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Acceptance House An acceptance house “accepts” a trade bill at a specified date in the future, meaning it pays the trade bill at a discounted rate.
Account The record of transactions, charges, credits and debits with or by Deltastock in respect of a customer’s foreign currency transactions, which the customer now has or at any time may have with Deltastock.
Account Balance The sum of all deposits, interest income and realized gains minus all withdrawals, realized losses, and incidental fees.
Account History Display log of all transactions made and closed.
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.
Actualize The underlying assets or instruments that are traded in the cash market.
Accumulation/ Distribution
A technical analysis, which measures the difference between the cumulative amount of buying pressure and the cumulative amount of selling pressure.
Adjustable Peg Term for an exchange rate regime where a country's exchange rate is "pegged" (i.e. fixed) in relation to another currency, often the US dollar or French Franc, but where the rate may be changed from time to time. This was the basis of the Bretton Woods system. See peg and crawling peg.
Adjustment Official action, normally either by a change in the internal economic policies to correct a payment imbalance or in the official currency rate.
Agent Bank (1) A bank acting for a foreign bank. (2) In the euro market, the agent bank is the one appointed by the other banks in the syndicate to handle the administration of the loan.
Aggregate Demand Total demand for goods and services in the economy. Includes private and public sector demand for goods and services within the country and the demand of consumers and firms in other countries for good and services.
Aggregate risk Size of exposure of a bank to a single customer for both spot and forward contracts.
Aggregate Supply Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
Agio Difference in the value between currencies. Also used to describe percentage charges for conversion from paper money into cash, or from a weak into a strong currency.
Agreement The Customer Agreement, including all annexes thereto, and all documents and authorizations executed by the customer in connection with the maintenance of the customer’s account (regardless of when such documents and authorizations are executed), as amended from time to time.
Annualized Extrapolates the behavior of an element (such as volatility) from a certain time period to a full year.
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.
Arbitrage channel The range of prices within which there will be no possibility to arbitrate between the cash and futures market.
Around Dealer jargon used in quoting when the forward premium/discount is near parity. For example, “two-two around” would translate into two points to either side of the present spot.
Asset Allocation Investment practice that divides funds among different markets to achieve diversification for risk management purposes and/or expected returns consistent with an investor’s objectives.
Ask (Offer) Price Ask is the market selling price, the price at which Deltastock or the market is prepared to sell a specified currency in a foreign exchange contract or cross currency contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation.
At best An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better An order to deal at a specific rate or better.
At-the-money In options, when the strike price equals the price of the underlying contract.
Back Office The departments and processes related to the settlement of financial transactions.
Balance The amount held in a customer’s account calculated for closed transactions (currently opened positions are not included). If there are no open positions, the balance and equity will be equal.
Balance of Payments A systematic record of the economic transactions during a given period for a country. (1) The term is often used to mean either: (i) balance of payments on "current account"; or (ii) the current account plus certain long-term capital movements. (2) The combination of the trade balance, current balance, capital account and invisible balance, which together make up the balance of payments total. Prolonged balance of payment deficits tend to lead to restrictions in capital transfers, and/or decline in currency values.
Band The range in which a currency is permitted to move. A system used in the ERM.
Bank line Line of credit granted by a bank to a customer, also known as a “line”.
Bank Rate The rate at which a central bank is prepared to lend money to its domestic banking system.
Base currency The first currency in a currency pair. A currency against which the exchange rate is applied. Usually it stands first in the codes of currency rates. It shows how much the base currency is worth as measured against the second currency. For instance, if the USD/CHF rate equals 1.6215, then one USD is worth 1.6215 CHF.
Basis The difference between the cash price and futures price.
Basis point One percent of one percent.
Basis trading Taking opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
Basket A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.
Bear Someone who believes that the prices/market will decline.
Bear Market A market in which prices decline sharply against a background of widespread pessimism (opposite of Bull Market).
