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Glossary
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- A -
Actualize
The underlying assets or instruments which are traded in the cash market.
Appreciation
Describes a currency strengthening in response to market demand rather than by official action.
Arbitrage
The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials.
Asset Allocation
Dividing instrument funds among markets to achieve diversification or maximum return.
Ask
The price at which the currency or instrument is offered.
Asset
In the context of foreign exchange is the right to receive from a counterpart an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward or spot deal.
At Best
An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better
An order to deal at a specific rate or better.
Authorized Dealer
A financial institution or bank authorized to deal in foreign exchange.
- B -
Base Currency
The currency in which the operating results of the bank or institution are reported.
Base Rate
A term used in the UK for the rate used by banks to calculate the interest rate to borrowers. Top quality borrowers will pay a small amount over base.
Basis
The difference between the cash price and futures price.
Bear
An investor who believes that prices are going to fall.
Bid
The price at which a buyer has offered to purchase the currency or instrument.
Book
The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities.
Break Even Point
The price of a financial instrument at which the option buyer recovers the premium, meaning that he makes neither a loss or gain.
Break Out
In the options market, undoing a conversion or a reversal to restore the option buyer`s original position.
Bull Market
A prolonged period of generally rising prices.
Bull
An investor who believes that prices are going to rise.
- C -
Chartist
An individual who studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.
Closed Position
A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.
Confirmation
A memorandum to the other party describing all the relevant details of the transaction.
Consumer Price Index
Monthly measure of the change in the prices of a defined basket of consumer goods including food, clothing, and transport. Countries vary in their approach to rents and mortgages.
Contract for Difference
A contract which is settled by a cash payment reflecting the monetary difference between the initial transaction price and the price of the underlying asset on expiry.
Cross Rates
Rates between two currencies, neither of which is the US Dollar.
Current Balance
The value of all exports (goods plus services) less all imports of a country over a specific period of time, equal to the sum of trade and invisible balances plus net receipt of interest, profits and dividends from abroad.
- D -
Day Order
An order that if not executed on the specific day is automatically cancel.
Day Trader
Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.
Deal Date
The date on which a transaction is agreed upon.
Deal Ticket
The primary method of recording the basic information relating to a transaction.
Dealer
An individual or firm acting as a principal, rather than as an agent, in the purchase and/or sale of securities. Dealers trade for their own account and risk.
Derivatives
A broad term relating to risk management instruments such as futures, options, swaps, etc... The contract value moves in relation to the underlying instrument or currency.
Desk
Term referring to a group dealing with a specific currency or currencies.
- E -
Economic Indicator
A statistics which indicates current economic growth rates and trends such as retail sales and employment.
- F -
Fed Funds
The interest rate on Fed funds. This is a closely watched short term interest rate as it signals the Feds view as to the state of the money supply.
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
Foreign Exchange.
Fundamentals
The macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.
- G -
Going Long
The purchase of a stock or commodity for investment or speculation.
Going Short
The selling of a currency or instrument not owned by the seller.
Good 'til Cancelled
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.
- H -
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.
Hedge
The purchase or sale of options or futures contracts as a temporary substitute for a transaction to be made at a later date. Usually it involves opposite positions in the cash or futures or options market.
- I -
Inflation
Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.
Intra Day Position
Open positions run by a dealer within the day. Usually squared by the close.
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- K -
- L -
Leading Indicators
Statistics 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.
Limit Order
An order to buy or sell a specified amount of a security at a specified price or better.
Liquidation
Any transaction that offsets or closes out a previously established position.
Liquidity
The ability of a market to accept large transactions.
Lot
The smallest increment that you can trade in for a futures product. For example 1 lot of Crude oil is 1,000 barrels.
- M -
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.
Majors
Those currencies that are quoted against the US dollar
Margin Call
A demand for additional funds to be deposited in a margin account to meet margin requirements because of adverse future price movements.
Mark to Market
The daily adjustment of an account to reflect accrued profits and losses often required to calculate variations of margins.
Monetarism
A school of economics which believes that strict control of money supply is the principal tool for implementing monetary policy, especially against inflation. Policies include cuts in public spending and hopefully temporary high interest rates.
- N -
Net Position
The number of futures contracts bought or sold which have not yet been offset by opposite transactions.
- O -
Offer
The price at which a seller is willing to sell. The best offer is the lowest such price available.
Omnibus Account
An account maintained by one broker with another in which all of the accounts of the former are combined and carried only in its name, rather than designated separately.
Open Position
The difference between assets and liabilities in a particular currency. This may be measured on a per currency basis or the position of all currencies when calculated in base currency.
Overloss
The situation where a trade is losing more money than the total available margin. City Credit Capital do not charge clients for overloss, instead we will waive the overloss and inform the client of such.
- P -
Pip
The smallest price unit for an instrument. For example for USD/CHF one pip equals 0.0001 Swiss francs, and for USD/JPY one pip equals 0.01 Japanese yen.
Position
The netted total commitments in a given currency. A position can be either flat or square (no exposure), long, (more currency bought than sold), or short ( more currency sold than bought).
Pyramiding
The use of cash generated by positive variation margins on a existing position to increase the size of the overall position, each reinvestment in successively smaller increments.
- Q -
Quote
An indicative price. The price quoted for information purposes but not to deal.
- R -
Resistance Point or Level
A price recognized by technical analysts as a price which is likely to result in a rebound but if broken through is likely to result in a significant price movement.
Retail Price Index
Measurement of the monthly change in the average level of prices at retail, normally of a defined group of goods.
Risk Management
The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organization. With respect to foreign exchange involves among others consideration of market, sovereign, country, transfer, delivery, credit, and counterpart risk.
- S -
Scalping
A strategy of buying at the bid and selling at the offer as soon as possible.
Short / Short Position
A shortage of assets in a particular currency. See short sale.
Short Sale
The sale of a currency futures not owned by the seller at the time of the trade. Short sales are usually made in expectation of a decline in the price.
Slippage
The difference between estimated transaction costs and the amount actually paid. Slippage occurs in a fast moving market where an order may not be filled at the desired price. For example you have placed an order for a specific rate, suddenly the market has moved beyond your order rate, that means the order will only be filled at the next price.
On Forex trading, CCC currently guarantee NO slippage, however in abnormal market conditions slippage may occur on our CFDs.
On Forex trading, CCC currently guarantee NO slippage, however in abnormal market conditions slippage may occur on our CFDs.
Spot
(1) The most common foreign exchange transaction. (2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
Spread
The difference between the bid and ask price of a currency or other financial product.
Stable Market
An active market which can absorb large sale or purchases of currency without major moves.
Stop Loss Order
Order given to ensure that, should a currency weaken by a certain percentage, a short position will be covered even though this involves taking a loss. Realize profit orders are less common.
Support Levels
When an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below; (2) the monetary authorities intervene to stop any further down ward movement. See resistance point.
- T -
Transaction Date
The date on which a trade occurs.
Transaction
The buying or selling of securities resulting from the execution of an order.
- U -
Unrealised (Floating) Profit/Loss
A profit/loss for your non-closed positions.
Unwind
Selling of assets and or instruments to square a position.
Up Tick
A transaction executed at a price greater than the previous transaction.
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