Glossary

Information about account activity and account status of a trading account managed by a broker.

American Stock Exchange is one of the largest USA stock exchanges, which is situated in New York. It was established in 1911, following the formal organization of New York curb brokers into the New York Curb Market Association. It received its current name in 1953.

Analysis of FOREX-related market news, forecasts and experts opinions.

Arbitrage – a trading strategy based on the purchase of an asset in one market at one price while simultaneously selling it in another market at a more advantageous price, in order to obtain a risk-free profit on the price differential.

The quoted price at which a customer can buy a currency pair. Also referred to as the 'offer,' 'ask price,' or 'ask rate.'

Base Currency - or foreign exchange trafding, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.

Bear - a person who believes the prices of stocks or the overall market will decline.

Bear market - a market distinguished by declining prices.

The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate.

BOC - Bank of Canada, Canadian central bank.

BOE - Bank of England, UK’s central bank.

BOJ - Bank of Japan, Japanese central bank.

A firm in the business of acting as a counterparty to foreign currency transactions.

Bull - an investor who thinks market prices will rise and he has a long position in the asset.

Bull market - any market in which prices are trending higher. Usually, used in context to describe a steadily rising stock market.

Call - a call option gives the option buyer the right to purchase an asset on a specified date.

A chart style where a thin line represents the price range for the instrument in the chart period. The opening and closing prices for the period are represented by a thicker line (red if the price finished lower and green if it finished higher). The overall effect can look like a candle. Many traders believe it is the easiest chart style to read.

Central Bank – it is the main bank in the country responsible for the monetary policy. Its primary responsibility is to maintain the stability of the national currency and money supply, but more active duties include controlling subsidized loan interest rates, and acting as a "bailout" lender of last resort to the banking sector during times of financial crisis.

Close an investment by transacting the opposite trade. For example, if you bought USDJPY 100,000, you would have to sell USDJPY 100,000 to close the position.

Any fixed commissions and ticket fees that apply to trades of the specified trade size.

Written acknowledgment of a trade, listing important details such as the date, the size of the transaction, the price, the commission, and the amount of money involved.

A month-to-month economic indicator, which gauges changes in the cost of living by measuring price changes in a common basket of goods and services that most people use, such as food, clothing, transportation, and entertainment.

A CFD is a derivative of a stock product and is used for trading. The CFD price behaves exactly like the underlying stock price. CFD trading offers a number of advantages over traditional stock trading, for example, trading on margin and direct (immediate) trading instead of waiting for a trade order to be filled on an exchange.

The cost of closing your positions, for example, commissions and trading fees.

By virtue of economic, political, and geographical factors, some countries are more stable than others. Country risk in reference to Forex means the stability of the currency and the creditworthiness of its bonds.

Select the currency cross to trade, for example, USDJPY. USDJPY means that you trade U.S. dollars against Japanese yen. If you buy, you buy dollars and pay in yen, and if you sell, you sell dollars and receive yen.

The two currencies (for example, euro and US dollar) that make up a foreign exchange rate. For example, EUR/USD is a currency pair. Currency pair as a financial tool is an object of a FOREX transaction, reflecting price changes of one currency in relation to the other currency.

A buy or sell order that will expire automatically at the end of the trading day on which it is entered.

A trade opened and closed on the same trading day.

A trader who tries to profit from short-term price movements, often taking and closing a position within the same trade day.

The act of buying and selling a stock within a trading session or a single trading day, without carrying open positions over to the following trading day or session.

Dealer - person or a firm in the business of acting as a counterpart to foreign currency transactions. Typically, a dealer buys for his or her own account and sells to a customer from the dealer's inventory.

A deep and long-lasting decrease in the price of goods and services within an economy. It is the opposite of inflation, which is an escalation in prices. An extended period of deflation can lead to a deflationary spiral – this is a decrease in prices resulting from reduced demand for goods and services, which leads to lower employment. With fewer people earning wages, demand falls even more and further perpetuates the cycle.

A practice account that allows you to trade on the FOREX market without risking REAL money. That is it's only difference from a real trading account.

