The aim of this article is to make you aware of the various terms that are used in forex market and in forex trading so that this knowledge helps you in your day to day trading. By knowing all the terms it will also be easier for you to understand different market conditions and take decision which will utilize such conditions properly.
1. Arbitrage: It refers to buying or sale of instruments and at the same time establishing opposite as well as equal position in related forex markets to make use of minor price variations between markets.
2. Around: This is common in dealer jargon which is used to quote the instance when forward discount is close to parity. As an example, 2-2 around will mean two points on both sides of existing spot.
3. Base Currency: In foreign exchange markets to quote a price US dollar is commonly used as the base currency.
4. Bid Rate: It refers to rate for which trader accepts to purchase a currency.
5. Bid / Ask Spread: It is the difference in offer & bid price and is the commonly used method to check market liquidity.
6. Bid Figure: This is one of the dealer expressions which refer to exchange rateӳ first few parts. These parts of forex rate hardly change during market fluctuations and dealers omit them while quoting. As an example, a USD/JPY forex rate could be 112.20/112.25 but verbally dealers would quote it as 20/25, omitting the first 3 digits.
7. Book: Book means a total position summary of a forex trader.
8. Broker: Broker is a firm or an individual who work like intermediaries to bring together sellers & buyer to get a commission.
9. Cable: It is one of the other trader jargons which refer to US dollar/Sterling exchange rate. The term came into existence from middle of 1800 when the rates were transmitted through transatlantic cables.
10. Candlestick Chart: It is a chart used for showing trading range and also closing plus opening price for a day.
11. Chartist: This is a person who is responsible for interpreting historical data to figure out trends using graphs or charts and forecasts future price movements.
12. Choice Market: In this market there is no spread and all the sell or buy takes place for one price.
13. Clearing: It is the process by which a trade is settled.
14. Commission: It is the transaction fee levied by brokers.
15. Cross Rates: It refers to exchange rate for two currencies shown as ratio of the two forex rates which are expressed in relation to any third currency.
16. Day Trading: This term refers to those positions that open as well as close on any particular trading day.
17. Dealer: Dealer is a person who works as a counter party in any transaction. In a position they take one side expecting to make a profit after closing that position in the next trade occurring with some other party.
The above list of forex terminology will surely assist you in understanding how the market functions and various methods that are used in the market. By closing looking at these terms and getting more information about them you will be able to improve your position in the market.