Bid Price Bid is the market buying price, the price at which Deltastock or the market is prepared to buy a specified currency in a foreign exchange contract or cross currency contract. At this price, the trader can sell foreign exchange. It is shown in the left side of the quotation, for example: 1.4527-1.4532.
Big Figure Quote A currency rate without the last two digits. Examples: USD/JPY rate of 122.05/122.10, the big figure is 122. EUR/USD rate of 0.9325/0.9330, the big figure is 0.93.
Book In a professional trading environment, a "book" is the summary of a trader’s or the desk’s total positions.
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 35 USD per ounce. The agreement lasted until 1971.
Broker An agent who handles investors' orders to buy and sell currency. For this service, a commission is charged which, depending on the broker and the amount of the transaction, may or may not be negotiated.
Bull Someone who believes that the prices/market will rise.
Bull Market A market characterized by rising prices.
Business Day Any day on which commercial banks are open for business in the principal financial centers of the countries where currencies are traded.
Buying Rate Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called the bid rate.
Cable Dealers' slang for the sterling/US dollar exchange rate.
Call Rate The overnight interbank interest rate.
Candlestick Chart A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
Carry The interest cost of financing securities or other financial instruments held.
Cash Normally refers to an exchange transaction contracted for settlement on the day the deal is struck. This term is mainly used in the North American markets and those countries which rely for foreign exchange services on these markets because of time zone preference, i.e. Latin America. In Europe and Asia, cash transactions are often referred to as value same-day deals.
Cash and Carry The buying of an asset today and the selling of a future contract on the asset. A reverse cash and carry is possible by selling an asset and buying a future.
Cash Delivery Same-day settlement.
Cash Market The market for the purchase and sale of physical currencies.
Cash Settled The closing out of currency contracts with the exchange of cash based upon the difference in the value of when the position was opened and the value of when it is closed, rather than the delivery of currency.
Central Bank A government or quasi-governmental organization that manages a country’s monetary policy. The US central bank is the Federal Reserve, and the German central bank is the Bundesbank.
Central Rate Exchange rates against the ECU adopted for each currency within the EMS. Currencies have limited movement from the central rate according to the relevant band.
Chartist An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.
Clean float An exchange rate that is not materially affected by official intervention.
Cleared Funds Funds unencumbered and freely available sent in to settle a trade.
Clearing The process of settling a trade.
Closed Position Exposures in foreign currencies that no longer exist. The process of closing a position is the selling or buying of a certain amount of currency to offset an equal amount of open positions. This will "square" the open position.
Commission The fee levied by an institution to undertake a trade.
Collateral An asset pledged as security to ensure payment or performance of an obligation.
Confirmation A notification sent by a dealer to the customer describing the terms of a trade.
Conversion Account A general ledger account representing the uncovered position in a particular currency. Such accounts are referred to as position accounts.
Conversion The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.
Conversion arbitrage A transaction where the asset is purchased and buys a put option and sells a call option on the asset purchased, each option having the same excise price and expiry.
Contract An Over-the-Counter (OTC) agreement between Deltastock and the customer to buy or sell currency.
Contagion The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the "Asian Contagion".
Convertible Currency Currency which can be freely exchanged for other currencies or gold without special authorization from the appropriate central bank. Copey - slang for the Danish krone.
Counter Currency The second listed currency in a currency pair.
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. Country Risk – risk associated with a cross-border transaction, including but not limited to legal and political conditions. Covered Arbitrage – arbitrage between financial instruments denominated in different currencies, using forward cover to eliminate exchange risk. Covered Margin – the interest rate margin between two instruments denominated in different currencies after taking account of the cost of forward cover. Crawling peg - a method of exchange rate adjustment; the rate is fixed/ pegged, but adjusted at certain intervals in line with certain economic or market indicators.
Cross Currency Pairs A foreign exchange transaction in which one foreign currency is traded against a second foreign currency.
Cross rate An exchange rate between two non-US currencies.
