| Appreciation |
A currency is said to 'appreciate' when it strengthens in price in response to market demand. |
| Arbitrage |
The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets. |
| Bear Market |
Someone who believes the prices/market will decline. |
| Bull Market |
A market characterised by rising prices. |
| Cable |
Dealers slang for the Sterling/US Dollar exchange rate. |
| Cash Market |
The market for the purchase and sale of physical currencies. |
| Counter Party |
The customer or bank with whom a foreign deal is made. The term is also used in interest and currency swaps markets to refer to a participant in a swap exchange. |
| Federal Reserve (Fed) |
The Central Bank of the United States. |
| 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. |
| Long Position |
A market position where the Client has bought a currency he previously did not hold own. Normally expressed in base currency terms. |
| Margin Call |
A demand for additional funds. A requirement by a clearing house that a clearing member (or by a brokerage firm that a client) brings margin deposits up to a required minimu m level to cover an adverse movement in price in the market. |
| Pip |
The term used in currency market to represent the smallest incremental move an exchange rate can make. Depending on context, normally one basis point (0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY). |
| Risk Capital |
The amount of money that an individual can afford to invest, which, if lost would not affect their lifestyle. |
| Short |
To go 'short' is to have sold an instrument without actually owning it, and to hold a short position with expectations that the price will decline so it can be bought back in the future at a profit. |
| Spot |
A transaction that occurs immediately, but the funds will usually change hands within two days after deal is struck. |
| Spread |
The difference between the bid and offer (ask) prices; used to measure market liquidity. Narrower spreads usually signify high liquidity. |
| Value Date |
Settlement date of a spot or forward deal. |
| Variation Margin |
An additional margin requirement that a broker will need from a client due to market fluctuation. |
| Volatility |
A statistical measure of a market or a security's price movements over time and is calculated by using standard deviation. Associated with high volatility is a high degree of risk. |
| Yard |
Slang for a billion. |
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