Currency Jargon Explained

Base Currency - The currency against which other currencies are quoted. Example, the primary base currency is the u.s. dollar.

Bear Market - A market in which prices decline sharply against a background of widespread pessimism (opposite of Bull Market). Bear Markets are generally shorter in duration than Bull Markets.

Bid - The rate at which a dealer is willing to buy the base currency.

Bull Market - A market characterized by rising prices.

Broker - An agent who handles investors' orders to buy and sell currency.

Counterparty - The customer or bank with which a foreign exchange deal is executed.

Cross Rate - An exchange rate between two currencies, usually constructed from the individual exchange rates of the two currencies, measured against the United States dollar.

Day Trading - Refers to opening and closing the same position or positions before the close of that day's trading (3:00p.m. EST).

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: bought $100,000 then sold $100,000 = FLAT.

Forex - An abbreviation of foreign exchange.

Fundamental Analysis - Analysis based on economic factors.

GTC - "Good Till Cancelled." An order left with a Dealer to buy or sell at a fixed price. The order remains in place until it is cancelled by the client.

Interbank Rates - The FX rates large international banks quote other large international banks. Normally the public and other businesses do not have access to these rates. Global Forex is one of the few companies able to provide clients with rates provided by multiple global banks.

Limit Order - An order given which has restrictions upon its execution, where the client may specify a price and the order can be executed only if the market reaches that price.

Long - A market position where the Client has bought a currency he previously did not own. Normally expressed in base currency terms. For example: long Dollars (short Japanese Yen).

Margin - Margin is a cash deposit provided by clients as collateral to cover possible future losses that may result from the clients Foreign Exchange trades.

Margin Call - A demand for additional funds. A requirement by a clearing house that a clearing member (or by a brokerage firm that a client) brings margin deposits up to a required minimum level to cover an adverse movement in price in the market.

Offer - The rate at which a Dealer is willing to sell the base currency.

Open Position - Any deal which has not been offset or reversed by an equal and opposite deal.

Pip or Points - Depending on context, normally one basis point, i.e. 0.0001.

Short - A market position where the Client has sold a currency he does not already own. Normally expressed in base currency terms, example, short Dollars (long D. Marks).

Spread - The difference in prices between bid and offer rates.

Stop Loss Order - An order to buy or sell at the market when a particular price is reached, either above or below the price that prevailed when the order was given.

Technical Analysis - Analysis based on market action through chart study, moving averages, volume, open interest, formations, and other technical indicators.

Volatility - A measure of price fluctuations.