.

• Break : Used to describe sudden movement of currency prices outside of a previous range.

• Breakaway Gap : A gap in price when a new trend forms.

• Bretton Woods : The location of the historic conference held in 1944 to establish the first foreign exchange system which was tied to US Dollars that were, in turn, backed by gold.

• Broker : Traditionally, an agent who works for a dealer by soliciting customer orders and earning for himself a commission in the process. Currently, the terms broker and dealer are often used interchangeably.

• Brokerage : A company that offers trading services to the public.

• Bull Call Spread : Buying a call option and selling another call option, both with the same expiry date. The call option sold usually has the higher strike price. The money paid buying the call option is offset with the money received for selling the other call option. Losses are capped, as are profits.

• Bull Market : An extended period where prices rise for a single security or for the market in general.

• Bull : A trader who believes that prices will rise.

• Bundesbank : The central bank of Germany.

• Business Day : See Banking Day.

• Butterfly Spread : An option strategy combining a bull and bear spread that uses three strike prices. The lower two strike prices are used in the bull spread, and the higher strike price in the bear spread. Both puts and calls can be used. In a long Butterfly Spread, you go long one call with a high strike price, long one call with a low strike price, and short two calls with a middle strike price.

• Buy Limit Order : An order to transact at a specific price (the limit) or lower.

• Buy Stop : A stop order to buy that is placed above the current market. A buy stop is used to close out a short position.

• Buying Rate : See Bid.

• Buying on Margin : Taking a position in a currency pair when only a portion of the total value is paid for. The rest is borrowed and interest is charged. The portion paid for is called margin.

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• CFTC : See Commodity Futures Trading Commission.

• CHAPS : See Clearing House Automated Payment System.

• CHIPS : See Clearing House Interbank Payment System.

• CLS : See Continuous Linked Settlement.

• CME : Chicago Mercantile Exchange

• CPI : See Consumer Price Index.

• CSR : Client Service Representative.

• Cable : The exchange rate for the British Pound/US Dollar (GBP/USD) currency pair, so named in reference to how rates for the two currencies were previously communicated by transatlantic cable.

• Calendar Spread : Holding long and short positions of the same option with different expiration dates.

• Call Rate : The interest rate charged in the interbank for overnight borrowing.

• Call Writer : The writer of a call option is another name for the seller of a call.

• Call : See long call.

• Candlestick Chart : A popular chart used for technical analysis purposes consisting of a body (the edges showing opening and closing prices) and vertical lines extending upwards and downwards from the body (showing respectively the highest and lowest ask/bid rates reached during the interval). Candlestick charts were made popular by Japanese rice merchants to track the price of rice over time.

• Capital Account : The net of investment flowing in and out of a country.

• Capital Risk : Risk where banks have to deal with another bank or financial institution who may not be able to uphold its side of the bargain.

• Carry Currencies : High interest rate currencies.

• Carry Grid : A grid of positions (including open orders, take profits, and stop losses) built on a carry trading strategy.

• Carry Positive : A carry trade where you are long the high interest currency and short the low interest currency. Excluding the volatility of the currency pair, this strategy is profitable based on the interest rate differential between the two countries.

• Carry Trade : The carry is the cost of keeping a position open overnight. Each currency has a different interest rate associated with it. You are paid interest on the currency you are long on, and you must pay interest on the currency on which you are short. The difference is the carry, sometimes referred to as the cost of carry.

• Carry : The cost of keeping a position open overnight. Each currency has a different interest rate associated with it. You are paid interest on the currency you are long in, and must pay interest on the currency you are short. The difference is the carry, sometimes referred to as the cost of carry. FXTrade uses a method of calculating interest rates which is more fair to traders.

• Cash Settlement : Spot and futures contract settlement procedure where, instead of taking physical delivery, profits or losses are settled in cash.

• Cash on Deposit : Funds deposited in a trading account.

• Central Bank Intervention : When the central bank enters the spot forex market to buy or sell forex in order to stabilize the country's currency, usually when supply or demand forces are unbalanced.

• Central Bank : A country's main bank, overseen by the government, whose role is to regulate other banks and financial institutions, and to enact monetary policy.

• Chartist : Someone who uses charts of past price movements (technical analysis) to predict future prices.

• Choice Market : Instead of a bid and ask price where there is a definable spread, a choice market is one where all trades, whether buy or sell, go through at the same price.

• Chooser Option : An option where the holder can choose whether the option is a call or a put during the life of the option.

• Clean Float : A type of exchange rate mechanism where an exchange rate is determined only by market forces with no central bank intervention whatsoever.

• Clearing House Automated Payment System : A forex settlement system used in the UK.

• Clearing House Interbank Payment System : An international wire system used by major banks.

• Clearing : The trade settlement process.

• Client : See Customer.

• Close Of Business Day : See Daily Cut-Off.

• Closed Position : A transaction that offsets the number of units in a previous open position. In the case of a long position, selling the exact number of units so that your exposure in the market is zero.

• Closing a Position : See Closed Position.

• Co-Owner : A secondary account holder. See Owner.

• Collateral : An asset that has value, given to secure a loan.

• Commission : The fee that a broker may charge clients for dealing on their behalf.

• Commodities Exchange : An exchange where various commodities and derivatives products are traded, including wheat, barley, sugar, maize, cotton, cocoa, coffee, milk products, pork bellies, oil, metals, and so on. The Chicago Board of Trade and New York Mercantile Exchange are the largest and most well-known commodity exchanges in the world.

• Commodity Futures Trading Commission : The United States regulatory agency for commodity futures trading (www.cftc.gov).

• Compound Option : An option for which the underlying is another option. Therefore, there are two strike prices and two exercise dates. Examples include a call on a call or a put on a put.

• Confirmation : Written statement that acknowledges a trade occurred, providing important information such as date, quantity, price, and total amount involved. On FXTrade, confirmation is done through pop-up boxes and the activity log.

• Consumer Price Index : A month to month economic indicator which gauges changes in the cost of living by measuring price changes in a common basket of goods and services that most people use, such as food, clothing, transportation, and entertainment.

• Contagion : When an economic crisis spreads from one market to another. An example is the fall of the Indonesian Rupiah in 1997 and its subsequent effect on other Asian and Latin economies.

• Continuous Linked Settlement : A means of settling foreign exchange transactions between major banks so as to eliminate settlement risk.

• Contract : A formal agreement to buy or sell a specific amount of a certain currency.

• Conversion Rate : The value of one currency exchanged for another currency.

• Convertible Currency : A currency that can be exchanged for another without special permission. Today, most of the currencies which were previously unconvertible are now convertible, such as the Polish Zloty.

• Copey : Traders' term for the Danish Krone.

• Corporate Yields : The return on an investment, usually calculated in percentage terms.

• CORRA : Canadian Overnight Money Market Rate - The rate used by financial institutions to borrow money to cover a shortage of funds (primarily for end-of-day settlement) from those institutions with a surplus of funds.

