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A digital code used by the American Bankers Association to define a bank.

A currency is said to appreciate when price rises in response to market demand; an increase in the value of an asset.

Taking advantage of countervailing prices in different markets by the purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market to profit from small price differentials.

The departments and processes related to the settlement of financial transactions (i.e. written confirmation and settlement of trades, record keeping).

A record of a nation's claims of transactions with the rest of the world over a particular time period. These include merchandise, services and capital flows.

The currency in which an investor or issuer maintains its book of accounts; the currency that other currencies are quoted against. In the Forex market, the US Dollar is normally considered the `base` currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair.

One hundredth of one percentage point. A change from 5.25% to 5.75% is said to be a 50 basis point move. See 'Point' for currency moves. 

A market distinguished by a prolonged period of declining prices accompanied with widespread pessimism.

The price that a buyer is willing to pay to purchase a given currency and sell another at a particular time. The price offered for a currency.

Dealer phrase referring to the first few digits of an exchange rate. These digits rarely change in normal market fluctuations, and therefore are omitted in dealer quotes, especially in times of high market activity. For example, a USD/Yen rate might be 107.30/107.35, but would be quoted verbally without the first three digits i.e. "30/35".

Bonds are tradable instruments (debt securities) which are issued by a borrower to raise capital. They pay either fixed or floating interest, known as the coupon. As interest rates fall, bond prices rise and vice versa.

Buying markets whose price appears to have bottomed out or fallen to low levels.

An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.

An individual, or firm, that acts as an intermediary, putting together buyers and sellers usually for a fee or commission. In contrast, a `dealer` commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. 

A market distinguished by a prolonged period of rising prices. (Opposite of bear market) 

Trader jargon for the British Pound Sterling referring to the Sterling/US Dollar exchange rate. Term began due to the fact that the rate was originally transmitted via a transatlantic cable starting in the mid 1800`s.

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.

Markets for medium to long term investment (usually over 1 year). These tradable instruments are more international than the 'money market' (i.e. Government Bonds and Eurobonds).

A government or quasi-governmental organization that manages a country`s monetary policy a prints a nation's currency. For example, the US central bank is the Federal Reserve, others include the ECB, BOE, BOJ.

An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader. 

A choppy market is also sometimes referred as a volatile market. Like the name implies, it chops about in sharp price jumps usually characterized by gaps. Often interpreted as Ranging Market.

The procedure through which the clearing house or association becomes buyer to each seller of a contract, and seller to each buyer, and assumes responsibility for protecting buyers and sellers from financial loss by assuring performance on each contract. 

A client also called a party, is a person or corporate body involved in any transaction with a financial institution.

To eliminate an investment from one's portfolio by either buying back a short position or selling a long position.

Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will 'square' the position.

A document exchanged by counterparts to a transaction that confirms the terms of said transaction.

A measure of the average amount (price) paid for a market basket of goods and services by a typical U.S. consumer in comparison to the average paid for the same basket in an earlier base year.

The tendency of an economic crisis to spread from one market to another. In 1997, financial instability in Thailand caused high volatility in its domestic currency, the Baht, which triggered a contagion into other East Asian emerging currencies, and then to Latin America. It is now referred to as the Asian Contagion.

The cost associated with borrowing money in order to maintain a position. It is based on the interest parity, which determines the forward price.

The participant, either a bank or customer, with whom the financial transaction is made.

The risk associated with government intervention (does not include central bank intervention). Examples are legal and political events such as war, or civil unrest.

The exchange rate between two currencies expressed as the ratio of two foreign exchange rates that are both expressed in terms of a third currency. Foreign exchange rate between two currencies other than the U.S. dollar, the currency in which most exchanges are usually quoted.  The cross rate is said to be non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/CHF quote would be considered a cross rate, whereas in the UK or Switzerland it would be one of the primary currency pairs traded. 

Any form of money issued by a government or central bank and used as legal tender and a basis for trade. It means money denominated in the lawful currency of a country.

The two currencies that make up a foreign exchange rate. For Example, EUR/USD

The risk of incurring losses resulting from an adverse change in exchange rates.

A category in the balance of payments account that includes all transactions that either contribute to national income or involve the spending of national income.

Opening and closing the same position or positions within the same trading session.

An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.

A negative balance of trade (or payments); expenditures are greater than income/revenue.

An actual delivery where both sides transfer possession of the currencies traded.

The borrowing and lending of cash. The rate that money is borrowed/lent at is known as the deposit rate (or depo rate). Certificates of Deposit (CD`S) are also tradable instruments.

A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument. An Option is the most common derivative instrument.  Trades that are constructed or derived from another security (stock, bond, currency, or commodity). Derivatives can be both exchange and non-exchange traded (known as Over the Counter or OTC). Examples of derivative instruments include Options, Interest Rate Swaps, Forward Rate Agreements, Caps, Floors and Swap options.

The deliberate downward adjustment of a currency`s value versus the value of another currency normally caused by official announcement.

The interest a private bank pays for a loan from the US Federal Reserve System. 

The risk on a company's cash flow stemming from foreign exchange fluctuations.

A statistic that indicates current economic growth and stability issued by the government or a non-government institution (i.e. Gross Domestic Product (GDP), Employement Rates, Trade Deficits, Industrial Production, and Business Inventories).

A market in which the current price reflects all available information from past prices and volumes.

European Monetary System

Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader`s book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.

The currency of the European Monetary Union (EMU) which replaced the European Currency Unit (ECU).. The currency of the European Monetary Union (EMU). This is the amalgamation of the following currencies, after Jan. 1, 2002 these currencies are now considered legacy currencies. Germany Deutsche Marks, Italy Lira, Austria Schillings, France Franc, Belgium Francs, Netherlands (Dutch) Guilders, Finland Markka, Portugal Escudo, Greece Drachmas, Ireland Punt, Luxembourg Francs, Spanish Pesetas.

See Currency Risk.

The date on which a trade occurs

Point at which a trader closed out of the market.

A mathematical formula where more weight is given to the most recent price.