As of August 1, 2008 FXFor Japan K.K. has changed its name to FXTrade Financial Co., Ltd
Toll Free 0120-445-435
- FSA Foreign Exchange Margin Trading License #258
Financial Futures Association of Japan Registration #1570 - Tokyo JST London GMT New York EST
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English Glossary
English
A
Accrual
The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.
Acting intervention
Different from a direct intervention in that a Central bank or banks act on behalf of another Central Bank.. For example, the FRB or ECB would act in the overseas market in the name of the BOJ account.
Against
The condition where the trading positions are carrying revaluation losses.
Appreciation
A currency is said to appreciate when it strengthens in price in response to market demand.
Arbitrage
A trading style. Attempting to profit by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. In the case of the Forex market, gaps often occur in the price movement between major currencies and minor currencies. Arbitrage trading is aiming to take advantage of these price discrepancies.
Ask Rate
The rate at which a financial instrument is offered for sale (as in bid/ask spread).
B
Back Office
The departments and processes related to the settlement of financial transactions.
Base Currency
In general terms, the base currency is the currency in which an investor or issuer maintains its book of accounts. In the FX markets, 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. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.
Bear Market
A market distinguished by declining prices.
Bid Rate
The rate at which a financial instrument is bid for purchase (as in bid/ask spread).
Big Figure
Dealer expression 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 "30/35". i.e. without the ‘Big Figure’ 107.
Bretton Woods Accord of 1944
An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and set the price of gold at US $35 per ounce. The agreement lasted until 1971.
Bull Market
A market distinguished by rising prices.
Broker
An individual or firm who acts as an intermediary for investors' and their orders to buy and sell.
C
Cable
Trader jargon referring to the Sterling/US Dollar exchange rate.
Call rate
The overnight inter-bank interest rate.
Carry Trade
Carry trade refers to the practice of speculators borrowing or selling lower-yielding currencies such as the yen or the Swiss franc at low costs and reinvesting in higher-return currencies and assets, such as the Australian dollar, New Zealand dollar, the British pound and the South African rand.
Cash market
The market for the purchase and sale of physical currencies.
Central Bank
The generic name given to a country's primary monetary authority, such as the Federal Reserve Bank in the U.S. Usually has responsibility for issuing currency, administering monetary policy, holding member banks' deposits, and facilitating the nation's banking industry.
Chartist
An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as a Technical Trader.
Commission
A transaction fee charged by a broker.
Convertible Currency
Currency which can be freely exchanged for other currencies.
Coordinated Intervention
Usually, for the purpose of regulating excessive movement in the forex market the FRB, ECB, BOJ and other central banks may take co-ordinated action directly in the market at the same time.
Correspondent
An agent- bank, broker or financial institution- that provides services such as international settlements for institutions that do not have direct access. The Forex business in particular needs to have a function to deliver the relevant local currencies to banks where they most likely do not have an account.
Counterparty
The party taking the ‘other’ side of a trade. Generally, the more counterparties (i.e. traders who can potentially take the opposite view) there are, the more efficient the market is.
Counterparty risk
The risk that the other party in an agreement will default and not abide by the agreement.
Cross rate
The exchange rate between any two currencies that are considered non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/JPY quote would be considered a cross rate, whereas in UK or Japan it would be one of the primary currency pairs traded.
Currency Risk
The risk that a change in exchange rates negatively affects an investment.
Currency Swap
Contract which commits two counterparties to exchange an agreed amount of different currencies for a fixed period and at the same time exchange streams of interest payments in different currencies and lastly principal amounts at a pre-agreed exchange rate at maturity.
Currency Option
An option contract which gives the buyer the right to purchase or sell one currency against another currency at a specified exchange rate during a specified period.
Currency Swaption
An Option to enter into a currency swap contract.
D
Day Trading
Refers to positions which are opened and closed on the same trading day.
Dealer
An individual who 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.