• Correlation : A statistical term that refers to a relationship between two seemingly independent things. In forex for example, one could argue that the Euro and the Sterling have a higher correlation than, for example, the Euro and the Brazilian Real.

• Correspondent Bank : A foreign bank that performs services for another bank that has no branch in the foreign location. Wiring funds through correspondent banks usually results in higher charges as the correspondent bank's fees would be deducted from the amount sent.

• Cost of Carry : See Carry.

• Counter Currency : See Quote Currency.

• Counterpart : See Counterparty.

• Counterparty : The other party in a forex deal. In online spot forex, the counterparty is the market maker.

• Countervalue : In a deal where one buys a currency against the US Dollar, the US Dollar value of the transaction is known as the countervalue.

• Country Risk : By virtue of economic, political, and geographical factors, some countries are more stable than others. Country risk in reference to forex means the stability of the currency and the creditworthiness of its bonds.

• Cove : Closing a short position by buying the exact units of the currency that was previously shorted.

• Covered Call : A call option sold by someone who owns the underlying asset.

• Crack Spread : The difference – or profit margin – between the price of a barrel of crude oil and the earnings that can be obtained from the products derived from the barrel of crude.

• Crawling Peg : A method of exchange rate adjustment in which the rate is fixed/pegged, but adjusted at certain intervals in line with the results of various economic or market indicators.

• Credit Risk : The risk that a debtor will not repay

• Cross Currency Contract : A contract to buy or sell one foreign currency in exchange for another foreign currency, neither of which is the US Dollar.

• Cross Deal : A foreign exchange deal in which neither currency is the US Dollar.

• Cross-Rate : The exchange rate involved in a cross deal. Quite often, the rate is derived from exchanging one currency for the US Dollar and then exchanging US Dollars for the second currency.

• Cryptology : The process or science of deciphering coded text or messages.

• Currency Pair : In a foreign exchange transaction, the two currencies involved. For example, USD/EUR.

• Currency Risk : For many businesses, the movement of forex rates presents a risk which may erode profits from foreign sources held in foreign currency.

• Currency Swap : A contract between two counterparties to exchange interest streams from two different currencies and then also exchange the lump sums at a future date.

• Currency : The legal tender for a particular country which is issued by that country's government.

• Custodian : A bank (Custodian bank), agent, or other organization responsible for safeguarding an individual's financial assets.

• Customer : A person that holds an account to trade through the services of a forex dealer.

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• D-MARK : See Deutschmark.

• DAX : Deutsche Aktien Xchange, Germany's primary stock index.

• DM : See Deutschmark.

• Daily Cut-Off : A particular point in the day chosen by a dealer to demarcate the end of one trading day and the beginning of the next, for administrative and logistical reasons.

• Day Order : A buy or sell order to automatically expire at the end of the current trading day.

• Day Trade : A trade that is opened and closed on the same trade date.

• Day Trader : A trader who tries to profit from short-term price movements, often taking and closing a position within the same trade day.

• Day Trading : The trading style of a Day Trader.

• Deal Blotter : A list of all the deals that were done in a trading day.

• Deal Date : The date a transaction is entered.

• Deal Slip : See Deal Ticket.

• Deal Ticket : A record of the basic details of a transaction that a dealer keeps, as opposed to the statements that customers receive.

• Dealer : An individual or firm that buys and sells assets from their own portfolio, acting as a principal or counterparty to a transaction.

• Dealing Desk : Used loosely as the place where dealers facilitate pricing and executing trades.

• Dealing Systems : Computer networks that link up banks to create the forex market. Examples of dealing systems are Reuters terminals and Bloomberg machines.

• Default : A term for breaching a contract.

• Deficit : In economics, when the balance of trades or payments are negative.

• Deflator : The equivalent of the effect of inflation when one considers the difference between real and nominal GDP. See Gross National Product.

• Delivery Risk : Risk where a counterparty is not able to fulfill his side of the deal even though he is willing to do so.

• Delivery : Date When a forex contract matures, usually two days after the transaction is entered. In the scope of online forex trading, delivery of the actual currencies is not taken. Rather, profits and losses are credited or debited from one's account balance.

• Depreciation : When the value of a particular currency falls substantially.

• Depth of Market : The volume of buy and sell orders waiting to be transacted for a particular currency pair at a particular point in time.

• Derivative : A financial contract whose value changes in relation to an underlying security. For example, an option changes value according to the asset that underlies it.

• Desk : See Dealing Desk.

• Details : The information necessary to facilitate a forex transaction. For example, the currency pair, rate, time and date, and the quantity.

• Deutschmark : The former currency of Germany, replaced by the Euro when Germany joined the European Union.

• Devaluation : When a government allows the value of its currency to weaken in relation to other currencies.

• Digital Option : See Binary Option.

• Direct Quotation : Quoting in variable units of domestic currency per fixed units of foreign currency.

• Dirty Float : Exchange rate policy where the value of a currency is allowed to fluctuate, but the central bank will intervene from time to time.

• Discretionary Account : An account where a customer allows the institution to make trading decisions and buy and sell on his or her behalf.

• Discount Spread : Refers to the situation where the bid price of a forward spread rate is less than the ask price.

• Diversified Carry Basket : A portfolio of carry trade positions that is distributed among different carry currencies and funding currencies in order to limit losses in one particular carry trade position.

• Dollar Rate : The amount of foreign currency quoted against one US Dollar. Some currencies are quoted in the amount of US Dollars per foreign currency unit, like the British Pound.

• Domestic Rates : The interest rates that apply to deposits or borrowing of a particular foreign currency. These rates are similar to those offered within the foreign country to citizens who keep money in deposit accounts.

• Done : The term used by traders to signal that a contract has been agreed upon.

• Dot-com boom : The period from roughly 1995 to 2001 that was marked by the founding (and, in many cases, spectacular failure) of a group of new Internet-based companies commonly referred to as dot-coms.

• Drawdown : The size of a drop in the value of an account from its peak to its low.

• Durable Goods Order : An economic indicator that marks the change in sales levels of products that have a lifespan of three years or more.

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• ECB Conferences : The top functionaries of the European Central Bank (ECB) hold regular press conferences in which they outline Central Bank decisions and concerns.

• ECB : See European Central Bank.

• ECU : See European Currency Unit.

• EFT : Electronic Funds Transfer.

• EMS : See European Monetary System.

• Easing : Refers to either a small price decline in a currency or when a central bank engages in monetary policy to spur spending. An example of central bank easing would be lowering of interest rates.

• Economic Indicator : A statistic that is used to gauge current economic conditions. See Consumer Price Index and Durable Goods Order as examples.

• Effective Exchange Rate : Explanation of a country's currency strength or weakness entirely on its trade balance.

• Either Way Market : A condition in the Euro interbank deposit market where both bid and offer rates for a particular period are the same.

• Elliot Wave Principle : An attempt to explain market activity by ascribing a pattern of eight waves to any complete cycle. The eight wave patterns consists of a five-stage advance and a three-stage correction.

