FOREX Glossary of terms
- Bear, Bearish, Bear Market
- A Bear is person who believes that the prices in the market will decline. This person would be considered Bearish. A Bear Market is a market that is declining (e.g. if the £ v US$ rate is falling). If the decline was expected to continue, the market would be Bearish.
- Bid Price
- The highest price a prospective buyer is willing to pay at a particular time for securities, futures contracts or foreign currencies.
- A market bottom is an area where prices in a decline encountered heavy support, were unable to progress any lower, and either reversed (i.e. went into a bull trend) or consolidated (traded sideways).
- British Pound (Sterling)
- The standard unit of currency used in the United Kingdom.
- An agent who handles investors orders to buy and sell. For this service, a commission is charged which, depending upon the broker and the amount of the transaction, may or may not be negotiated...
- Bull, Bullish, Bull Market
- A Bull is a person who believes that prices in the market will rise. This person would be considered Bullish. A Bull Market is a market that is rising (e.g. if the £ v US$ rate moves higher). If the advance is expected to continue, the market would be Bullish.
- Foreign exchange jargon for the UK Pound v US Dollar exchange rate. Alludes to the cable laid under the Atlantic, which linked the tickertape machines in New York and London.
- This is another technical analysis term which relates to
a condition when the rates are moving in a sideways fashion
which is usually encountered after a market top or bottom.
- This is a technical analysis term. When a market moves strongly in one direction and then pulls back. This pullback will be referred to as a correction. A correction, (which is a common occurrence in a bull (up) or bear (down) trend), is often sharper (i.e. occurs more quickly) than the preceding move. Corrections are a component of the overall trend (either up or down) and are not considered terminal to that trend (i.e. reversing it). Indeed a correction usually strengthens the foundations of the trend to carry on and sustain further gains or further losses in the days/weeks ahead.
- Currency Hedging
- Trying to reduce or eliminate exchange rate risks by
buying forward, using financial features or borrowing in the
- European Central Bank. Manage the Euro currency and
European interest rates/monetary policy.
- On January 1, 1999, the Euro was adopted as the official
currency by Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal and
Spain. Following the adoption of the Euro by Greece in 2001,
Europe created one of the most significant changes in the
world’s monetary system when in 2002, the Euro became the
common currency of Europe for 12 countries in the European
- Exchange Rate Risk
- The potential loss that could be incurred from a movement
in exchange rates.
- Federal Reserve System
- The Federal Reserve System, also known as The Fed, is the
central bank of the United States of America. It was created
to provide the United States of America with a safer, more
flexible, and more stable monetary and financial system.
Over the years, its role in banking and the economy has
expanded. The Federal Reserve System is a network of twelve
Federal Reserve Banks and a number of branches under the
general oversight of the Board of Governors. The Reserve
Banks are the operating arms of the central bank.
- The Federal Open Market Committee (FOMC) is a 12-member
committee which sets credit and interest rate policies for
the Federal Reserve System. This committee consists of 7
members of the Board of Governors, and 5 of the 12 Federal
Reserve Bank Presidents. This group, headed by the Chairman
of the Federal Reserve Board, sets interest rates either
directly (by changing the discount rate) or through the use
of open market operations (by buying and selling government
securities which affects the federal funds rate).
- Forex / FX
- An abbreviation of Foreign Exchange
- Forward Contracts
- A contract between two counterparties where one person
agrees to buy from another other person, who of course
agrees to sell, a certain quantity of a financial instrument
or commodity at a predetermined price but for delivery at an
agreed future date.
- Forward Points
- The interest rate differential between two currencies
expressed in exchange rate points. The forward points are
added to or subtracted from the spot rate to give the
forward or outright rate.
- Indicative Rates
- All rate quotes shown on our website are for indicative
purposes only and are based on Interbank rates (see below).
It is important to note that foreign exchange rates
fluctuate and that rates will vary depending on the amount
and product purchased or sold. To obtain an accurate
quotation please contact us to discuss your requirements.
- Interbank Rates
- FX rates large international banks quote other large
international banks. The difference between the buy and sell
rate, (the spread) can be around 0.07%. Normally the public
and other businesses do not have access to these rates.
- Limit Order
- An order given which has restrictions upon its execution,
where the client may specify a price and the order can be
executed only if the market reaches that price.
- Monetary Policy
- A body whose members are appointed by the Bank of
England, responsible for setting UK interest rates at
- A committee within the Bank of England (UK Central Bank)
responsible for setting interest rates The MPC sets an
interest rate it judges will enable the inflation target to
be met. The Bank of England's Monetary Policy Committee
(MPC) is made up of nine members – the Governor, the two
Deputy Governors, the Bank's Chief Economist, the Executive
Director for Markets and four external members appointed
directly by the Chancellor. (UK Central Bank) which is
responsible for setting interest rates in the UK.
- OCO Order
- A One Cancels the Other (OCO) Order is a type of currency
trade that is often used in the Forex and futures market. In
simple terms, it is actually two separate orders which are
linked together and placed as a single order. When one of
the linked orders is executed, the other order is
- The rate at which a dealer is willing to sell.
- Overnight Trading
- The buying or selling of currencies between 9pm and 8am
which can be executed using stop loss or limit orders.
- PIPs or Points
- Currencies are quoted to 5 decimal points, and depending
on context, PIP is the term used to define the smallest
element of an exchange rate - normally one basis point. For
- Resistance Level
- A price level at which you would expect selling to take
- Spot means the contract is based on an instantaneous
price and the settlement date is two business days forward.
- The difference in prices between bid and offer rates.
- Another term to describe the UK currency, i.e.; UK Pound
- Stop Loss Order
- This is the term used to describe an order to buy or sell
one currency against another when a pre-determined price is
reached. This type of order which is lodged with a Bank or
Broker offers 24-hour protection and will float until either
cancelled or hit. It is used to protect your purchase or
sale of a currency from negative movements in the market
overnight or over a period of days/weeks. It is free of
charge to use and provides an excellent vehicle for
companies and individuals to protect themselves from
negative movements while leaving the door open for them to
benefit if the market moves in their favour.
- Support Level
- Support is a forecasted price level where the rate of
exchange should encounter buying pressure, which should stop
the price/rate from falling any further. Main market
participants (Investment Funds, Banks etc.) look for support
and resistance levels to place their orders and thus they
become, to a larger degree, self-fulfilling prophecies. See
also Resistance Level.
- Technical Analysis
- Technical analysis is the study of market action,
primarily through the use of charts, for the purposes of
forecasting future prices and trends. Technical analysis
provides details of SUPPORT and RESISTANCE levels. It
further identifies trends and indicates when a trend is
reversing. It is widely used by the main market players (the
people who move the rates with the volumes they trade) and
accordingly has arguably become the most popular form of
analysis in tracking and forecasting currency movements.
- A market top is an area where prices in an upward trend
encountered heavy resistance, was unable to progress any
higher, and either reversed (i.e. went into a bear trend) or