Glossary

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  • A currency is said to "appreciate" when it strengthens in price in response to market demand.

  • A currency is said to "appreciate" when it strengthens in price in response to market demand.

  • The simultaneous buying and selling of a financial instrument at two different prices in two different markets, resulting in profits without risk.

  • Investment practice that divides funds among different markets to achieve diversification for risk management purposes and/or expected returns consistent with an investor’s objectives.

  • The buying price. The higher price of the two way quote.

  • An instruction given to a dealer to buy or sell at the best rate that can be obtained at the moment.

  • A trading method that uses an automated system to trade without any human input. MGK would like to welcome active players like automated trading accounts.

  • A method for checking the potential profitability of a trading system by applying it to historical data.

  • The base currency is the first currency listed in any currency pair. Its value is determined against the counter currency’s value. For example, if the rate of the EUR/USD pair is 1.3525, then the EUR is the base currency and it is worth 1.3525 USD.

  • The rate at which the Bank of England lends to the retail Banks.

  • Someone who believes that prices in the market are going to decline. Opposite of a bull.

  • The quoted price at which a client can sell.

  • Plus or minus two standard deviations where the standard deviations are calculated historically in a moving window estimation. Hence, the bands will widen if the most recent data is more volatile. If the prices break out of the band, this is considered a significant move.

  • Someone who believes that prices in the market are going to rise.

  • Germanys central bank.

  • A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.

  • Refers to the simultaneous selling of a currency with a low interest rate, while purchasing a currency with a high interest rate.

  • Chicago Board of Trade.

  • Refers to the simultaneous selling of a currency with a low interest rate, while purchasing a currency with a high interest rate.

  • Person who analyses markets with the use of charts.

  • The process of settling a trade.

  • To eliminate an investment from ones portfolio by either buying back a short position or selling a long position.

  • Chicago Mercantile Exchange.

  • The department of a firm that ensures that the firm complies with the regulation of the Financial Services Authority.

  • The customer or bank with whom a foreign exchange deal is made.

  • Risk associated with a cross-border transaction, including but not limited to legal and political conditions.

  • Consumer Price Index, used as a measure of inflation.

  • A pair of currencies that does not include the US dollar.

  • A price quote consisting of any currency quoted against a currency that is not the USD. The quote is made up of the individual exchange rates of the two currencies against the USD.

  • One of two parts of a nations balance of payments (the other is capital account). It is a record of all trade, exports and imports, between a nation and the rest of the world. The current account is separated into merchandise, services, and whats called unilateral transfers. The merchandise part is nothing other than the well-known balance of trade. Theres also a lesser known balance of services -- the difference between services imported and exported.

  • An order which remains open until the end of the trading hours for that day.

  • Opening and closing of a position in the same contract in one day.

  • An individual or firm that acts as a principal or counterpart to a transaction.

  • A deep and long-lasting decrease in the price of goods and services within an economy. It is the opposite of inflation which is an escalation in prices.

  • A fall in the value of a currency due to market forces.

  • The deliberate downward adjustment of a currencys price, normally by official announcement.

  • The Interest rate that an eligible depositary institution is charged to borrow short-term funds directly from the Federal Reserve Bank or Central Bank.

  • A contract that charges in value in relation to the price movements of a related or underlying security, future or other physical instrument. An option is one of the most common derivative instruments

  • European Central Bank.

  • European Monetary System.

  • A segregated account where clients money is kept separate from a dealers operating funds.

  • The currency of the European Monetary Union

  • The dollar level of new orders for both durable and nondurable goods. This report is more important than the durable goods report which is released earlier in the month.

  • Floating exchange rates refer to the value of a currency as decided by supply and demand.

  • The Central Bank of the United States.

  • The interest rate on Fed fund account balances that is closely monitored to gauge the Feds view on the economy.

  • Execution of an opening or closing order.

  • The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based on the interest rate differential between the two currencies involved.

  • This type of analysis focuses on the macroeconomic factors that influence the value of a countrys currency.

  • A way of trading financial instruments for a specific price on a specific date in the future. Unlike options, futures give the obligation to buy or sell instruments at a later date. They can be used to both protect and to speculate against the future value of the underlying product.

  • The seven leading industrial countries (US, UK, Germany, Japan, France, Canada, Italy).

  • A situation where the market trades at a significantly different price to the previously traded price without trades occurring at intervening prices. This tends to relate to when a market resumes trading after a period of closure (e.g. a weekend) or in highly volatile moments.

  • The use of debt to increase exposure to high risk/reward. Gearing is also known as leverage.

  • In technical analysis, when a short-term moving average breaks through a long-term moving average upward, it is considered that the currency has set an up-trend.

  • Total value of a countrys output, income or expenditure produced within the countrys physical borders.

  • Gross domestic product plus income earned from investment or work abroad.

  • An order which remains open until filled or until the client cancels.

  • An economic condition whereby prices for consumer goods rise, eroding purchasing power.

  • The Interbank Market is the currency market for Foreign Exchange - the international market for currencies. The Interbank Market is the largest market in the world dealing in about US$ two trillion daily turnover.

  • The foreign exchange rates at which large international banks quote other large international banks.

  • Action by a central bank to impact the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

  • Action by a central bank to impact the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

  • Economic indicators that change before the economy changes.

  • Leverage is a loan from your broker, which enables you to trade with a small amount of capital. It can increase your potential profit, but it can also increase your risk.

  • The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

  • An order to buy or sell at a more advantageous level than where the market last traded

  • When the base or trade currency is bought, the position is said to be long.

  • A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.

  • An account for which the account holder gives the broker the holders authorization to buy and sell foreign currencies on his or her behalf. It is also widely known as discretionary account.

  • The required equity that an investor must deposit to collateralize a position.