Fed The United States Federal Reserve. Federal Deposit Insurance Corporation Membership is compulsory for Federal Reserve members. The corporation had deep involvement in the Savings and Loans crisis of the late 80s.
Fixed Exchange Rate Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower bands, leading to intervention by the central bank.
Flat/Square Where a client has not traded in that currency or where an earlier deal is reversed thereby creating a neutral (flat) position. example: you bought $500,000 then sold $500,000 = FLAT
Floating Exchange Rate When the value of a currency is decided by the market forces dictating the demand and supply of that particular currency. FOMC Federal Open Market Committee, the committee that sets money supply targets in the US which tend to be implemented through Fed Fund interest rates etc.
Foreign Exchange The purchase or sale of a currency against sale or purchase of another. Forex An abbreviation of foreign exchange. Forward Contract Sometimes used as synonym for "forward deal" or "future". More specifically for arrangements with the same effect as a forward deal between a bank and a customer. Forward Deal A deal with a value date greater than the spot value date. Forward Points The interest rate differential between two currencies expressed in exchange rate points. The forward points are added to or subtracted from the spot rate to give the forward or outright rate depending on whether the currency is at a forward premium or discount. Forward Rate The rate at which a foreign exchange contract is struck today for settlement at a specified future date which is decided at the time of entering into the contract. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefore the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate. Fundamental Analysis Analysis based on economic and political factors. FX Foreign Exchange. G5, G7, G10 [G5] The Group of Five. The five leading industrial countries, being US, Germany, Japan, France, UK; [G7] The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy;[G10] G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.
Good Until Canceled (GTC) An instruction to a broker that unlike normal practice the order does not expire at the end of the trading day, although normally terminates at the end of the trading month. * Head and Shoulders A pattern in price trends which chartist consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder, profit taking has caused the price to drop or level. The price then rises steeply again to the head before more profit taking causes the price to drop to around the same level as the shoulder. A further modest rise or level will indicate that a further major fall is imminent. The breach of the neckline is the indication to sell.
Hedging A hedging transaction is one whose main aim is to protect an asset or liability against a fluctuation in the foreign exchange rate rather than profit from the exchange rate fluctuations. Initial Margin The deposit required by the Broker before a client can trade/transact a deal to have some cushion in the event of default by the party. Interbank Rates The Forex rates large international banks quote to other large international banks. Normally the public and other businesses do not have access to these rates. Intrinsic Value The amount by which an option is In-the-money. The intrinsic value is the difference between the exercise/strike price and the price of the underlying security. Kiwi Slang for the New Zealand dollar. Leading Indicators Statistic that are considered to precede changes in economic growth rates and total business activity, e.g. factory orders. Leverage In options terminology, this expresses the disproportionately large change in the premium in terms of the relative price movement of the underlying instrument. *
LIBOR (London Inter Bank Offer Rate) British Bankers' Association average of interbank offered rates for dollar deposits in the London market based on quotations at 16 major banks. Effective rate for contracts entered into two days from date appearing. Limit Order – Reserved Day Trading Deal An order to perform a Day-Trading deal at a rate pre-defined by the customer, when and if such rate comes up in real market time. The Limit rate is superior to the existing rate at the time of reservation. The reservation order lasts for a period defined by the customer, and is associated by the necessary collaterals to facilitate the potential Day*Trading deal, when and if activated, under the pre-defined terms. Liquidity The ability of a market to accept large transactions without having any major impact on the interest rates. Long A market position where the Client has bought a currency he previously did not own. For example: long Dollars. M0; M1; M2; M3; M4 [M0} Cash in circulation . Only used by the UK; [M1] Cash in circulation plus demand deposits at commercial banks. There are variations between the precise definitions used by national financial authorities; [M2] Includes demand deposits time deposits and money market mutual funds excluding large CDs; [M3] In the UK it is M1 plus public and private sector time deposits and sight deposits held by the public sector.; [M4] In the US it is M2 plus negotiable CDs. Maintenance Margin The minimum margin which an investor must keep on deposit in a margin account at all times in respect of each open contract. * Margin (1) Difference between the buying and selling rates, also used to indicate the discount or premium between spot or forward. (2) For options the sum required as collateral from the writer of an option. (3) For futures a deposit made to the clearing house on establishing a futures position account. (4) The percentage reserve required by the US Federal Reserve to make an initial credit transaction. Margin Call A demand for additional funds to cover positions. A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse future price movements. * Market Maker A market maker is a person or firm authorized to create and maintain a market in an instrument. * Market Value Market value of a Forex position at any time is the amount of the domestic currency that could be purchased at the then market rate in exchange for the amount of foreign currency to be delivered under the Forex Contract. Mid-Price or Middle Rate The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers. Mio Million.
Moving Average A way of smoothing a set of data, widely used in price time series. Nickel US term for five basis points. Old Lady Old lady of Threadneedle Street, a term for the Bank of England. One Cancels Other Order Where the execution of one order automatically cancels a previous order also referred to as OCO or 'One cancels the other'.
