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Bold 2009 Prediction for Forex Traders
Here's my bold prediction for you in 2009!
You will break your trading resolutions by the end of February.
*You will abandon your trading plan
*You will fall into the same destructive trading patterns you resolved to change
*Your account will earn the same or less than in 2008
I know this this sounds harsh, but statistically speaking, that's what will happen to most traders. So, are you going to let this happen to you?
True, statistics cover populations and not individual traders. The fact is, its traders who are outside of the norm and trade with focused discipline that really achieve their financial goals. When is now the time to re-focus with discipline and dedication and really commit yourself to your trading plan?
Today is January 15, 2009 and February is just around the corner.
Let this be your wake-up call!
Be honest with yourself and focus with the discipline of a seasoned trader on staying true to your trading plan or risk becoming a statistic!Happy "Disciplined" Trading!!
Do you have what it takes to become a successful Forex Trader?
Forex trading, or any trading for that matter, is an occupation that requires experience and the accumulation of proficiency not unlike any other highly skilled profession. Whether you are a leading executive at a major publically traded company, a professional golfer or trading from your kitchen table, there are 5 key ingredients that one must possess in order to become successful.
1. You must be Passionate about what you do.
As Forex traders we all face one unique set of circumstances that does not exist in any other profession. We get rewarded for when we succeed and equally punished when we don’t! Could you image a corporate worker one quarter receiving a significant accomplishment bonus and the next quarter actually getting money taken from their paycheck for missing performance targets? Not on your life! We do as Forex traders and that is why passion for what you do will carry you through the tough times that are part of your trading business. Asked yourself why you trade currencies and would you still do it if Forex were not potentially lucrative? Your answers will be quite revealing. You’ve got to feel your passion for trading!
2. You have to Apply Yourself and work hard at it.
I talk to so many people that enter into Forex trading with the aspiration of getting rich quick. Without putting the time and energy into really getting good at trading I see them jump from strategy to strategy looking for the goose that will lay the golden egg and eventually quitting while blaming everything else, except the true cause.I got news for you – you are the goose and your Forex education is the golden egg. The magic has always resided with the magician and not some strategy. Work hard at trading and the rewards will eventually come your way. Remember what Tiger Woods said, “Funny, the harder I work the luckier I get.” Apply yourself as a trader and it will be no accident when your account begins to blossom.
3. You must Focus to really get good at what you do.
Now here is the hurdle most Forex traders struggle to get over. You have the passion and you are applying yourself to your trade, now focus and really get good at just at what you are doing. Be the expert to the experts at just that one thing. Become the master of a strategy or risk management methodologies. Really focus on getting good at it.Stop jumping around or getting pulled from the last “latest and greatest” into the next “latest and greatest” and focus on one aspect of Forex trading and know it inside out. Know it strengths and weakness. Set your sights on becoming expert on just one aspect of trading and watch it spill over in all other aspects for your currency trading. This is the time to fail forward fast, use every setback as a learning opportunity that will propel you 3-steps ahead!
4. You must Push Yourself beyond the point everyone else might have quite.
In Forex Trading this is simple. Assume there is someone on the other side of your trade that is pushing themselves and sharpening their edge. To be successful you must you must do the same thing. Now is the time to examine your mental edge. Do you know the single most critical factor in any currency trade? It is you, the trader! Sharpening you mental edge is the most difficult aspect of trading, but also the most rewarding.Start with your Forex education and gain the self-awareness necessary to maximize your strengths and suppress your weaknesses. Any expert will tell you that trading is 80% mental. It’s time to sharpen your trading to the razor’s edge and you do this through Forex education. A constant and never ending process that will become the cornerstone of your Forex experience.
5. You must, without wavering, be Determined and Persist to your objective.
You will fail. I can state that emphatically. However, you will not be defeated unless you allow your failures to control your trading. It is the old adage; failure is not falling of your horse, failure is refusing to get back on. Your success depends on your ability to dismiss the criticism, rejection, self-doubt and pressures associated with Forex trading.Defining what is a winning trade, losing trade and bad trade will go a long way into developing you as a successful trader. Without the determination and persistence in all aspects of your trading life, obstacle will definitely appear closer and larger than they actually are.Take a moment and assess yourself and your trading. Do you have the key elements to succeed? Which areas are presents development opportunities? When conducting a self-evaluation it is critical to be totally upfront and honest with yourself. After all, you will only be dishonest with yourself. One of the most interesting observations you can make is that all key success factors are interwoven. One factor supports the other. This is why your Forex education is a continuous journey of forex strategy, money management and self-mastery. Set these factors as your Forex education goals and take your currency trading to new heights.Happy Trading!!
How to Adopt the Traits of a Successful Trader ?