Cross Rate An exchange rate between two currencies, usually constructed from the individual exchange rates of the two currencies.
Currency Option Option contract, which gives the right to buy or sell a currency with another currency at a specified exchange rate during a specified period.
Currency Risk The risk of incurring losses resulting from an adverse change in exchange rates.
Currency Swap Contract which commits two counter-parties to exchange streams of interest payments in different currencies for an agreed period of time and to exchange principal amounts in different currencies at a pre-agreed exchange rate at maturity.
Currency Swaption OTC Option to enter into a currency swap contract.
Currency Warrant OTC Option; long-dated (more than one year) currency option.
Currency Trading The act of exchanging the legal tender of one country for another.
Customer The party that executes an agreement with Deltastock.
Currency Pair The two currencies that make up a foreign exchange rate. IE: USD/CHF.
Daily Cut-off The point in time for each business day selected by Deltastock to signify the end of the business day.
Day trader Speculators who take positions in commodities that are then liquidated prior to the close of the same trading day.
Day Trading Refers to opening and closing the same position or positions within one day's trading.
Deal date The date on which a transaction is agreed upon.
Deal Ticket The primary method of recording the basic information relating to a transaction.
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. By contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
Deflator Difference between real and nominal Gross National Product, which is equivalent to the overall inflation rate.
Delivery Cut-off The point in time that signifies the end of the trade date. The trade date of any contract entered into after the daily cut-off shall be the next business day. The daily cut-off will occur at 5:00 p.m. Eastern time (2:00 p.m. Pacific time).
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.
Dirty Float Floating a currency when the rate is controlled by intervention from the monetary authorities.
Dollar Rate When a variable amount of a foreign currency is quoted against one US dollar, regardless of where the dealer is located or in what currency he is requesting a quote. The exception is the sterling/US dollar rate (cable) which is quoted as a variable amount of US dollars to one sterling.
Demo Trading System Free interactive online demonstration sub-system of the actual Deltastock Trading System available to potential customers of Deltastock.
Dollar Value The amount of lawful currency of the United States which at any moment in time would be generated by the conversion of the relevant foreign currency into US dollars at Deltastock’s then-prevailing exchange rates for buying or selling the foreign currency.
Easing A modest decline in price.
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, an agreement between member nations of the European Union to maintain an alignment between the exchange rates of their respective currencies. EURO - the currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU). European Central Bank (ECB) - the Central Bank for the new European Monetary Union.
European Monetary Unit The principal goal of the EMU is to establish a single European currency called the euro, which will officially replace the national currencies of the member EU countries in 2002. Currently, the Euro exists only as a banking currency and for paper financial transactions and foreign exchange. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.
Equity The amount currently held in a customer’s account calculated as if all the opened positions will be closed at the current market quotes. The account is comprised of unrealized gains, less unrealized losses and plus or minus storage.
Euro Zone The group of 12 countries that have combined their currencies into a single currency (Euro). They still have separate sovereignties, but also have a combined central bank (ECB) which handles economic policy issues for them as one group.
Exchange control A system for controlling inflows and outflows of foreign exchange; the devices include licensing multiple currencies, quotas, auctions, limits, levies and surcharges.
Exotic A less broadly traded currency.
Exposure (i) Net working capital - the current assets in a foreign currency minus current liabilities in the currency;
(ii) Net financial method - the current assets in a foreign currency minus current liabilities and long-term debt in the currency;
(iii) Monetary/non-monetary method - monetary assets and liabilities in the foreign currency are valued at current exchange rates, while non-monetary items are entered at the relevant historic rates.
Fast market Rapid movement in a market caused by strong interest from buyers and/or sellers. In such circumstances, price levels may be omitted and bid and offer quotations may occur too rapidly to be fully reported.
Fair Market Value The price for a financial instrument that is determined in an open market environment between a willing buyer and seller.
Fed Fund Rate The interest rate on Fed funds. This is a closely watched short-term interest rate as it signals the Fed's view about the state of the money supply.
