Currency-Best foreign exchange terminology


As a newbie in Forex trading, what really becomes difficult to understand the terminology used by merchants in the normal course of business. This article tries to explain just in more common terms in operations.

Arbitration – purchase and sale of the same currency or instrument, simultaneously in different markets to win price difference.

Base currency – the currency of reference against which are compared or quoted in other currencies. The used primary base currency is the dollar of the United States (USD).

Best effort – an executable order at the best possible price on the distributors or dealers discretion.

Bid – The price buys from which a buyer is willing to close.

Broker – a person or a company that matches and executing purchase and sale of Commission orders. The prices are by the owners, not runners.

Cable – Sterling British pound or sterling (Great Britain pound) is sometimes referred to as the cable in the jargon of the market.

Cross rate – this is the exchange rate between two currencies not involving the base currency.

Direct negotiation – a process whereby distributors deal directly among themselves without a broker.

Position limit daylight – limits imposed by prudent currency position that can be carried out by an operator during regular trading hours.

Exotic currency – higher or a coin of lesser importance which has low liquidity and limited traffic.

Forward winner – an agreement of Exchange maturing after the date of delivery.

Kiwi – New Zealand dollar in the jargon of the market

LIBOR – London interbank bid. Art in which a Bank lends to another, is normally set on a daily basis at 11:00 hours GMT.

Important currency – Euro, marco German, the Swiss franc, the pound sterling and the Japanese yen.

Market maker – a dealer that constantly provides two-way prices, both a bid and an offer.

Offer – the price that will sell a seller.

PIP – Term used in the passage of the markets of foreign exchange counter to indicate the smallest incremental displacement an exchange rate can make.

Terms of contribution of America — an appointment that reflects the number of units of United States dollar coin.

Terms of European contribution – an event that reflects the number of currency units per United States dollar.

I try to Spot – an agreement of Exchange whereby one of the parties will deliver a particular currency against receiving a certain amount of another  on the basis of an agreed rate on the other hand usually within 2 business days

Next item – an agreement of Exchange with maturity of one business day more than the date of cash.

Exchange Agreement – an agreement of currencies that consists of a simultaneous buying and selling of different dates of maturity with the same party.

Following Tom – next morning, an agreement of Exchange, which mature one day before an agreement, since what the maturity becomes the next day.

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