Depreciation
A currency is said to depreciate when it falls in price in response to market demand.
Derivative
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.
Devaluation
The deliberate downward adjustment of a currency's price, normally by official announcement.
E
European Central Bank (ECB)
The Central Bank for the new European Monetary Union.
Economic Indicator
A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
EMS
Abbreviation for European Monetary System.
Exotic
A less broadly traded currency.
Exposure
In foreign exchange, a potential for gain or loss because of movement in foreign exchange rate.
F
Fast Market
Rapid movement in a market. In such circumstances price levels may be omitted and bid and offer quotations may occur too rapidly to be fully reported.
Favor
The condition where the trading positions are carrying the revaluation gains.
Federal Reserve (FED)
The Central Bank for the United States.
Fixed Exchange Rate
Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower bands, leading to intervention.
FF rate (Fed Funds Rate)
The interest rate on Fed funds. This is a closely watched short term interest rate as it signals the Feds view as to the state of the money supply.
Flat/Square
To be neither long nor short is the same as to be flat or square. One would have a flat book if he has no positions or if all the positions cancel each other out.
Floating Exchange Rate
An exchange rate where the value is determined by market forces.
FOMC
The Federal Open Market Committee, the committee that sets money supply targets in the US which are usually implemented through Fed Fund interest rates. There are seven members, meetings are usually held eight times a year and watched very closely by the market for guidance on interest rates
Foreign Exchange (Forex, FX)
The simultaneous buying of one currency and selling of another.
Forward Rate
Forward rates are quoted in terms of forward points , which represents the difference between the forward and spot rates. In order to obtain the forward rate from the actual exchange rate the forward points are either added or subtracted from the exchange rate.
Forward points
The pips added to or subtracted from the current exchange rate to calculate a forward price. Also refer to as “swap points”.
Fundamental Analysis
Analysis of the macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.
G
G7
The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.
G10
G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.
Good Till Cancelled Order (GTC)
An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.
Gross Domestic Product (GDP)
Total value of a country's output, income or expenditure produced within the country's physical borders.
H
Hedge
One of trading styles. Hedging stands for lessening the market risks. To avoid the unexpected loss in the future, investors need to hedge the price moving risk by attaching somewhat insurance function so as to set off the original risks. A position or combination of positions that reduces the risk of your primary position.
High/Low
Usually the highest traded price and the lowest traded price for the underlying instrument for the current trading day.
"Hit the bid"
Acceptance of selling at the best bid.
I
IMF
International Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates.
Indicative quote
A market-maker's price which is not firm.
Inflation
Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.
Initial Margin
The initial deposit (margin) required before entering into a position with a broker.
Inter-bank market
A market in which large international banks trade with each other. There is no physical market place, the transactions take place over electronic networks. This allows the market to be open continuously from Mon morning thru Friday evening.
Inter-bank rates
The Foreign Exchange rates at which large international banks quote other large international banks.
Intervention
Action by a central bank to effect the value of its currency by entering the market..In Japan, intervention in the Forex market is executed under the Finance minister's authority and the Bank of Japan would act to sell or buy Japanese Yen as an agent of the Ministry of Finance.
L
Leading Indicators
Statistics that are considered to predict future economic activity.
Limit Order
A request to deal as a buyer or seller for a foreign currency transaction at a specified price, or at a better price, if obtainable.
Liquidation
The closing of an existing position through the execution of an offsetting transaction.
Liquidity
The ability of a market to accept large transaction with minimal or no impact on price stability.
Long position
A position that appreciates in value if market prices increase.
M
Maintenance margin
The minimum margin which an investor must keep on deposit in a margin account at all times in respect of each open contract.
Margin
The amount of money or collateral that must be, in the first instance, provided or thereafter, maintained, to ensure against losses on open contracts.
Margin call
A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer. NOTE: Not applicable to foreign exchange trading
Market Maker
A dealer who supplies prices and is prepared to buy or sell at those stated bid and ask prices. A market maker runs a trading book.