Federal Deposit Insurance Corporation (FDIC) The regulatory agency responsible for administering bank depository insurance in the US.
Federal Reserve (Fed) The Central Bank of the United States.
Fill or Kill An order which must be entered for trading, normally in a pit three times. If not filled it is immediately canceled.
Filled Trade A trade that is fully executed on behalf of a customer’s account pursuant to an order. Once filled, an order cannot be canceled, amended or waived by the customer.
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.
Flat/Square To be neither long nor short is the same as to be flat or square. One would have a flat book if one has no positions or if all the positions cancel each other out.
Flexible exchange rate Exchange rates with a fixed parity against one or more currencies with frequent revaluations. A form of managed float.
Floating exchange rate An exchange rate where the value is determined by market forces. Even floating currencies are subject to intervention by the monetary authorities. When such activity is frequent, the float is known as a dirty float.
Floating profit (loss) Unrealized profit (loss) in an open position.
Floating Rate Interest As opposed to a fixed rate, the interest rate on this type of deal will fluctuate with market rates or benchmark rates. One example of a floating rate interest is a standard mortgage.
FOMC Federal Open Market Committee, the committee that sets money supply targets in the US, which tend to be implemented through Fed Fund interest rates, etc.
Foreign Currency The legal tender issued by and acceptable for the payment of obligations under the laws of one or more countries other than the United States of America.
Foreign Exchange Contract A Spot Contract for the purchase or sale of a Foreign Currency.
Foreign Exchange Rate The price relationships between two currencies that are freely determined by the forces of supply and demand.
Foreign Exchange Swap A transaction which involves the actual exchange of two currencies (principal amount only) on a specific date at a rate agreed at the time of the conclusion of the contract (short leg), at a date further in the future at a rate agreed at the time of the contract (the long leg).
Foreign Exchange (Forex or FX) The simultaneous buying of one currency and selling of another in an Over-the-Counter market. Most major FX is quoted against the US dollar.
Forward A deal that will commence at an agreed date in the future. Forward trades in FX are usually expressed as a margin above (premium) or below (discount) the spot rate. To obtain the actual forward FX price, the margin is added to the spot rate. The rate will reflect what the FX rate has to be at the forward date so that if funds were re-exchanged at that rate there would be no profit or loss (i.e. a neutral trade). The rate is calculated from the relevant deposit rates in the two underlying currencies and the spot FX rate. Unlike in the futures market, forward trading can be customized according to the needs of the two parties and involves more flexibility. In addition, there is no centralized exchange. Forward points - the pips added to or subtracted from the current exchange rate to calculate a forward price. Forward Rate - forward rates are quoted in terms of forward points, which represent 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. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies involved in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefore, the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate.
Free margin Available funds in the client’s account not currently being used to support existing trading positions, which can be used to open new positions.
Fundamentals The macroeconomic 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.
Fundamental Analysis Analysis based on economic and political factors. Thorough analysis of economic and political data with the goal of determining future movements in a financial market.
Futures Contract An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a future and a forward is that futures are typically traded over an exchange (Exchange-Traded Contacts – ETC), versus forwards, which are considered Over-the-Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.
G7 The seven leading industrial countries: the US, Germany, Japan, France, the UK, Canada, and Italy.
G10 The G7 plus Belgium, the Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.
Gold Standard The original system for supporting the value of issued currency. Where the price of gold is fixed against the currency this means that the increased supply of gold does not lower its price but causes prices to increase.
Gross Basis Open positions, calculated without the benefit of any netting between long and short positions.
"GTC Order" or "Good Till
Cancelled Order"
A trade order placed for a specific amount of time to buy or sell a foreign currency. An order left with a dealer to buy or sell at a fixed price. The order remains in place until it is canceled by the client.
Hard currency A currency whose value is expected to remain stable or increase in terms of other currencies.