• End of Day Mark to Market : The value of all open positions in a dealer's book based on the closing market rates. In addition, any profits or losses are recorded.

• Entity Trading Account : A trading account that does not belong to an individual, but rather to a company that has designated a person to be responsible for its trading decisions.

• Equities : Ownership interest in a corporation in the form of common stock or preferred stock.

• Equity Curve : The value of a trading account graphed over a period of time.

• Equity : Total assets minus total liabilities; also called net worth.

• Escrow Account : A segregated account where customer money is kept separate from a dealer's operating funds.

• Euro : See European Monetary Unit.

• Eurocurrency : A currency that is deposited in a financial institution located outside the currency's country of origin.

• Eurodollar : US dollars deposited in a bank outside the USA.

• European Central Bank : Established in Frankfurt in 1998, the ECB is responsible for all monetary policy decisions that influence the Euro currency. Based on the Maastricht Treaty, the ECB's main responsibility is to ensure price stability. To this end, it is authorized to issue the Euro and is responsible for setting interest rates for those countries that have converted to the Euro.

• European Currency Unit : The predecessor of the Euro.

• European Monetary System : An arrangement in the 1970s and 1980s where many European countries linked their currencies to prevent large fluctuations in value. It was one of several initiatives leading to the deployment of the Euro.

• European Monetary Unit : The currency of the European Monetary Union (EMU), introduced in 1999. The following countries and their currencies were replaced with the Euro: Germany, Deutsche Mark; Italy, Lira; Austria, Schilling; France, Franc; Belgium, Franc; Netherlands, Dutch Guilder; Finland, Markka; Portugal, Escudo; Greece, Drachma; Ireland, Punt; Luxembourg, Franc; and Spain, Peseta.

• European Option : An option whose holder can exercise it only at the expiry date.

• European Union : The group of European countries joined together to promote economic, political, and social co-operation.

• Excess Margin Deposits : Deposited funds in a trading account above and beyond what is required for margin requirements.

• Exchange Control : Various devices a central bank uses for controlling the movement of foreign exchange so as to not deplete a country's reserves.

• Exchange : The physical location of trading activity. Some famous examples include the New York Stock Exchange or the Chicago Mercantile Exchange.

• Execution : Completing a trade.

• Exercise Price : See Strike Price.

• Exit : In the case of a long position, the sale of the long currency. In a short position, the purchase of the short currency, resulting in a closed position.

• Exotic : As opposed to the major currencies which are heavily traded, exotics are the less traded currencies.

• Exotics : The lesser traded currencies, as opposed to the major currencies which are heavily traded.

• Expiration Date : The day on which a financial option is no longer valid.

• Exposure : The net of all long and short positions for a particular currency. Based on the traders' positions for all currencies, his/her exposures can result in either loss or gain.

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• FASB #8 : See Financial Accounting Standards Board's Statement Number 8.

• FDIC : See Federal Deposit Insurance Corporation.

• FOMC : See The Federal Open Market Committee.

• FX : An acronym for Forex.

• FXManager : Investment managers can use FXManager as a resource when trading their clients' funds in the FX market.

• FXNews : FXNews is a currency news service offered by OANDA.

• Factory Orders : An economic indicator that marks the change from one period to another of the orders for durable and nondurable goods. More orders mean economic growth whereas the opposite signifies a slowdown.

• Fast Market : Strong buying and/or selling pressure in the market, in which prices often gap and move too quickly to be disseminated.

• Fed Fund Rate : The interest rate on Fed fund account balances that is closely monitored to gauge the Fed's view on the economy. The accounts are held by member banks and are usually used for lending or borrowing from one another.

• Fed Funds : Account balances held by banks at their local Fed Bank.

• Fed Meetings : The Federal Reserve System (the Fed) is the US central bank responsible for conducting US monetary policy by influencing money and credit conditions in the economy. The Federal Reserve Board of Governors and the Federal Open Market Committee (FOMC) hold regularly scheduled and special meetings that are followed closely by market watchers.

• Fed : See Federal Reserve.

• Federal Deposit Insurance Corporation : The US regulatory agency that administers bank deposit insurance.

• Federal Open Market Committee : Committee made up of Federal Reserve members who meet eight times a year to discuss current monetary policy and its effect on the present economy, and to address any possible changes needed.

• Federal Reserve Board : The senior members of the Federal Reserve, each of whom is appointed by the US President. The chairman of the Fed Reserve Board serves a 4-year term, while the other members serve 14-year terms.

• Federal Reserve : The Central Bank of the United States.

• Fedwire Settlement : System used by the Federal Reserve banks and other banks.

• Fill Price : The price at which a buy or sell order goes through.

• Fill or Kill : An order that must be executed immediately based on certain criteria such as price and quantity. If it cannot be executed, the order is immediately canceled.

• Fill : Completing an order to buy or sell.

• Financial Accounting Standards Board's Statement Number 8 : Standardized accounting rules dictating how companies should translate foreign currency into US Dollars on their balance sheets.

• Financial Risk : The possibility that a business won't be able to meet its financial obligations.

• Finex : Currency trading at the New York Cotton Exchange.

• Firm Quote : When a buyer or seller requests a firm quote, the dealer provides a bid and ask quote that can be immediately executed if the buyer or seller wishes. See Indicative Quote.

• Fiscal Policy : Using tax policy to affect economic conditions.

• Fisher Effect : The effect of interest rates on international money movement such that money moves into currencies paying higher interest rates.

• Fixed Exchange Rate : Foreign exchange policy where a central bank maintains an official rate for their currency, often intervening to keep the rate fixed within a limited range.

• Fixing : Determining rates by selecting a level which, as well as possible, balances buying and selling pressure. An example is London Gold Fixing.

• Flat : See Square.

• Flexible Exchange Rate : An exchange rate that is fixed, but is re-evaluated frequently.

• Floating Exchange Rate : An exchange rate whose value is determined by market forces.

• Force Majeure : French for greater force. Represents a clause in a contract that relieves either party from fulfilling the obligations of the agreement should an extraordinary event prevent the completion of the contract. Typical examples include war, labor strikes, riots, and natural disasters. Commonly-included in futures and options contracts especially when dealing with commodities such as oil and agricultural products.

• Foreign Exchange Centers : The largest forex center in the world is London. Other financial centers which follow the sun across the sky are New York, Tokyo, Hong Kong, Singapore, and Zurich. Trading passes from one center to the next, the traders in one bank's dealing desk handing off the trading book to their colleagues in another center.

• Foreign Exchange : Buying or selling one currency against another currency.

• Forex : Acronym for Foreign Exchange.

• Forward Contracts : A transaction that settles at a future date. The buyer and seller are bound by the contract to settle on the specified date.

• Forward Point : Differential added to or subtracted from the spot rate to calculate the forward rate. The differential is based on anticipating future conditions and fluctuates accordingly.

• Forward Rates : An exchange rate that differs from the spot exchange rate by forward points. The forward points are either added to or subtracted from the spot rate depending on anticipation of future conditions.

