Day Trading
Dealer
Deficit
Delivery
Deposit
Depreciation
Derivative
Devaluation
ECB - European Central Bank
Economic Indicator
EMU - European Monetary Union
End Of Day (Mark-to-Market)
Euro
Execution Date
Fed - Federal Reserve
Fixed Exchange Rate (Representative Rate)
Flat (Square, Balanced)
FOMC - Federal Open Market Committee
Forex - Foreign Exchange
Forward
Forward Points
FRA - Forward Rate Agreements
Front and Back Office
Fundemental Analysis
Futures Contract
Day Trading
Opening and closing the same position or positions within
the same trading session.
Dealer
An individual or firm that 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.
Deficit
A negative balance of trade or payments.
Delivery
An actual delivery where both sides transfer possession of
the currencies traded.
Deposit
The borrowing and lending of cash. The rate that money is
borrowed/lent at is known as the deposit rate (or depo rate). Certificates of
Deposit (CD`S) are also tradable instruments.
Depreciation
A decline in the value of a currency due to market forces.
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.
ECB - European Central Bank
The Central Bank for the European Monetary Union.
Economic Indicator
A statistic that indicates current economic growth and
stability issued by the government or a non-government institution (i.e. Gross
Domestic Product (GDP), Employment Rates, Trade Deficits, Industrial
Production, and Business Inventories).
EMU - European Monetary Union
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. On Janaury1, 1999 the
transitional phase to introduce the Euro began. The Euro now exists as a
banking currency and paper financial transactions and foreign exchange are made
in Euros. This transition period will last for three years, at which time Euro
notes an coins will enter circulation. On July 1,2002, only Euros will be legal
tender for EMU participants, the national currencies of the member countries
will cease to exist. The current members of the EMU are Germany, France,
Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain
and Portugal.
End Of Day (Mark-to-Market)
Traders account for their positions in two ways: accrual or
mark-to-market. An accrual system accounts only for cash flows when they occur,
hence, it only shows a profit or loss when realized. The mark-to-market method
values the trader`s book at the end of each working day using the closing
market rates or revaluation rates. Any profit or loss is booked and the trader
will start the next day with a net position.
Euro
The currency of the European Monetary Union (EMU) which
replaced the European Currency Unit (ECU).
Execution Date
The date on which a trade occurs.
Fed - Federal Reserve
The Central Bank for the United States.
Fixed Exchange Rate (Representative Rate)
An official exchange rate set by monetary authorities for
one or more currencies. In practice, even fixed exchange rates fluctuate
between definite upper and lower bands, leading to intervention.
Flat (Square, Balanced)
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.
FOMC - Federal Open Market Committee
The Federal Reserve monetary committee.
Forex - Foreign Exchange
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
The pre-specified exchange rate for a foreign exchange
contract settling at some agreed future date, based upon the interest rate
differential between the two currencies involved.
Forward Points
The pips added to or subtracted from the current exchange
rate to calculate a forward price.
FRA - Forward Rate Agreements
FRA`s are transactions that allow one to borrow/lend at a
stated interest rate over a specific time period in the future.
Front and Back Office
The front office usually comprises of the trading room and
other main business activities.
Fundamental Analysis
Analysis of economic and political information with the
objective 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.