Head and Shoulders A pattern in price trends which chartists consider to indicate a price trend reversal. The price has risen for some time, at the peak of the left shoulder; profit taking has caused the price to drop or level out. The price then rises steeply again to the head before more profit taking causes the price to drop to around the same level as the shoulder. A further modest rise or level will indicate that a further major fall is imminent. The breach of the neckline is the indication to sell.
Hedging The practice of undertaking one investment activity in order to protect against loss in another, e.g. selling short to nullify a previous purchase or buying long to offset a previous short sale. While hedges reduce potential losses, they also tend to reduce potential profits.
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 purchasing at the offer or selling at the bid.
Inflation An economic condition whereby prices for consumer goods rise, eroding purchasing power.
Initial Margin Requirement or Opening Margin Requirement The minimum margin required to establish a new open position. The required initial deposit of collateral to enter into a position as a guarantee on future performance.
Interest Arbitrage Switching into another currency by buying spot and selling forward, and investing proceeds in order to obtain a higher interest yield. Interest arbitrage can be inward, i.e. from foreign currency into the local one, or outward, i.e. from the local currency to the foreign one. Sometimes, better results can be obtained by not selling the forward interest amount. In that case, some treat it as no longer being a complete arbitrage, as if the exchange rate moved against the arbitrager, the profit on the transaction may create a loss.
Interbank Rates The Foreign Exchange rates at which large international banks quote other large international banks.
Interest parity One currency is in interest parity with another when the difference in the interest rates is equalized by the forward exchange margins. For instance, if the operative interest rate in Japan is 3% and in the UK is 6%, a forward premium of 3% for the Japanese yen against the pound would bring about interest parity.
Interest rate Swaps An agreement to swap interest rate exposures from floating to fixed or vice versa. There is no swap of the principal. The interest cash flows whether it is payments or receipts that are exchanged.
Internationalization Referring to a currency that is widely used to denominate trade and credit transactions by non-residents of the country of issue. The US dollar and Swiss franc are examples.
Intervention Action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
Kiwi Slang for the New Zealand dollar.
Leading Indicators Statistics that are considered to predict future economic activity.
Leverage The ratio of the amount used in a transaction to the required security deposit (margin).
Liability In terms of foreign exchange, the obligation to deliver to a counterparty an amount of currency either in respect of a balance sheet holding at a specified future date or in respect of an un-matured forward or spot transaction.
LIBOR The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.
Limit Order An order to buy or sell foreign currency or pairs of currencies at a specified price or exchange rate. A Limit Order to buy generally will be executed when the ask price equals or falls below the price or exchange rate specified in the Limit Order. A Limit Order to sell generally will be executed when the bid price equals or exceeds the price or exchange rate specified in the Limit Order. Customers should note, however, that market conditions may often prevent execution of an individual customer’s Limit Order despite other dealing activity at that price level.
Liquidating Order An order to close out one or more open positions.
Liquidity The ability of a market to accept large transaction with minimal to no impact on price stability.
Long Position In foreign exchange trading, when the base currency in the pair is bought, the position is said to be long in that currency. It is understood that when the base currency in the pair is "long" the second currency will be "short".
Loss Loss incurred as a result of a transaction.
Lot A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.
Maintenance Margin Requirement The minimum margin balance necessary to maintain the open positions in a customer’s account.
Make a market A dealer is said to make a market when he/she quotes bid and offer prices at which he/she stands ready to buy and sell.
Managed float When the monetary authorities intervene regularly in the market to stabilize the rates or to aim the exchange rate in a certain direction.
Margin The amount of cash that Deltastock requires a customer to deposit or maintain in the customer’s account in connection with the customer’s trading activity.
Margin Call A demand for the deposit of additional margin as described in the Customer Agreement.
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 the identified currency or pairs of currencies at the current market price. An order to buy is executed at the ask price; an order to sell is executed at the bid price.
Market Rate/Quote The current quote of a currency pair.