• Forward : A transaction that settles at a future date.

• Free Reserves : The margin by which excess reserves exceed borrowings.

• Fundamental Analysis : The study of economic factors (GDP, Trade Balance, Employment, and so on) that can influence prices in financial markets.

• Fundamental Trader : An investor who uses fundamental analysis.

• Fundamentals : Economic factors (GDP, Trade Balance, Employment, and so on) that can influence prices in financial markets.

• Funding Currencies : Low interest rate currencies.

• Futures Contract : An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange while forwards are traded over the counter (OTC).

• Futures : An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange while forwards are traded over the counter (OTC).

- G -

• G10 : G7 plus Belgium, The Netherlands, and Sweden.

• G20 : A group composed of the following 20 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the United States, and the European Union. The Group of 20 dedicated themselves to financial stability in light of the financial crises during 1997-1999.

• G7 : The seven leading industrialized countries: Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States of America.

• G8 : G7 and Russia.

• Gearing : A term related to margin trading where you are controlling a position whose face value is greater than the money you deposit.

• Globex : An after hours electronic futures and options trading platform developed by Reuters.

• Going Long : The purchase of a currency pair.

• Going Short : Selling a currency pair by first borrowing it, then returning it at a later time by buying it back (hopefully once prices are lower). See Selling Short.

• Gold Standard : A commitment made by certain countries to fix the prices of their domestic currencies in terms of a specified amount of gold. Also known as the Bretton Woods System, the Gold Standard was enacted in 1946 and created a system of fixed exchange rates that allowed governments to sell their gold to the United States treasury at a fixed price. On August 15, 1971 President Richard Nixon ended the Bretton Woods system.

• Golden Cross : In technical analysis, when two moving averages intersect, usually a short one like a 20 day and a long one such as 40 day. This is considered a favorable sign that the underlying currency will move in the same direction.

• Goldilocks Economy : Term which describes an economy that has steady growth and acceptable inflation. In this sense, the economy is not too hot and not too cold.

• Good Until Canceled : An order that does not expire at the end of the trading day as is usual practice. Unlike what its name suggests, it does expire at the end of the trading month though, as opposed to being open forever.

• Grid Trading : A series of positions and open orders that are built with a predetermined spread defined by the trader.

• Gross Domestic Product : The total value of a country's output produced within its physical borders.

• Gross National Product : GDP plus production and income from nationals abroad.

- H -

• Hard Currency : A currency that investors have confidence in. Examples could be the US Dollar or the Euro.

• Head and Shoulders : A price trend pattern which has three peaks, the middle one higher than the surrounding two forming what looks to be a head with two shoulders on either side. This pattern is seen as an indicator of a trend reversal.

• Hedge Fund : A private fund which usually solicits investments from wealthy individuals. It is unregulated as it's assumed that the investors are knowledgeable and realize the speculative nature of the fund. It usually invests in high risk, short term instruments in order to achieve above-average returns.

• Hedge : A term used to describe reducing risk associated with adverse market movements by using two counterbalancing investments, thereby minimizing any losses caused by price fluctuations. For example, if you sell a house in Holland to relocate to the UK (your new base currency), you are in a long Euro (EUR) position and short Pounds Sterling (GBP). To offset this position you would need to sell the equal amount of EUR to make up for the short GBP position.

• Hit the Bid : Selling at the bid price.

• Holder : Buyer and subsequently owner of a currency pair.

- I -

• IFEMA : International Foreign Exchange Master Agreement

• IM : See International Monetary Market.

• IMF : See International Monetary Fund.

• ISO : See International Organization for Standardization.

• In the Money : When the strike price of an option is cheaper than the underlying asset's current price.

• Inconvertible Currency : See Unconvertible Currency.

• Indicative Quote : A market maker's price. It is not dealable, but is for information purposes only. See Firm Quote.

• Inflation : A rise in prices or a drop in the purchasing power of money.

• Initial Margin Requirement : When entering a position, the minimum amount that must be paid in cash.

• Initial Margin : The first deposit by a customer which determines a corresponding maximum trade size.

• Interbank Market : A market in which financial institutions can trade. The term refers to short term money or foreign exchange markets that are only accessible to banks or financial institutions. There is no physical market place; the transactions take place over communication networks such as Bloomberg or Reuters.

• Interday Trading : Positions that are opened and closed within the same trading day.

• Interdealer Market : Same as Interbank Market.

• Interest Rate Carry : See Carry.

• Interest Rate : The rate charged or paid for the use of money. An interest rate is expressed as an annual percentage of the principal. Interest rates often change as a result of inflation and Central Bank policies.

• Interest Rate Swap: A swap that exchanges the revenue generated by the two legs of the agreement. One party pays an agreed-upon fixed interest rate for the notional amount in exchange for the interest that same amount earns for the duration of the agreement.

• International Monetary Fund : Supranational organization established in 1946 to provide international liquidity and loans to member countries.

• International Monetary Market : The futures trading arm of the Chicago Mercantile Exchange.

• International Organization for Standardization : The organization responsible for developing the standardized forex trading codes used by traders, such as EUR for Euros or CAD for the Canadian Dollar.

• Internationalization : Refers to a widely used currency for trade and transactions. The US Dollar and the Euro are examples.

• Intervention : See Central Bank Intervention.

• Intra Day Position : Positions that are opened and closed within the same trade day.

• Introducing Broker : A person or firm that introduces customers to a market maker often in return for commission or a portion of the spread.

- J -

• Japanese Housewives : A term coined by the financial press to refer to the Japanese households that speculated on the carry trade and became a major seller of yen, thereby driving the currency against the levels forecast by financial institutions.

• Java Code : Java is a programming language originally developed by Sun Microsystems. It is used to enable interactive Web applications, including FXTrade.

• Jean Claude Trichet : President of the European Central Bank, appointed November, 2003.

• Jim Cramer : A financial market analyst, host of CNBC's Mad Money, and co-founder of TheStreet.com.

• Jobber : A trader whose strategy is to enter and exit trades quickly for small but frequent profit, without carrying a position overnight.

• Jurisdiction Risk : The risk that funds will be lost when placed under the jurisdiction of a foreign authority.

- K -

• Key Currency : For smaller countries, the act of orienting their currency to that of a major trading partner.

• Kill or Fill : An order that does not permit partial filling. If it cannot be completely filled, then the order is to be canceled (i.e. "killed").

• Kiwi : Traders' term for the New Zealand Dollar.

- L -

• LIBOR : See London Inter-Bank Offered Rate.

• LIFFE : London International Financial Futures Exchange

• Ladder Option : An option that locks in gains as the underlying asset reaches predetermined price levels, In this way, these levels are like rungs of a ladder. The gains are locked in even if the asset price should subsequently drop.

• Lagging Indicator : Economic indicators that change after the overall economy has changed, used to confirm effects of Fed policy. An example is the Consumer Price Index (CPI).

• Leading Indicators : Economic indicators used to predict future economic activity, such as the levels of the S&P 500 index.