Not all Forex traders were cut from the same cloth, but the most successful investors do have several things in common. Whether you are a newcomer to trading or you are a seasoned pro who is trying to improve your game plan, the following suggestions may help you out. Below are five ways to evolve into a successful trader:
1. Become a lifelong student – Never stop learning about the business you are in. If you think you know everything about the Forex market, then think again. The successful trader is a lifelong student who constantly absorbs new information about the ever-evolving climate of Forex trading.
2. Be courageous – It's hard to overcome your fears when you are dealing with an unpredictable investment. Even if you are equipped with extensive knowledge about the market, you still have to put your money at risk every day. Reserve a small amount of apprehension (just enough to keep you sensible), but don't hesitate at every turn.
3. Hone your math skills – You are wading through a sea of mathematical information every day when you look over your charts. The most successful traders know how to take that large amount of information and pull out necessary information.
4. Be patient – Become a long-term investor and put all notions of overnight success to rest. You must adopt a stoic attitude, as you make the most informed decisions about your business and leave the rest to fate.5. Learn to love trading – Maybe you already do love trading and that's why you are involved with Forex. However, many people are either too wrought with anxiety to enjoy it or merely see it as a job. If you don't like trading, don't trade. A great trader will love the roller coaster ride he/she is on.Are the above suggestions obvious? Perhaps, but many of us take a wrong turn somewhere and need some simple advice to get us back on track. In order to stay on top of your game, you will need to constantly reinvent yourself, as there is no world that calls for flexibility more than the Forex market.
Online Forex Trading - These Two Simple Equations Can Lead You to Huge Gains
Forex Education Tips - 5 Steps to Successful Forex Trading
Like the TV show says … “How’d they do that, anyway?”
That's the million dollar questions, isn’t it? Countless books, seminars and expos have been hosted to answer this very question. That sad fact is that thousands of books have been written and countless seminars and interviews have been conducted in an attempt to answer the magic questions. The reality of the situation is that there is no magic formula; no one single Holy Grail of Forex trading.
So what do the successful traders do that the rest of us have simple not comprehended. They have mastered a process of winning where they combine and customize several factor to produce consistent results. They have mastered the Process of Trading.
The Process of Trading is:
Strategy > Money Management > Self-Mastery
Here are some simple Forex Education tips to help you master the process of forex trading:
Success
You must have a written business plan that will detail all aspects of your trading. When are you going to trade, how much to risk, strategies for entries and exits are just o name a few. To become a consistent (profitable) Forex trader you have to plan your trade sand trade your plan.
Simplicity rules! Don’t make this plan too complicated. One sheet of paper for you mission statement and another for your trading plan should suffice. Anything more is probably too complicated.
Success Tip #2 – Focus on Your Personal Psychology
Knowing yourself will allow you to master the discipline necessary to execute high quality trades with solid money management techniques. Lack of discipline is fatal in Forex trading. Go on a personal journey to identify you attitudes towards risk and money. Get intimate with your strengths and weaknesses as a trader and build in to your trading plan strategies to minimize those weaknesses and maximize your strengths.
Different personalities lend to different trading styles. Get familiar with all the different styles and over time you will begin to gravitate towards one particular style. Don’t fight the urge like I did. I insisted I was a day trader, but had only limited results. I found my winning percentages were much higher when I entered swing trades. Guess what’s my bread and butter strategy now!
Success Tip #3 – Be Realistic About Your Expectations
This is a hard one, I know! I am on the internet every day and the amount of advertising is staggering. Brokers are offering free education (fox in the hen house if you ask me), forums of all different trading styles and points of view. Gurus pushing their system as “the one” that will make you the big bucks. How do you get through all that noise?
Let me tell you loud and clear right now – everyone is right and everyone is wrong. You have to make a personal commitment to become a successful trader, find a trading style that works for you and expect a slow and steady approach to wealth building through Forex.
What works for me may not work for you. Expect to go through an exploratory period where you are learning and at the same time exploring yourself as a trader. Keep an open mind and don’t pay attention to all the noise out there.
Success Tip #4 – Exercise Patience
Rome was not built in a day and neither will your trading account. In fact, I tell all of my students that while they are studying to become successful Forex traders they should not look solely at their account balance as an indication of success or failure.
By tracking and increasing your percentage of high quality trades you execute is a far better barometer of your progress than your account balance. Cause and effect rule here. Over time when you increase your probabilities through the execution of high quality trades your account balance will respond accordingly.
Keep the focus on the process and with time your results will blow your mind.
Success Tip #5 - Money Management Is Top Priority
I would rather have a shaky strategy and excellent money management techniques than the other way around. This topic warrants its own blog post to do it justice. Limited your exposure (read “risk”) allows for you to stay in the game and allow the laws of probability to work.