Mark-to-Market Process of reevaluating all open positions with the current market prices. These new values then determine margin requirements.
Market Value The dollar value determined by the current foreign exchange rates that the customer would receive if the position were liquidated for immediate delivery in the relevant market.
Mark to Market The process of recalculating the value of the open positions in a foreign currency trading account, assuming all open positions were liquidated at current market rates.
Maturity The date on which payment of a financial obligation is due.
Mid-price or middle rate The price halfway between the two prices or the average of both buying and selling prices offered by the market makers.
Minimum price fluctuation The smallest increment of market price movement possible in a given futures contract.
Momentum investor A market participant who increase market exposure when the market is rising and decreases exposure or goes short when the market is declining.
Net Position The amount of currency bought or sold which has not yet been offset by opposite transactions.
Notice of Withdrawal A request by the customer to withdraw funds from the customer’s account.
Odd Lot A non-standard amount for a transaction.
Offer The price, or rate, that a willing seller is prepared to sell at.
"One Cancels the Other Order" or "OCO Order" Two orders – “Limit” and “Stop” are submitted simultaneously, as the execution of either one of them automatically cancels the execution of the other.
Open position Any deal that has not been offset by an equal and opposite deal.
Overnight Position Trader’s open long or short position that is not closed by the end of a trading day.
Overnight Trading Refers to a purchase or sale between the hours of 9:00 p.m. and 8:00 a.m. on the following day.
Opening Transaction An order that, when executed, establishes a long position or a short position, or increases an existing position.
Order Generally an instruction by a customer (or a customer’s authorized agent) to attempt to execute a trade for the customer’s account.
Over-the-Counter or "OTC" Off-exchange markets in which market participants, such as Deltastock and the customer, enter into privately negotiated contracts or other transactions directly with each other.
Overnight Position A trader’s open long or short position that is not closed by the end of a trading day.
Parity (1) Foreign exchange dealer's slang for your price is the correct market price. (2) Official rates in terms of SDR or another pegging currency.
Parities The value of one currency in terms of another.
Pip/Point The smallest price unit for any foreign currency (e.g. for USD/CHF one point [or pip] equals .0001 Swiss francs, and for USD/JPY one point [or pip] equals 0.01 Japanese yen).
Posted Margin The part of the margin balance that is posted to Deltastock in support of the customer’s open position and unrealized losses.
Political Risk The uncertainty in return on an investment due to the possibility that a government might take actions that are detrimental to the investor's interests.
Profit Taking The unwinding of a position to realize profits.
Profit/Loss or "P/L" or Gain/Loss The actual gain or loss in US dollars resulting from trading activities on closed positions, plus the theoretical gain or loss on open positions that have been marked to market.
Price Transparency Describes quotes to which every market participant has equal access.
Quote A simultaneous bid and offer in a currency pair.
Realized Gain/Loss The actual gain or loss resulting from closing an open position.
Resistance A price level at which you would expect selling to take place.
Resistance Point or Level A price recognized by technical analysts as one which is likely to result in a rebound, but if broken through is likely to result in a significant price movement.
Risk management The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organization. With respect to foreign exchange, it involves, among other considerations, market, sovereign, country, transfer, delivery, credit, and counterparty risk.
Risk Position An asset or liability that is exposed to fluctuations in value through changes in exchange rates or interest rates.
Required Margin A sum equal to the greater of the Initial Margin Requirement or the Initial Margin Requirement minus Unrealized Losses and storage, plus Unrealized Gains, provided it is not less than 30% of the Initial Margin Required.
Risk Capital The amount of money that an individual can afford to invest, which, if lost, would not affect his/her lifestyle.
Round trip Buying and selling of a specified amount of currency.
Settlement Actual physical exchange of one currency for another.
Settlement date The date by which an executed order must be settled by the transfer of instruments or currencies and funds between buyer and seller.
Settlement Risk Risk associated with the non-settlement of the transaction by the counterparty.
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.