The volume of buys and sell orders waiting to be transacted for a particular currency pair at a particular point in time.

A financial contract whose value changes in relation to an underlying security. For example, an option changes value according to the asset that underlies it.

An index; an average computed from the stock prices of a group of the largest companies in the United States.

Published by Dow Jones & Company, the index is a price-weighted average of daily stock prices, calculated as of the stock exchange closing. There are Dow Jones Transportation Average, Dow Jones Industrial Average and Dow Jones Utility Average indices. The Dow Jones index is an indicator of the current status of the US economy and it reflects how US businesses are influenced by various economic and political events.

ECB - European Central Bank.

Forex ECN brokers provide access to an electronic trading network, supplied with streaming quotes from the top tier banks in the world. By trading through an ECN broker, a currency trader generally benefits from greater price transparency, faster processing, increased liquidity and more availability in the marketplace.

A statistic that is used to gauge current economic conditions.

ECU — European Currency Unit.

EMS — European Monetary System.

The Euro Interbank Offered Rate or Euribor is a daily reference rate based on the averaged interest rates at which banks offer to lend unsecured funds to other banks in the Euro wholesale money market or interbank market.

European-style option — an option contract that can be exercised only on its expiration date.

What one currency is worth in terms of another. For example, one Argentine dollar might be worth 58 US cents or 70 Japanese yen. Currencies traded freely in foreign-exchange markets have a spot rate (applying to trades settled 'spot', that is, two working days hence) and a forward rate (which is the spot rate adjusted for the interest rate differential between the two currencies until maturity). Countries can determine their exchange rates in several ways:

• A floating exchange rate system, where the currency finds its own level in the market.
• A crawling or flexible peg system, which is a combination of an officially fixed rate and frequent small adjustments that in theory work against a build-up of speculation about a revaluation or devaluation.
• A fixed exchange-rate system, where the value of the currency is set by the government and/or the central bank.

Exotic currency — a currency with little liquidity and limited trading activities.

Expiration date/maturity date — the last day on which an option may either be exercised or offset.

Fed Fund Rate — the interest rate for overnight loans at the Federal Reserve. 

Central banking system of the USA is managed by a board of Governors of the Federal Reserve System, which is located in Washington D.C. FRB includes twelve regional privately-owned Federal Reserve Banks. Its duties include conducting the nation’s monetary policy, supervising Federal Reserve Banks and banking institutions, monitoring international operations of US banks as well as operations of foreign banks in the USA.

FOMC — a 12-member committee consisting of the seven members of the Federal Reserve Board and five of the 12 Federal Reserve Bank presidents. The committee sets objectives for growth of money and credit that are implemented through purchases and sales of U.S. Government securities in the open market. The FOMC also establishes policy relating to Federal Reserve System operations in the foreign exchange markets.

Foreign Exchange trading is an alternative term for Forex trading, FX trading and currency trading. FX Grant is the provider of an online Foreign Exchange trading platforms and software.

International currency exchange market that allows making profits by buying and selling currencies. An abbreviation of FOReign EXchange, meaning foreign currency exchange. The term ‘FOREX’ is used to describe exchange of convertible currencies, and not all currency exchange transactions. The phrase ‘FOREX market’ emphasizes that quotes are determined by market, not administrative forces. Forex transactions vary by purpose and may be of trade, speculative, hedging, or regulatory (currency interventions by central banks) nature.

Forward — a transaction in which a commercial buyer and seller agree upon delivery of a specified quality and quantity of goods at a specified future date. Terms may be more “personalized” than is the case with standardized futures contracts (i.e., delivery time and amount are as determined between seller and customer). A price may be agreed upon in advance, or there may be agreement that the price will be determined at the time of delivery. Forward contracts are traded on the OTC market.

The study of economic factors (GDP, Trade Balance, Employment, and so on) that can influence prices in financial markets.

Futures — an agreement to purchase or sell an underlying asset for delivery in the future: at a price that is determined at initiation of the contract; that obligates each party to the contract to fulfil the contract at the specified price; that is used to assume or shift price risk; and that may be satisfied by delivery or offset. Futures contracts are traded on stock exchanges.