Let’s take a casino for example. They need gamblers to frequent their slot machines to make money. Why? They have a game that has a greater than 50% chance of making money for the house. The more people that play the slots, the greater the casino’s profits.
The casino controls risk by payout tables (always favoring the house!) and increases their probabilities by keeping gamblers at the slot machines (read “free drinks”). As a trader you must limit your risk by committing only 1% - 3% of available capital to a single trade. When you execute enough trades with a high probability strategy you too can clean up like the casinos – but only by staying in the game long term.
In conclusion, Forex trading is not easy. It’s hard work and will test the limits of your patience and perseverance. If anyone tells you otherwise .., buyers beware! It can be a very rewarding and profitable venture if done correctly. In the end it is a profession that requires a learning curve and practical experience, no different than an airline pilot or engineer. Understanding how to approach and learn this game will allow you to reap all the benefits advertised. It is your Forex Education that you will master the Process of Forex Trading.
Market Profile in India
The average monthly turnover in the merchant segment of the Forex market increased to US$ 40.5 billion in 2003-2004 from US$ 27.0 billion in 2002-2003. In the inter-bank segment, the turnover has moved up from US$ 103 billion in 2002-2003 to US$ 134.2 billion in 2003-2004. Consequently, the average monthly total turnover increased sharply to US$ 174.7 billion in 2003-2004 from US$ 130 billion in the previous year. The inter-bank to merchant turnover ratio hovered in the range of 2.9 –3.9 during the year.
The recent Indian forex market is widened then before, to know all about the Indian forex market i.e. its major players, method of exchange, facilities to resident of India, legal provision etc.
Forex In India
The appointment of an Expert Group on Foreign Exchange (popularly known as Sodhani Committee) in November 1994 is a landmark in the design of foreign exchange market in India. The Group studied the market in great detail and came up with far reaching recommendations to develop, deepen and widen the Forex market.
In the process of development of Forex markets, banks have been accorded significant initiative and freedom to operate in the market. To quote a few important measures relating to market development and liberalization, banks were allowed freedom to fix their trading limits, permitted to borrow and invest funds in the overseas markets up to specified limits, accorded freedom to determine interest rates on FCNR deposits within ceilings and allowed to use derivative products for asset-liability management purposes. Similarly, corporate were given flexibility to book forward cover based on past turnover and allowed to use a variety of instruments like interest rates and currency swaps, caps/collars and forward rate agreements in the international Forex market. Rupee-foreign currency swap market for hedging longer term exposure has developed substantially in the last few years.
About Forex
Foreign Exchange This short introduction explains the basics of trading Forex online, a brief explanation of the markets and the major benefits of trading Forex online. There are also two scenarios describing the implications of trading in a bear as well as a bull market to better acquaint you with some of the risks and opportunities of the largest and most liquid market in the world. Overview Foreign exchange, Forex or just FX are all terms used to describe the trading of the world's many currencies. The Forex market is the largest market in the world, with trades amounting to more than USD 3 trillion every day. Most Forex trading is speculative, with only a low percentage of market activity representing governments' and companies' fundamental currency conversion needs. Unlike trading on the stock market, the Forex market is not conducted by a central exchange, but on the “interbank” market, which is thought of as an OTC (over the counter) market. Trading takes place directly between the two counterparts necessary to make a trade, whether over the telephone or on electronic networks all over the world. The main centres for trading are Sydney, Tokyo, London, Frankfurt and New York. This worldwide distribution of trading centres means that the Forex market is a 24-hour market. Trading Forex A currency trade is the simultaneous buying of one currency and selling of another one. The currency combination used in the trade is called a cross (for example, the euro/US dollar, or the GB pound/Japanese yen.). The most commonly traded currencies are the so-called “majors” – EURUSD, USDJPY, USDCHF and GBPUSD.The most important Forex market is the spot market as it has the largest volume. The market is called the spot market because trades are settled immediately, or “on the spot”. In practice this means two banking days. Forward OutrightsFor forward outrights, settlement on the value date selected in the trade means that even though the trade itself is carried out immediately, there is a small interest rate calculation left. The interest rate differential doesn't usually affect trade considerations unless you plan on holding a position with a large differential for a long period of time. The interest rate differential varies according to the cross you are trading. On the USDCHF, for example, the interest rate differential is quite small, whereas the differential on NOKJPY is large. This is because if you trade e.g. NOKJPY, you get almost 7% (annual) interest in Norway and close to 0% in Japan. So, if you borrow money in Japan, to finance the trade and buying NOK, you have a positive interest rate differential. This differential has to be calculated and added to your account. You can have both a positive and a negative interest rate differential, so it may work for or against you when you make a trade. Trading on MarginTrading on margin means that you can buy and sell assets that represent more value than the capital in your account. Forex trading is usually conducted with relatively small margin deposits. This is useful since it permits investors to exploit currency exchange rate fluctuations which tend to be very small. A margin of 1.0% means you can trade up to USD 1,000,000 even though you only have USD 10,000 in your account. A margin of 1% corresponds to a 100:1 leverage (or “gearing”). (Because USD 10,000 is 1% of USD 1,000,000.) Using this much leverage enables you to make profits very quickly, but there is also a greater risk of incurring large losses and even being completely wiped out. Therefore, it is inadvisable to maximise your leveraging as the risks can be very high. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary. Why Trade Forex?