Short Margin The client’s account condition when Equity becomes smaller than the amount required to keep the positions open.
Short position Selling a currency in which you have no position in anticipation of it falling in value. At that point you will be able to "cover" your short by buying back the currency at a lower price. (If physical delivery of the currency is involved, the short seller will need to borrow the currency in order to make the delivery to the buyer). In foreign exchange, when the base currency in the pair is sold, the position is said to be short in that currency. It is understood that when the base currency in the pair is "short", the second currency will be "long".
Sidelined A major currency that is lightly traded due to major market interest being in another currency pair.
Soft Market There are more potential sellers than buyers, creating an environment where rapid price falls are likely.
Spot Contract A contract where settlement is in two business days.
Spot Rate The rate of exchange between two foreign currencies for "spot" value (normally settlement in two business days), generally quoted either in "US terms" (price of one unit of foreign currency expressed in US dollars and cents) or in "European terms" (price of one US dollar expressed in units and decimals of the foreign currency).
Swissy Slang for the Swiss franc.
Support levels When an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below; (2) the monetary authorities intervene to stop any further downward movement.
Spread The difference between the ask (offer) and bid price in a market quote. The spread is the reason why a newly opened position’s mark to market, or valuation, will likely be negative. If a trader buys a particular currency he/she will pay the ask (offer) price, but the current mark to market will be based on what the marketplace is presently paying for this currency. That price would be found on the bid side of the market quote, competitively lower than where he/she just bought the currency.
Stop/Loss Order An order to buy or sell at a specified foreign exchange rate away from the current market for the purpose of liquidating an open position during market conditions in which the open position has declined in value. Execution of such an order can occur at rates below (or above) the specified foreign exchange rate.
Storage The charge or recompense associated with a rollover.
Support levels When an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below; (2) the monetary authorities intervene to stop any further downward movement.
Swap price A price as a differential between two dates of the swap.
Swap The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, swapping is somewhat similar to borrowing one currency and lending another for the same period. However, any rate of return or cost of funds is expressed in the price differential between the two sides of the transaction.
Technical Analysis Analysis of market price action. Technical analysis studies historical price changes with the aim to forecast future price movements. By studying price charts and a host of supporting technical indicators, we in effect let the market tell us how it is most likely to behave. The whole purpose of charting the price action of a market is to identify trends in the early stages of their development and then trade in the direction of those trends. One of the two types of analysis used to analyze the currency market.
Thursday/Friday Dollars A US foreign exchange technicality. If a foreign bank buys dollars on Tuesday for Thursday delivery; if the bank leaves the funds overnight and transfers them on Friday by means of a clearing house check then clearance is not until Monday, the next working day. Higher interest rates for this period are available as a result.
Tomorrow to Next Simultaneous buying and selling 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.
Trading Policies and Procedures Trading policies and procedures, as may, from time to time, be revised, updated or amended by Deltastock at its sole discretion.
Unrealized Gain/Loss The theoretical gain or loss on open positions valued at current market rates, as determined by Deltastock at its sole discretion. Unrealized gains/losses become profits/losses when the position is closed.
Used Margin The amount in the client’s account required to support all the current positions.
US Prime Rate The rate at which US banks will lend to their prime corporate customers.
Value Date With respect to any contract, the applicable settlement date specified in the confirmation that relates to the particular contract. A Value Date must fall on a business day in the countries of the traded currencies.
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, calculated by using standard deviation. High volatility is associated with a high degree of risk.
Vostro Account A local currency account maintained with a bank by another bank. The term is normally applied to the counterparty's account from which funds may be paid into or withdrawn as a result of a transaction.
Whipsaw Slang for the condition of a highly volatile market when a sharp price movement is quickly followed by a sharp reversal.
Working day Days on which the banks in a currency's principal financial center are open for business. For FX transactions, a working day only occurs if the bank in both financial centers are open for business (all relevant currency centers in the case of a cross are open).
Yard Slang for a billion.