• Left-Hand Side : Refers to the bid quote, which is the price at which customers who are long a currency pair sell it.

• Leverage : The ratio of margin to the maximum position size. With a deposit of $5000 and a leverage of 50, a trader could enter a position with a face value of $250,000. Leveraging allows you to profit quickly, but lose money just as fast.

• Liability : The obligation to deliver currency as part of a spot transaction. In speculative forex trading, currency is not delivered. All profits and losses are subtracted from margin deposits.

• Limit Order : An order to transact at a specified price or better. See Buy Limit Order and Sell Limit Order.

• Limit Price : The specified price as part of a limit order.

• Line Chart : The simplest form of charting, a line chart plots a series of lines connecting the various price levels over a specified time period.

• Liquid : Term used to describe a market where there are lots of buyers and sellers generating a great deal of volume.

• Liquidation : This is what happens as a result of a margin call. All positions are closed to prevent further loss. At margin call, the value of the account is not sufficient to sustain the position size. OANDA Margin Rules

• Liquidity : Term used to describe a market where there are lots of buyers and sellers generating a great deal of volume.

• London Inter-Bank Offered Rate : The rate that banks use when borrowing from one another.

• Long Call : An option which gives its holder the right, but not the obligation, to buy the underlying asset.

• Long Position : When a currency pair is long, the first currency is bought while the second currency is sold short. To go long on a currency means that you buy it. A long position is expressed in terms of the base currency.

• Long Put : An option which gives its holder the right, but not the obligation, to sell the underlying asset.

• Long : When a currency pair is long, the first currency is bought while the second currency is sold short. To go long on a currency means that you buy it. A long position is expressed in terms of the base currency.

• Lookback Option : An option that lets the holder look back at the prices of the underlying asset during the life of the option and select the ideal price to exercise at.

• Lots : Standardized method of trading in forex which requires a trade of 100,000 units of a particular currency. Trading with FXTrade occurs in units and trade sizes that can vary from 1 to 10,000,000 units.

- M -

• M1 : Money supply component which consists of all cash in circulation, plus all of the money held in checking accounts, as well as all the money in travelers checks.

• M2 : Money supply component which consists of M1 plus all of the money held in money market funds, savings accounts, and small Certificates of Deposits.

• M3 : Money supply component which consists of M2 plus all of the large Certificates of Deposits.

• MFN : See Most Favored Nation.

• MXN : The currency symbol for the Mexican peso.

• Maintenance Margin : The minimum margin that must be available in an account to support all open trades.

• Maintenance : See Maintenance Margin.

• Make A Market : A dealer makes a market by providing a two-way quote—a bid and ask price—in which they stand ready to buy or sell. In this way, dealers are also known as market makers.

• Managed Float : Exchange rate policy where central banks regularly intervene to stabilize and/or steer the direction of their currency.

• Manual Trader : A trader that inputs his/her trades manually without an API.

• Margin Account : An account that allows leverage buying and short selling on credit.

• Margin Call : A notification that more funds must be deposited into an account because the value of the account has fallen below the minimum margin needed to cover the size of existing positions.

• Margin : The minimum deposit required to maintain an open position. For example, with an open position of $250,000 and a leverage of 50, the required margin would be $5000.

• Mark-To-Market : For an open position, what its value would be if it were closed out at the current market rates.

• Market Close : In the 24-hour forex market, the market never closes. For administrative purposes, many banks institute 5pm EST as the market close in order to differentiate between value dates, as well as mark delivery dates.

• Market Maker : A dealer who provides a two-way quote—a bid and ask price—in which they stand ready to buy or sell. In this way, dealers are also known as market makers.

• Market Order : An order for immediate execution at the best available price.

• Market Rate : The most current quote for a currency pair.

• Market Risk : The risks that occur when demand and supply pressures in the market cause the value of an investment to fluctuate.

• Martingale System : A betting strategy where the gambler doubles his/her bet after every loss, so that the first win recovers all previous losses plus wins a profit equal to the original stake. This strategy may be seen as a sure thing by those who practice it, but will eventually bankrupt people reckless enough to try it because winning may require infinite wealth due to the exponential growth of betting amounts.

• Maximum Leverage : The biggest position that a margin deposit would cover. At a leverage of 50, one could enter a maximum leveraged position of $100,000 by depositing $2,000 worth of margin.

• Mean Reversion : A theory suggesting that prices and returns eventually move back towards the mean or average.

• Mid : See Middle Rate.

• Middle Price : See Middle Rate.

• Middle Rate : The price halfway between the bid and ask quote offered by dealers.

• Mini Account : A special type of trading account where traders can trade partial lot sizes. With FXTrade, no distinction is made between regular and mini accounts. All clients can place trades ranging from 1 to 10 million units.

• Module : A portion of a program that carries out a specific function and may be used alone or in combination with other modules of the same program.

• Momentum : The tendency of the market to continue moving in the same direction in which it is currently moving.

• Monetarists : People who believe that money and monetary policy have a strong effect on capacity and growth in the economy. Monetarists focus on the work of Milton Friedman.

• Monetary Base : Required and non-required deposits made at the central bank by member banks and the currency in circulation.

• Monetary Easing : When a central bank encourages spending by easing monetary controls. An example would be lowering interest rates.

• Monetary Policy Committee : The Monetary Policy Committee (MPC) is a committee of the Bank of England that meets every month to decide the official interest rate in the United Kingdom.

• Monetary Policy : Central bank attempts to influence the economy through money supply levels.

• Money Manager : A person who is responsible for the entire financial portfolio of an individual or other entity. A money manager receives payment in exchange for choosing and monitoring appropriate investments for the client.

• Most Favored Nation : Preferential treatment in trade between World Trade Organization (WTO) members.

• Moving Average : Method of smoothing out data on price charts so that trends are easier to spot. Average refers to a mathematical average or a statistical mean that is plotted over the original curve.

- N -

• NAV : Net Asset Value. The total value of an asset less liabilities. In the case of a trading account, the NAV is the balance of deposits, realized and unrealized profit/loss, and interest, minus withdrawals.

• NFP : Non-Farm Payroll. Reported monthly, this figure represents the total number of paid U.S. workers of any business, excluding farm employees, general government employees, private household employees, and employees of nonprofit organizations that provide assistance to individuals. The NFP report also includes estimates of the average work week and average weekly earnings of all non-farm employees.

• NOK : Currency symbol for the Norwegian Krone.

• NYCE : New York Cotton Exchange.

• Naked Put : A put sold by someone who is not short the underlying asset.

• Narrow Market : Also known as a thin market, where there is light trading.

• Negative Carry Pairs : A carry trade where you are long the lower interest currency and short the higher interest currency. This type of trade might be part of a hedging strategy.

• Negative Sloping Yield Curve : A yield curve is a graph that plots the various yields (usually government bonds) beginning with short term rates on the left side of the graph and extending towards long term rates to the right. Negative sloping refers to the fact that on such a curve short term rates are actually higher than long term rates. This is contrary to normal yield curves as dictated by the time value of money.