FX Grant is your partner on the FOREX market. With us, you will make profits by trading Forex.

G10 - G7 plus Belgium, the Netherlands and Sweden.

G7 — a group of seven of the leading industrialized countries which include Japan, Germany, France, United Kingdom, Canada and the U.S. that meet periodically to discuss international economic issues in order to forge international economic cooperation.

A break between prices on a chart that usually occurs on weekends when no trading takes place; can be created by important external factors.

Greenwich mean time; time zones compute their local time as an offset from GMT (for example, Moscow time is GMT + 3 hours in winter and GMT + 4 hours in summer). The time difference with Moscow is 4 hours in winter and 3 hours in summer.

A type of limit order that remains in effect until it is either executed (filled) or cancelled, as opposed to a day order, which expires if not executed by the end of the trading day. A GTC option order is an order which if not executed will be automatically cancelled at the option's expiration.

A hedge is a tool used to limit exposure to investment losses. For example, an investor who has large, unrealised profits in a physical stock or stock Options position might sell a CFD for the same stock to prevent any loss of the profits. While the hedge ensures profit in this case, it also ensures that the profit cannot grow. In other words, when you hedge you limit your profits as well as your losses.

A private fund, which usually solicits investments from wealthy individuals. It is unregulated as it's assumed that the investors are knowledgeable and realise the speculative nature of the fund. It usually invests in high risk, short-term instruments in order to achieve above-average returns.

IMF - International Monetary Fund. 

A numerical measure of the way the price of a representative group of Stocks has changed over time. Every major exchange has one or more indices. For example, the NASDAQ exchange has the NASDAQ 100 Index (a composite of the100 largest non-financial companies listed on NASDAQ). Some indices are created and managed by private corporations, such as the Dow Jones Industrial Average and S&P 500. You can trade CFDs based on many of the world's stock market indices.

A rise in prices or a drop in the purchasing power of money.

The first deposit by a customer, which determines a corresponding maximum trade size.

When entering a position, the minimum amount that must be paid in cash.

The currency the instrument is traded in.

A market in which financial institutions can trade. The term refers to short-term money or foreign exchange markets that are only accessible to banks or financial institutions. There is no physical market place; the transactions take place over communication networks such as Bloomberg or Reuters.

Positions that are opened and closed within the same trading day.

Interest is a charge applied to borrowed money, and is generally expressed as a percentage per year. When buying CFDs, you are in principle borrowing money for a trade, so you are charged a standard interest rate based on the current LIBOR (London Interbank Offer Rate) plus a small percentage. When you sell a CFD, on the other hand, you receive interest for the amount the CFD represents. This percentage is the LIBID rate minus a small percentage.

The rate charged or paid for the use of money. An interest rate is expressed as an annual percentage of the principal. Interest rates often change as a result of inflation and Central Bank policies.

FOREX trading via the Internet, from anywhere in the world, without bosses or staff.

Positions that are opened and closed on the same day.

A person or firm that introduces customers to a market maker often in return for commission or a portion of the spread.

A tradable symbol with a monetary value. This can be a Forex cross (currency pair), or a stock ticker (for CFDs and Stocks), etc.

Economic indicators used to predict future economic activity, such as the levels of the S&P 500 index.

The ability to hold an investment position of greater value than that of your equity (collateral). When leveraging (also called gearing) your investment, you need only deposit a fraction of the current value of the instrument you are investing in.

A tool offered my FX Grant that allows you to control large amount of a commodity with a comparatively small amount of capital.

Leverage is a ratio between balance in your trading account and amount of a transaction, for example, 1:20, 1:40, 1:50, 1:100. A 1:100 leverage means that a trading account with your Dealer can have the balance 100 times less than the transaction amount.

Limit orders are commonly used to enter a market and to take profit at predefined levels. Limit orders to buy are placed below the current market price and are executed when the ask price hits or breaches the price level specified. Limit orders to sell are placed above the current market price, and are executed when the bid price breaches the price level specified.

The simplest form of charting, a line chart plots a series of lines connecting the various price levels over a specified time period.