Market order
An order to buy or sell a financial instrument immediately at the best possible price.
Mark-to-Market
Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.
Mid-price or middle rate
The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers.
O
Offer
The rate at which a dealer is willing to sell a currency.
One Cancels the Other Order (OCO)
A designation for two orders whereby if one of the two orders is executed the other is automatically cancelled.
Open order
An order that will be executed when a market moves to its designated price. Normally associated with Good 'til Cancelled Orders.
Open position
A deal not yet reversed or settled with a physical payment.
Outright
A One-sided trade whether buying or selling, which is different from a two-sided trade which involves both a buy and a sell order simultaneously like a swap or a hedge.
Over The Counter (OTC)
Used to describe any transaction that is not conducted over an exchange.
P
Pips/Points
One unit of price change in the bid/ask price of a currency. For most currencies, it denotes the fourth decimal place in an exchange rate and represents 1/100 of one percent (.01%) or .0001
Political Risk
The uncertainty in return on an investment due to the possibility that a government might take actions which are detrimental to the investor's interests.
Position
The netted total holdings of a given currency. A position can be either flat or square (no exposure), long, (more currency bought than sold), or short ( more currency sold than bought).
Price Transparency
Describes quotes to which every market participant has equal access.
Profit Taking
The unwinding of a position to realize profits.
Q
Quote
An indicative market price, normally used for information purposes only.
R
Rally
A recovery in price after a period of decline.
Resistance
A term used in technical analysis indicating a specific price level at which people are likely to sell in a rising market and thus resisting the upward movement.
Revaluation
Increase in the exchange rate of a currency as a result of official action.
Risk Capital
The amount of money that an individual can afford to invest, which, if lost would not affect their lifestyle.
Roll-Over
Process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies.
Round trip
Buying and selling of a specified amount of currency.
S
Settlement
The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.
Short Position
An investment position that benefits from a decline in market price.
Slippage
Refers to the negative (or depreciating) pip value between where a stop loss order becomes a market order and where that market order may be filled.
Spot
The most common foreign exchange transaction. (2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
Spread
The difference between the bid and offer(ask) prices; Narrower spreads usually signify high liquidity.
Square
Purchase and sales are in balance and thus the dealer has no open position.
Stop Loss Order
An order to buy or sell at the market when a particular price is reached, either above or below the price that prevailed when the order was given.
Support Levels
A term used in technical analysis indicating a specific price level at which people are likely to buy in a falling market and thus supporting prices.
Swap
The combination of purchase and sales of a commodity or currency of which the value dates differs from each other. The swap deals are made use of for shift of outstanding value date toward the future. There are many variation in terms, i.e., Today/Tomorrow, Tomorrow/Next, one week, two week, one month from the spot date and so on. Those are all quoted by e swap point' in the market.
Swap Points
The pips added to or subtracted from the current exchange rate to calculate a forward price. Points are based on the interest rate differential between the two currencies and is therefore, from an interest rate perspective, advantageous to be long the currency with the higher yield.
Spot Price
The current market price. Settlement of spot transactions usually occurs within two business days.
T
Technical Analysis
An effort to forecast prices by analyzing historical market data.
Tick
A minimum change in price, up or down. Usually one pip
Tomorrow Next
Simultaneous buying of a currency for delivery the following day and selling for the next day or vice versa.
Two-Way Price
Rates for which both a bid and offer are quoted.
TTB rate—Telegraphic Transfer Buying
An abbreviation of Telegraphic Transfer Buying rate.
TTS rate—Telegraphic Transfer Selling
An abbreviation of Telegraphic Transfer Selling rate.
V
Value Date
The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as the maturity date.
Volatility
A statistical measure of the amount by which an asset price is expected to fluctuate over a given period.
W
Whipsaw
Slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
Y
Yard
Slang for one billion.