• Net Interest Rate Differential : The difference in the interest rates associated with two currencies.

• Net Position : Currency positions that have not been offset with opposite positions.

• Netting : Settlement method where only the difference (profit or loss) is settled at the close.

• News Trader : An investor who bases his/her decisions on the outcome of a news announcement and its impact on the market.

• Noise : The term used to describe market activity that does not always match overall market sentiment, resulting in a series of variables that, in reality, do not match their modeled counterparts. In general, the shorter the time frame, the more difficult it is to separate the meaningful market movements from the noise.

• Nostro Account : An account held by a domestic bank with a foreign bank where the original bank has no branches. It is used for cash management purposes. Nostro means ours in Latin. See Vostro Account.

- O -

• OCO : See One Cancels the Other Order.

• OECD : See Organisation of Economic Co-operation and Development.

• OTC : See Over the Counter.

• Odd Lot : A non-standard transaction size. In forex, a standard lot is usually 100,000 units of a particular currency.

• Off-Shore : A business entity that may or may not be physically located in a country, but whose operations and regulation fall outside the country, primarily because it is incorporated elsewhere.

• Offer Price : See Offer.

• Offer Rate : See Offer.

• Offer : Also known as the Ask Price, it is the price at which a seller is willing to sell.

• Old Lady : Term for the central bank of England.

• Omnibus Account : An account that one futures commission merchant carries for another in which the transactions of multiple individual account holders are combined. The identities of the individual account holders are not revealed to the holding merchant.

• One Cancels the Other Order : Two orders that are submitted simultaneously. If either one is executed, the other one is automatically canceled.

• Open Order : Buy or sell order that does not expire until canceled. In theory the order does not expire. However, it usually does so at the end of the trading month rather than lasting forever.

• Open Outcry : An area of an exchange floor (called a “pit”) where buyers and sellers meet to negotiate prices. Typically seen today for only a handful of commodities such as soybeans and rice, a series of “bids” and “offers” are made until two counterparties reach an agreed price. Due to the noise and hectic activity in a busy pit, participants have developed an intricate series of hand signals used to communicate transaction details.

• Open Position : A position whether long or short that is subject to market fluctuations and thus profits or losses. See also Closed Position.

• Options : The right, but not the obligation, to buy (long call) or sell (long put) an underlying asset.

• Order : Instructions to buy or sell.

• Organization of Economic Co-operation and Development : From their web site: [Organization of countries] sharing the principles of the market economy, pluralist democracy, and respect for human rights.

• Oscillators : Technical analysis tools that provide buy and sell signals, characterized by a signal that oscillates between overbought and oversold levels.

• Out of the Money : When the strike price of the option is more expensive than the underlying asset's current price.

• Over the Counter : Refers to trading that is not done over a formal exchange. Traditional forex is traded over the counter, meaning traders entered into forex transactions with one another over telephones or electronic devices. Counter refers to counterparty, in that with forex one trades with a counterparty instead of through an exchange. In online forex trading, the counterparty is the market maker.

• Overbought : A currency pair is overbought when its price rises much more quickly than usual in response to net buying. Once overbought, the pair is then expected to make a contrarian move, meaning its price is expected to fall.

• Overheated Economy : An economy with inflation and high interest rates.

• Overnight Limit : The maximum amount of a net long or short position that a dealer can carry over into the next dealing day.

• Overnight Position : A dealer's net position that is carried into the next trading day.

• Overnight : Trades that extend past the current trade day into the next.

• Oversold : A currency pair is oversold when its price falls much more quickly than usual, declining too far in response to net selling. Once oversold, the pair is then expected to make a contrarian move, meaning its price is expected to rise.

• Owner : The account holder, the name under which a forex account is held.

- P -

• Par : The official value of a currency.

• Par Spread : The term used to describe the situation where the bid and ask prices for a forward spread rate are identical.

• Paris : Nickname for the US Dollar-French Franc currency pair before the French Franc was converted to the Euro.

• Parity : See Purchasing Power Parity.

• Partial Lot : Some brokerages allow trading in partial lots, which are fractions of 100,000 units that normally make up a full lot. Trades on FXTrade range from 1 to 10,000,000 units.

• Pegged : A system where a currency's value is tied with that of another currency. For example, the Chinese yuan with the US dollar. Most pegs are allowed to deviate within a small band.

• Petrodollars : Refers to the forex reserves as a result of oil sold by oil producing nations.

• Pip : The smallest upward or downward price movements quoted in forex. In EUR/USD, a movement of 0.0001 is one pip (for example, from 140.005 to 140.004 euro). In USD/JPY, a movement of 0.01 is one pip (for example, from 116.32 to 116.31 yen).

• Pipette : One-tenth of a pip. FXTrade quotes rates down to the pipette.

• Point & Figure Charts : Technical analysis graphs that focus solely on price without any consideration of time.

• Political Risk : Changes in government policy or to a wider extent, government instability that might have negative effects on the currency.

• Position : A trade that is still in effect. See Open Position and Closed Position.

• Premium : See Carry.

• Premium Spread : Refers to the situation where the bid price of a forward spread rate is greater than the ask price.

• Price Transparency : The ability of all market participants to trade at the same price.

• Price : The cost of purchasing a second currency in terms of a first currency.

• Principal Value : The original amount invested.

• Principals : Refers to the major currencies that are traded: USD, EUR, CHF, AUD, CAD, NZD, and JPY.

• Producer Price Index : An economic indicator that gauges the month-to-month price change that producers receive for their output.

• Profit Taking : Closing a position in order to realize a gain.

• Purchasing Power Parity : Refers to functional equivalency. It is the relationship between the amount of currency needed to buy a common good in one country and the amount needed to buy the same good in the second country. This is one way to establish an exchange rate between two currencies.

• Put Writer : The writer of a put option is another name for the seller of a put.

• Put : See long put.

- Q -

• Quantitative Analysis : A technique used to analyze an observed behavior by employing complex mathematical and statistical modeling, measurement, and research.

• Quote Currency : The second currency of two in a currency pair. For the EUR/USD, USD is the quote currency. The exchange rate quoted is how many units of the second currency you will receive for one unit of the base currency. See Base Currency.

• Quote : When both a bid and ask price are provided for a currency pair.

- R -

• Rainbow Option : An option that has two or more underlying assets. The option only pays out when all the underlying assets act accordingly.

• Rally : A period where prices surge upward.

• Range : The difference between the highest and lowest price of a currency pair during a given trading period.

• Rate Differentials : The difference between the interest rates of two countries. The country with the higher interest rate will attract investment that will be financed in the lower rate country.

• Rate of Return : The percentage of money gained or lost on an investment relative to the amount of money invested.

• Rate : The price at which one currency can be bought or sold for another currency.

• Ratio Spread : Holding an unequal amount of long and short options positions. Two short and one long is a popular ratio spread strategy.

• Reaction : When prices fall after a period of advance.

• Realized P/L : The profit and loss that is generated by closing a position.