Your personal user name or nickname required to enter a system.

Login is a user name. It is different from a password because you don’t have to keep it secret, and from nickname because it is not publicly available. Systems need logins for user identification: to enter a forum or a trading platform, you are required to enter your login and confirm it with your password. This is how the system identifies users and allows them to enter.

In general, going long is buying, and going short is sellling. A long position will increase in value if market prices increase. For example, in Forex trading, going long is buying the trade currency of the Forex currency pair. If you were going long on USDJPY, you would be buying USD by selling JPY. For securities, going long is taking ownership of a security through buying it, as opposed to going short where you sell the security without owning it.

When invested assets decrease in volume as a result of transactions, or when expenses required to make a transaction exceed profits from it.

The number of units, or the quantity of assets required for a trade using a specific financial instrument (as a rule, number of units per lot must be divisible by 100). Minimum lot in FX Grant is 1000 base currency units.

The amount of equity (collateral) required for an investment position, as a percentage of the current value. When trading on margin (also called 'gearing', or 'leverage'), you need only deposit a fraction of the current value of the instrument you are investing in.

Margin Call - a condition when all positions are forcibly closed. This occurs when the balance in your account (Equity) went to zero from the amount of collateral required (Margin) for the sum of all open positions. The operation takes place automatically.

A recognised institution or individual willing to trade certain securities any time that a trader wants to buy or sell. The incentive for the market maker to buy or sell at all times is the spread, or difference, between the bid and ask prices.

An order to buy or sell a specified instrument as soon as possible at the price obtainable in the market.

MetaTrader 4 is an online trading platform designed for financial institutions dealing with Forex, CFD, and Futures markets. It is has a user-friendly front-end trading interface. It provides technical analysis, charting and Expert Advisors to help you develop your own trading strategies. The different functions and options of this system allow great flexibility in trading. Constant monitoring of the market not required due to Expert Advisors, MetaQuotes Language II release from routine and allows programming automated trading strategies. Free of charge demo accounts. MetaTrader 4 supports different languages (including English, German, Russian, French). It works with Windows 98/XP/Vista.

Method of smoothing out data on price charts so that trends are easier to spot. Average refers to a mathematical average or a statistical mean that is plotted over the original curve.

The National Association of Securities Dealers Automated Quotations NASDAQ is the largest stock exchange in the USA, providing price quotations on high technology stocks. With approximately 3,800 high technology companies and corporations, it has more trading volume per hour than any other stock exchange in the world.

New York Mercantile Exchange, or NYMEX, is a US futures exchange established in 1872. It is ranked first in the world by the amount of trade in oil futures. It handles billions of dollars worth of oil, gas, platinum, palladium, gold, silver, copper and aluminum being bought and sold on the trading floor. According to Futures Industry Association, in 2006, 216 million transactions made on NYMEX, with the operating revenues reaching $497.3 million, net income $154.8 million and capitalization $11.4 billion.

The oldest and largest stock exchange in the USA. Established in 1792. Located in New York on the Wall Street.

The price at which you can buy a specified instrument. For Forex trading, it is the price at which you can buy the trade/base currency (quoted first) by selling the price currency of the pair. For example, if you buy EURUSD 100,000, you are buying euros 100,000 against US dollars.

A position in a currency that has not yet been offset. For example, if you buy USDJPY 100,000, you have an open position in USDJPY until you offset it by selling USDJPY 100,000.

Option — a contract which establishes that one party (the holder or buyer) has the right (but not the obligation) to exercise the contract (the option) at a specified future moment or period of time (the exercise date or expiration) and the other party (the writer or seller) has the obligation to honour the terms of the contract. Since the option gives the buyer a right and in the case of the writer - an obligation, the buyer pays the option premium to the writer. The buyer has a 'long' position, and the seller a 'short' position. The value of the contract is determined by an underlying asset, thus the instrument is classified as a derivative.

The instruction, by a customer to a brokerage, for the purchase or sale of a security with specific conditions. Limit and Stop orders are the main types.

