Forex Terminology

Forex Terminology

As a beginner in Forex trading, it really becomes difficult to understand the terminology used by traders in the regular course of business. This article deals in explaining simply the most common expressions in forex trading
Arbitration - Purchase and sale of the same currency or instrument, simultaneously in different markets to get the price difference.
Base currency - currency of reference in relation to other currencies which are compared or quoted. The primary base currency used is U.S. dollar (USD).

Best effort - an executive order of the best possible price on dealers or traders discretion.

Offer - the price at which the buyer is willing to close the purchase.

Broker - an individual or company that responds and executes orders to buy and sell on commission. Prices are provided by the owners, not by the brokers.

Cable - British Pound Sterling or choice (UK pound) is sometimes called a cable in market parlance.

Cross Rate - The exchange rate between two currencies does not include the base currency.

Direct Dealing - a process through which dealers deal direct with each other without a broker.

Daylight Position Limit - Limits imposed currency wise position that can be done by the merchant during regular trading hours.

Exotic Currencies - Major or minor currency, which has little liquidity and limited dealing.

Next entirely - A foreign exchange deal that matures place of delivery date.

Kiwi - New Zealand dollar in market parlance

Libor - London interbank offered rate. The arte, which helps a bank to another, normally set on a daily basis at 11:00.

Large currency - the euro, German mark, Swiss franc, British pound and Japanese yen.

Market Maker - a trader who consistently offers two-way prices as bid and offer.

Offer - The price which the seller will sell.

Pip - a term used during the Counter currency markets determine the smallest incremental move the course can be done.

Quote American terms - A quote that reflects the number of units of U.S. dollar currency.

Quote European rules - A quote that reflects the number of currency units per U.S. dollar.

City Deal - Forex deal which party would give a certain currency against receiving a certain amount of another currency based on the agreed rate from another party usually within 2 business days

Next Town - Forex contract matures one day past the spot date.

Swap Deal - Forex contract consists of simultaneous buying and selling a variety of maturity dates by the same party.

Tom Next - Tomorrow Next, exchange rate contract maturing one day prior to the regular spot deal, making it the next day maturity.




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