• Reciprocal Currency : A currency pair involving the US Dollar in which the US Dollar is not the first currency quoted. An example is the euro which is the base currency when paired with the US dollar. EUR/USD is the way of quoting these two currencies.

• Regulated Market : A market in which a government agency monitors and regulates industry activity to protect investors. An example is forex trading in the United States.

• Repurchase Agreements : When the central bank buys or sells a security to a government securities dealer with the promise to sell it back or repurchase it a short while later. This act has the effect of injecting or removing reserves from the banking system in order to meet central bank strategies for implementing monetary policy.

• Resistance Point or Level : See Resistance.

• Resistance : A ceiling which prices aren't able to penetrate because there is consistent selling activity at that price level.

• Retail FX Market : Comprises a wide range of non-institutional traders, from large organizations to individual investors. In less than 10 years, a relatively small number of online currency brokers and market makers have had a massive effect on this market by efficiently exploiting technology, driving a five-fold decrease in the cost of trading.

• Retail Side : The sale of services, goods, or commodities in small quantities directly to consumers.

• Revaluation Rate : A rate, possibly historical (as in the closing rate for the previous trading day), which is used to revalue a dealer's position or book.

• Right Hand Side : Refers to the ask or offer price. This is the price at which traders buy.

• Risk Capital : The amount of money one could risk without impinging on one's accustomed lifestyle.

• Risk Management : The use of strategies to control or reduce financial risk. An example is a stop-loss order that minimizes maximum loss.

• Risk : See Foreign Exchange Risk

• Roll-Over : Extending the settlement value date on an open position to the next trade date.

• Rollover Credit : Amount credited to a trader's account when the long currency of a currency pair has a higher yielding interest rate than the shorted currency.

• Rollover Debit : Amount debited from a trader's account because of an overnight rollover, when the long currency of a currency pair has a lower yielding interest rate than the shorted currency.

• Rollover Rate : Generally, the daily rollover interest rate is the amount a trader either pays or earns, depending on the currency pairs in question. FXTrade does not use rollover rates. Instead, a type of interest calculation that is more fair to traders is used.

• Round Lot : In most cases, 100,000 units of a currency.

• Round Trip : The buying and selling of a currency pair and having the profit or loss applied to one's account currency.

• Running a Position : See Open Position.

- S -

• S/N Roll : See Spot/Next Roll.

• SWIFT : See Society for Worldwide Interbank Telecommunications.

• Same Day Transaction : A position that is opened and closed on the same day.

• Sell Limit Order : An order to enter a position only at a specified price (the limit) or higher. FXTrade limit orders are executed as soon as the market price reaches the quote.

• Sell Stop : A limit order with a limit placed below the current market price. Once triggered, the limit order becomes a market order.

• Selling Rate : Same as the Ask or Offer rate.

• Selling Short : Selling a currency pair that involves being short the base currency and long the quote currency, with the intent of buying the currency pair at a later time when prices are lower in order to make a profit.

• Settlement Date : In forex, the date when physical delivery must take place. For most currency pairs it is two days after the trade date. However, the USD/CAD currency pair settles one day after its trade date.

• Settlement Risk : Loss as a result of one's counter-party being unable to settle.

• Settlement : The physical delivery of currencies made when a contract matures. In forex, it is usually two days after the trade. In practice, traders don't take delivery, but profits and losses are applied directly to their account balance.

• Short Call : An option that obliges the seller to sell the underlying asset to the buyer.

• Short Covering : Buying the exact same units of a currency pair to offset an earlier short sale of the same currency pair.

• Short Position : When a currency pair is short, the first currency is sold while the second currency is bought. To go short on a currency means that you sell it. A short position is normally expressed in terms of the base currency.

• Short Put : An option which obliges the seller to buy the underlying asset from the buyer.

• Short Sale : See Selling Short.

• Short Squeeze : When short sellers frantically scramble to cover their short positions as the market is experiencing a sharp upward movement. The attempt exacerbates the problem because more buying makes the prices higher and more difficult for other short sellers to cover their positions.

• Short : Selling a currency pair that involves being short the base currency and long the quote currency, with the intent of buying the currency pair at a later time when prices are lower in order to make a profit.

• Shout Option : An option that lets the holder lock in profits while continuing to participate in the movement of the underlying asset.

• Sidelined : When there is above ordinary interest in a currency pair, other major currency pairs that are thinly traded as a result of this are considered sidelined.

• Society for World-wide Interbank Telecommunications : Global electronic network for forex settlement, whose office is based in Belgium. Known for the SWIFT Code, which is an 8 or 11 alphanumeric character international standard that uniquely identifies financial institutions for the purpose of transfers and settlement. The SWIFT code is also known as BIC (Bank Identifier Code).

• Soft Market : Where there are more sellers than buyers resulting in the potential for a quick downtrend.

• Sovereign Risk : Risk that a country will default on its bonds.

• Speculative : The condition where there is no guarantee that money will be made and tremendous risk that you will lose all your capital. The attraction to speculative trading is that you can make a great deal of money very quickly. However, you can also lose it just as fast.

• Spike : A larger than usual price movement. It can be caused by a financial institution entering an erroneous price that appears as a valid price, even though it gets corrected almost immediately.

• Spot Market : See Spot.

• Spot Price : The current market price of a currency traded in the spot market.

• Spot Settlement Basis : See Spot.

• Spot : Buying and selling forex with the current date's price for valuation, but where settlement usually takes place in two days. Trades on FXTrade are settled immediately.

• Spot/Next Roll : See Roll-Over.

• Spread : The value difference between the bid and ask price of a currency pair.

• Square : A condition where all positions in a dealer's books are closed.

• Squeeze : Central bank attempts to reduce the money supply in order to increase the price of money.

• Stable Market : A market that can accommodate huge volumes of buying and selling without large moves. For example, the trading of the EUR/USD pair.

• Sterilization : The process by which central banks offset intervention in the forex market by activities in the domestic money market.

• Sterling : Another name for the British Pound (GBP).

• Stochastics Oscillator : The stochastics oscillator is a special type of oscillator used for technical analysis. Each type is derived from a different equation and focuses on different aspects of price action.

• Stockbroker : An agent in the buying and selling of stocks or other securities.

• Stocky : Traders' term for the Swedish Krona.

• Stop Loss Order : See Stop Losses.

• Stop Loss Strategy : A trading strategy that involves setting limit orders at different price levels to avoid incurring further losses.

• Stop Losses : A limit order to close a position when a given limit is reached. When long, the stop loss order is placed below the current market price. When short, the stop loss order is placed above the current market price.

• Stop Order : See Stop Losses.

• Stop : See Stop Losses.

• Stop-buy : A buy order for a currency price that is above the current market, or current price. It becomes a market order when the specified price is reached. Stop-buys are used by traders to establish positions in markets which they perceive to be rising in value.

• Straddle : An option strategy involving holding both a call and put with the same strike price and same expiry date.