OTC Market (Over the Counter Market) — a market for currencies, commodities, shares, options, or other financial contracts via electronic connections between dealers. The OTC market has no physical locations or address, and differs from organized exchanges which have a physical location where trading takes place. Also referred to as:- Off Exchange.

Open positions that a dealer can carry over into the next dealing day.

Pip stands for percentage in point , the smallest increment by which a Forex cross price changes. Most currency pairs are quoted to four decimal places, meaning that a movement from 1.1850 to 1.1851 for a currency pair would constitute one pip. For a particular position, you can calculate the value of a single pip using the above formula. For instance, you know that the EUR/USD is quoted with four decimals, so for a given position you can multiply the position amount by the value of one pip, or USD 0.0001. So, on a EUR/USD 100,000 contract, one pip would equal USD 10. On a USD/JPY 100,000 contract, one pip is equal to JPY 1000 because USD/JPY is quoted with only two decimals (meaning one pip = JPY 0.01).

Changes in government policy or to a wider extent, government instability that might have negative effects on the currency.

An investment in an instrument. For example, when you trade (say, buy) USDJPY, you open a USDJPY position. When you then execute the opposite trade (in this case, sell) USDJPY, you close the position. Position can also refer to a trader's cash/securities/currencies balance, whether he or she is short of cash, has money to lend, is overbought or oversold in a currency, etc.

Premium — the price that an option buyer pays for the option.

Profit from transactions.

Put — a put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate.

A current price of a currency pair at which the currencies can be bought or sold a simultaneous Bid and Ask in a currency pair.

The second currency of two in a currency pair. For the EUR/USD, USD is the quote currency. The exchange rate quoted is how many units of the second currency you will receive for one unit of the base currency.

A market in which a government agency monitors and regulates industry activity to protect investors. An example is Forex trading in the United States.

The price level at which a rising price is expected to stall when market participants begin to sell the instrument. The opposite of resistance is support.

Trying to control the outcome of a known or predictable range of gains or losses. Risk management involves several steps, beginning with a sound understanding of one's business and the exposures or risks that have to be covered to protect the value of that business. Then an assessment should be made of the types of variables that can affect the business and how best to protect it against unwelcome outcomes. Risk management may be as simple as placing stop loss orders to prevent large losses, or as complex as hedging positions with Options or diversifying the portfolio to ensure that you are not overexposed to a single industry or instrument type. Consideration must also be given to the preferred risk profile, that is, whether one is risk-averse or fairly aggressive in approach. This also involves deciding which instruments to use to manage risk, and whether a natural hedge can be used. Once undertaken, a risk-management strategy should be continually assessed for effectiveness and cost.

When a Spot Forex position is held at the end of the business day prior to its Value date, it will be rolled over to a new value date on a Tom/Next basis. As part of the rollover, positions are subject to a swap charge or credit based on the LIBOR/LIBID interest rates of the two traded currencies with an added a mark-up of +/- 0.25% (for private accounts) plus an interest component for any unrealised profit/loss on the position.

In Forex, this is the currency that the investor pays with or receives when trading. For example, in EURUSD the variable currency is USD, that is, one unit of EUR is worth a variable amount of USD. When you buy EUR, you pay with USD, and when you sell EUR you receive USD. The other currency (EUR in the example above) is called the base currency.

Any investment instruments, other than insurance policies or fixed annuities, issued by a corporation, government, or other organisation. Securities are typically Stocks and bonds.

Settlement price — the daily price at which the clearing organization clears all trades and settles all accounts between clearing members in each contract month. Settlement prices are used to determine both margin calls and invoice prices for deliveries. 

In Forex trading, going short is to buy the price currency of the Forex currency pair. For example, if you were going short on GBPUSD, you would be buying USD by selling GBP. For equities, going short is selling a security without owning it, as opposed to going long where you are taking ownership of the security by buying it. A short position benefits from a decline in market prices.

A direct trade on a market price with a standard settlement date (Value date) of two business days from the trade date.

The part of the market calling for spot settlement of transactions. The precise meaning of spot depends on local custom for a commodity, security or currency. In the UK, US and Australian foreign-exchange markets, spot means delivery two working days hence.

