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Forex Glossary Terminology
Before getting acquainted with Forex trading strategies it’s important for each new trader to learn basic terms of Forex. Otherwise it will raise difficulties in trading and in making a profit. Each trader should recognize that one of the key points of having success in foreign exchange trading is the careful study of the glossary. Learning Forex glossary which provides cross-references between related terms, an extensive range of definitions, informative sidelights, hyperlinked keywords and numerous examples, is really a unique guide in the study of foreign currency trading and investing. At present it conveys numerous terms relating to online currency trading, finance and investment.
Arbitrage – performing operations in order to gain profit due to changes of currency courses on international currency markets. This operation is a transaction that consists of two actions: selling and buying of different kinds of currencies on the same sum.
Authorised person – any natural or legal person who is duly authorized to act on behalf of the Client through special Power of Attorney.
Agreement – the Terms and Conditions defining the services offered by the Company under the Client Agreement.
Balance – is a total finance result of all completed transactions and operations of depositing and withdrawing of money from the trading account.
Balance Currency – the currency that the trading account of the Client is denominated in; it shall mean that all charges, commissions, fees and other payments are calculated in that currency.
Base currency and quoted currency – each currency item on Forex market includes two currencies: the first currency in indication is named “base currency”, second is "quoted currency". It is essential to understand that all the transactions are performed in base currency. Because of this, profit or loss and cost of the point are received in quoted currency. To get these figures to the balance currency the Company automatically re-counts it due to the current market course. There is no commission for this type of conversion.
Bid/Ask prices – there are two types of prices on the Forex market: 1) the price of buying (ask) and 2) the price of selling (bid).
Client – any natural or legal person who has completed the procedure stated in the above Paragraph regarding the Commencement of the Client Agreement.
Client Account or Trading Account – special personal account with unique number opened by the Company in the name of the Client and maintained for the purposes of trading in financial instruments through the trading platform(s) of the Company.
Closed position – purchase (sale) covered by the opposite sale (purchase) of the contract (opposite of the open position).
Contract for Difference (CFD) – Contract for Difference on spot foreign exchange/shares/spot metals/futures or any other related Contract for Difference related financial instrument which is made available for trade through the trading platforms of the Company.
Contract’s specification – main trading conditions (spread, minimum/maximum volume of transaction, step of changing volume of transaction, margin etc.) for each financial instrument offered by the Company.
Current market rate – current price of performing transactions for certain currency pair on the financial market.
Equity – the funds on the Client’s Account reduced by the current loss on the open positions and increased by the current profit on the open positions (account's balance adjusted according to open positions' current result).
Financial instruments – means the financial instruments in relation to which the Company is authorized to provide its services in accordance with its CIF authorization.
Floating profit/loss – unfixed profits/losses on the opened positions due to the current value of the currency courses.
Free margin – the funds that are available for opening a position calculated as follows: Margin level = Equity – Margin.
Full finished transaction – it consists of two opposite trading operations with the same volume (opening position and closing position): buying and following selling or selling and following buying.
Locked positions – long and short positions, simultaneously opened on the same financial instrument and on the same trading account.
Login and password – necessary details used by the Client in order to access his trading account and the Company’s electronic systems.
Long position – buy of financial instrument aiming at selling it at increased price. Applied to currency pairs: buying of base currency for quoted currency.
Margin – the funds available in the trading account of the Client which are required for maintaining an open position.
Margin level – shall mean the equity to Margin ratio calculated as follows: Margin Level = Equity/Margin.
Marginal trading – performing of arbitrage operations for a sum several times greater than the value of the client’s own money (free margin). In this case possible loss over this arbitrage must be covered by the current sum of the client’s free margin.
Market Maker – a Company or an individual that quotes both a buy and a sell price in a financial instrument.
Necessary margin – this is the amount of funds required by Company for keeping the positions opened. For each financial instrument this amount is determined by the leverage and the volume of the opened position.
Non-market price – the price of financial instrument that appears in the trading platform due to some technical error.
Open position – purchase (or sale) not covered by the opposite sale (or purchase) of the contract. It shall mean any position that has not been closed.
Over-the Counter (OTC) – trading in financial instruments such as stocks, bonds, commodities, derivatives, foreign exchange currencies, etc. directly between two parties outside of a regulated market. Shall mean the execution venue for any financial instruments whose trading is governed by the Client Agreement.
Order – any instruction given to the Company by the Client for performing trading operations.
Orders level – price specified by the Client at which the order shall be executed.
Point or pip
- the minimum change in the fourth decimal place (0.0001) for currency pairs (spot foreign exchange) quoted to 5 figures after the decimal point
- the minimum change in the second decimal place (0.01) for currency pairs (spot foreign exchange) quoted to 3 figures after the decimal point
- the minimum change in the last decimal place for other financial instruments (shares, spot metals, futures etc.)
Rate – price of the unit of base currency shown in quoted currency.
Request – the Client instruction to the Company to get a quotation.
Quotation – the information about the current course of the financial instrument shown in Bid and Ask view.
Short position – sell of a financial instrument hoping that its price will fall. Applied to currency pairs: selling of base currency for quoted currency.
Spot trade – purchase or sale of a foreign currency or commodity at an agreed price for settlement on the spot date. Futures transactions that expire in the current month are also considered spot trades.
Spread – this is the difference between Ask and Bid prices. The information received by the Client through the Trading Platform includes both of those prices. Current spread represents the liquidity level of the financial instrument.
SWAP – operation consisting of two opposite conversion transactions for the same volume of traded currency with different value dates and different changing rates. The result is presented as a balance operation ‘SWAP’ in the trading account.
Trading platform – this is a program product called NetTradeX. With the use of this platform, the Client can receive information regarding the trading process on-line, to perform technical analysis of the markets, to conduct trading operations, to set up, modify or delete orders and to communicate with the Company.
Value date – the date when the funds have been delivered.
Written notification – hard or electronic copy of any document (including faxes, E-mails, inner post of trading platform, etc.).
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