• Strangle : Similar to a straddle, the strangle is a cheaper strategy since the strike prices of both the call and the put are far out of the money.

• Strike Price : The price at which the underlying asset can be bought or sold as specified in an option contract.

• Sub-account : The OANDA platform allows users to segregate their accounts into various sub-accounts to simplify various trading and hedging strategies.

• Support Levels : A level or floor beneath which it is difficult for a currency to fall, characterized by strong buying pressure.

• Swap : A transaction that moves the maturity date of an open position to a future date. See Roll-Over.

• Swissy : Trader's nickname for the Swiss Franc.

- T -

• T-Bills : See Treasury Bills.

• T-Bonds : See Treasury Bonds.

• T-Notes : See Treasury Notes.

• T/N Roll : See Tomorrow Next.

• T/N : See Tomorrow Next.

• Take Profits : A limit order that is placed above the market with a long position or below the market with a short position. When the market reaches the limit price, the position is closed thereby locking in a profit.

• Take the Offer : A verbal order where a trader agrees to the price with which to sell a currency pair to a dealer.

• Technical Analysis : The use of historical rates, price charts, and other market data to forecast future prices.

• Technical Correction : A price adjustment based on technical factors like resistance and support levels, as well as overbought and oversold levels, instead of market sentiment.

• Technical Indicators : Short-term trends that technical analysts use to predict future price movements of securities and/or commodities. Also called technicals, technicalities.

• Technical Side : The use of historical rates, price charts, and other market data to forecast future prices by means of statistical analysis.

• Technical Trader : An investor who uses technical analysis.

• Technicalities : Short-term trends that technical analysts use to predict future price movements of securities and/or commodities. Also called technicals, technical indicators.

• The City : Located within greater London, UK, The City is one of the largest concentrations of financial and business institutions in the world, and is the largest currency trading center.

• Thin Market : See Narrow Market.

• Tick : The smallest possible change in a price, either up or down. Also known as a pip.

• Ticker : Streaming display of the current or recent historical price of a currency pair.

• Tier One : The Bank of International Settlements' measure of a bank's financial strength. Tier One is the highest grade.

• Tom Next : See Tomorrow Next.

• Tomorrow Next : The process of not taking delivery of a currency by closing the position and reopening it with the current trade date so the settlement date is pushed forward to the next trade date (tomorrow). This is done indefinitely until the trade is closed.

• Trade Date : The date on which a position is opened.

• Tradeable Amount : The smallest transaction size allowed. For many brokers the tradeable amount is the round lot, which is usually 100,000 units of a particular currency. With FXTrade, it is 1 unit.

• Trading Margin Excess : Extra funds beyond the margin requirements for existing positions that can be used to enter new positions or increase existing positions.

• Trading Model : A sophisticated program that provides you with expert buy/sell recommendations for trading currencies on the foreign exchange markets. A Trading Model, based on its evaluation of historical analyses, forecasts, and your trading profile, makes recommendations about currency positions by anticipating fluctuations in the foreign exchange markets and capitalizing on these movements.

• Trading Platforms : A software application used for trading forex, usually over the Internet.

• Transaction Cost : The cost involved in buying or selling a currency pair. Some consider the transaction cost to be the actual value of the contract, while others feel it is the price of facilitating the trade, such as commissions and spreads.

• Transaction Date : The date on which a position is opened or closed.

• Transaction : Buying or selling a currency pair.

• Treasury Bills : US government short-term obligations with 13-, 26-, and 52-week maturities.

• Treasury Bonds : US government long-term obligations with 15-year or more maturities.

• Treasury Notes : US government medium-term obligations with 2- to 10-year maturities.

• Trend Lines : Lines, arcs, or other visual cues plotted on a line chart used to predict possible future market directions. Trend lines are often projected from historical points on the graph that are considered significant (retracements, highs, lows, and so on).

• Trend : The current direction of the market, whether up or down or sideways (which is sometimes referred to as non-trending or trading market).

• Two-Tier Market : A dual exchange rate system in which only one of the rates is open to market pressure, as with the pre-1995 South African Rand.

• Two-Way Price : See Quote.

• Two-Way Quotation : See Quote.

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• US Dollar : The currency of the United States of America.

• US Prime Rate : The interest rate at which banks in the US will lend to their most valued customers.

• US Treasury : The department within the United States government that is responsible for issuing Treasury bills, notes, and bonds.

• Unconvertible Currency : A currency that cannot be exchanged for another because of foreign exchange regulations.

• Uncovered : See Open Position.

• Under-Valuation : See Undervalued.

• Undervalued : When a currency is below its purchasing power parity it is considered undervalued.

• Unit : A widely used quantity of currency. In FXTrade, one unit of USD is equal to one United States dollar, while one unit of EUR is one euro. For JPY, one unit is equivalent to one yen. One unit is the smallest trade size in FXTrade.

• Unrealized P/L : A hypothetical valuation of the current position and the resultant profit or loss if the position were to be liquidated at that moment.

• Uptick : A trade that must be executed at a price higher than the previous trade. Certain rules on the New York Stock Exchange require this during sessions of extreme volatility.

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• Valuation : The process of determining the value of an asset or company.

• Value Date : The settlement date for a currency contract, usually two business days. For USD/CAD it is one business day.

• Volatility : Measure of how much the price of a currency changes over time.

• Vostro Account : An account of a foreign bank held at a domestic bank where the foreign bank has no branches. It is used for cash management purposes. Vostro means yours in Latin. See Nostro Account.

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• WTO : See World Trade Organization.

• Warrants : A certificate, usually issued along with a bond or preferred stock, entitling the holder to buy a specific number of securities at a specific price, which is usually above the current market price at the time of issuance, for a specific period of time.

• Wealth Creation Business : A professional service that includes a combination of investment advice, tax services, and estate planning.

• Whipsaw : Refers to when a position is taken and a stop loss is created. The market moves down to trigger the stop loss and then turns around. In this way, the trader suffers two losses: the loss associated with the stop loss which was put below the position's entry level, and the loss of not being able to participate in the subsequent rise of the currency pair.

• Whisper Number : Analyst predictions about earnings or economic indicators. They're considered whispers because they are not made public, but inevitably become public through leaks. Some people call them rumours and attribute as much credibility to them as they do rumours.

• Wholesale : The sale of services, goods, or commodities in large quantities to individual clients.

• Wire Transfer : Electronic transfer of funds from one bank to another.

• Working Day : When the banks in the country of origin for a particular currency are open for business. For currency pairs, this is compounded by the fact that both banks must be open.

• World Trade Organization : A global organization of countries that trade with one another and set rules by which trading is conducted.

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• Yard : Traders' term for a billion as in a billion dollars.

• Yield Curve : A curve that shows the relationship between yields and maturity dates for a set of similar bonds, usually Treasuries, at a given point in time.

• Yield : The return on an investment. The yield is usually calculated in percentage terms.

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• Z-Score : In statistics, the distance a data point is from the mean, measured in standard deviations.

• ZAR : Currency symbol for the South African Rand.