Spot transaction — spot transaction is a transaction requiring prompt delivery of and full payment for the currency or other asset. In the Interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.

The difference between the Bid price at which you can sell the trading instrument and the Ask price at which you can buy the trading instrument.

A command to the dealing desk to close your position when your losses reach a certain level. A stop-loss order is designed to limit an investor's loss on a security position. If the price moves against you and touches your stop loss, your order should close automatically, and your trading activity should be downscaled or your trading strategies adjusted accordingly.

Stop orders are commonly used to exit positions and to protect against trading losses. Stop orders to sell are placed below the current market level and are executed when the Bid price hits or breaches the price level specified. Stop orders to buy are placed above the current market level and are executed when the Ask price hits or breaches the price level specified. If the Bid price for sell orders (or the Ask price for buy orders) is hit or breached, the order becomes a market order and is filled as soon as possible at the price obtainable in the market. Note that this price may differ from the price you set for the order. In the case of Futures, the order will be filled if possible, and any remaining volume will remain open as a market order. In the case of CFDs, the order will be filled completely if the volume in the market allows for it. In the case of a partial fill, the remaining portion of the order will remain open as an order.

Strike price — the price at which the buyer of a call option has the right to purchase a specific asset or at which the buyer of a put has the right to sell a specific asset. Also known as the ‘exercise price.’

Fee charged or paid to a trader for the rollover of a FOREX position due to the difference in currencies interest rates.

Its amount depends on the interest rates of the currencies in which the trader has a FOREX position. On the FOREX market, swap is a foreign-exchange agreement between two parties to exchange a certain amount in one currency for an amount in another currency within a certain period, or as per other conditions set. Swaps are usually done when open spot positions are carried overnight to the next dealing day.

Take Profit — an order used by currency traders specifying the exact rate or number of pips from the current price point where to close out their current position for a profit.

An effort to forecast prices by analysing market data, i.e. historical price trends and averages, volumes, open interest, etc.

Short-term trends that technical analysts use to predict future price movements of securities and/or commodities. Also called technicals, technicalities.

A single-time quote sent by the information system, created by movements in the price of a currency

A FX Grant customer, who trades FOREX with us trading with the purpose of making profit.

A sophisticated program that provides you with expert buy/sell recommendations for trading currencies on the foreign exchange markets. A Trading Model, based on its evaluation of historical analyses, forecasts, and your trading profile, makes recommendations about currency positions by anticipating fluctuations in the foreign exchange markets and capitalising on these movements.

A software application used for trading Forex, usually over the Internet.

A Trailing Stop order is a stop order that has a trigger price that changes with the spot price. As the market rises (for long positions), the stop price rises according to the proportion set by the user, but if the market price falls, the stop price remains unchanged. This type of stop order helps an investor to set a limit on the maximum possible loss without limiting the possible gain on a position. It also reduces the need to constantly monitor the market prices of open positions.

Buying or selling a currency pair.

The cost involved in buying or selling a currency pair. Some consider the transaction cost to be the actual value of the contract, while others feel it is the price of facilitating the trade, such as commissions and spreads.

Overall market tendency – positive trend (upward movement) and negative trend (downward movement).

Trend is the general direction of the changes in any given time series. Trends analysis uses different equations – linear, logarithmic, polynomial, etc. Trends can be represented as charts; actual chart types are determined by considering graphic patterns of the time series data, by averaging indicators that show the time series dynamics, or based on the statistic check of a hypothesis on graph parameter stability.

A macroeconomic indicator that shows the ratio of the total number of unemployed workforce to the total workforce.

The date on which the settlement of funds for a trade transaction will take place in your account.

There are two types of volatility:

• Historical volatility is actual volatility based on volatility realised in past movements in the market.
• Implied volatility is the volatility interpreted from the price of Options. So, the implied volatility is the expected spread of movement of an underlying asset’s price, predicted over the term of the Option, and derived from the known prices of Options and the other parameters used in the calculation of those prices.

A street in New York hosting the largest US stock exchanges, such as NYSE, NASDAQ, AMEX, NYMEX, and NYBOT.