24 hour tradingOne of the major advantages of trading Forex is the opportunity to trade 24 hours a day from Sunday evening (20:00 GMT) to Friday evening (22:00 GMT). This gives you a unique opportunity to react instantly to breaking news that is affecting the markets.
Superior liquidityThe Forex market is so liquid that there are always buyers and sellers to trade with. The liquidity of this market, especially that of the major currencies, helps ensure price stability and narrow spreads. The liquidity comes mainly from banks that provide liquidity to investors, companies, institutions and other currency market players.
No commissionsThe fact that Forex is often traded without commissions makes it very attractive as an investment opportunity for investors who want to deal on a frequent basis. Trading the “majors” is also cheaper than trading other cross because of the high level of liquidity. For more information on the trading conditions of Saxo Bank, go to the Account Summary on your SaxoTrader and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.
100:1 LeverageLeverage (gearing) enables you to hold a position worth up to 100 times more than your margin deposit. For example, a USD 10,000 deposit can command positions of up to USD 1,000,000 through leverage. You can leverage the first USD 25,000 of your investment up to 100 times and additional collateral up to 50 times.
Profit potential in falling marketsSince the market is constantly moving, there are always trading opportunities, whether a currency is strengthening or weakening in relation to another currency. When you trade currencies, they literally work against each other. If the EURUSD declines, for example, it is because the US dollar gets stronger against the euro and vice versa. So, if you think the EURUSD will decline (that is, that the euro will weaken versus the dollar), you would sell EUR now and then later you buy euro back at a lower price. In case that the EURUSD indeed declines, then you can take your profit. The opposite trading scenario would occur if the EURUSD appreciates. Important Forex Trading Terms
SpreadThe spread is the difference between the price that you can sell currency at (Bid) and the price you can buy currency at (Ask). The spread on majors is usually 3 pips under normal market conditions. For more information on the trading conditions at Saxo Bank, go to the Account Summary on your Client Station and open the section entitled “Trading Conditions” found in the top right-hand corner of the Account Summary.
Pips A pip is the smallest unit by which a cross price quote changes. When trading Forex you will often hear that there is a 3-pip spread when you trade the majors. This spread is revealed when you compare the bid and the ask price, for example EURUSD is quoted at a bid price of 0.9875 and an ask price of 0.9878. The difference is USD 0.0003, which is equal to 3 “pips”.On a contract or position, the value of a pip can easily be calculated. You know that the EURUSD is quoted with four decimals, so all you have to do is cancel out the four zeros on the amount you trade and you will have the value of one pip. Thus, on a EURUSD 100,000 contract, one pip is USD 10. On a USDJPY 100,000 contract, one pip is equal to 1000 yen, because USDJPY is quoted with only two decimals. Trading Scenario – Trading Rising PricesIf you believe that the euro will strengthen against the dollar you'll want to buy euro now and sell it back later at a higher price.• You buy euro We quote EURUSD at Bid 0.9875 and Ask 0.9878, which means that you can sell 1 euro for 0.9875 USD or buy 1 euro for 0.9878 USD.In this example you buy euro 100,000, at the quote price of 0.9878 (ask price) per euro. • The market moves in your favor Later the market turns in favour of the euro and the EURUSD is now quoted at Bid 0.9894 and Ask 0.9896. • Now you sell your euro and get the profit You sell euro at a Bid price of 0.9894. • The profit is calculated as follows Sell price-buy price x size of trade (0.9894 minus 0.9878) multiplied by 100.000 = USD 140 Profit (Note that the profit or loss is always expressed in the secondary currency)Trading Scenario – Trading Falling Prices If, on the other hand, you believe that the euro will weaken against the dollar, you'll want to sell EURUSD.• You sell euro We quote EURUSD at a Bid price of 0.9875 and Ask price of 0.9880 and you decide to sell euro 100,000 at a Bid price of 0.9875. • The market moves in your favour The euro weakens against the dollar and the EURUSD is now quoted at bid 0.9744 and ask 0.9749. • Now you buy back your euro You buy EUR at an ask price of 0.9749. • Your profit/loss is then Sell price-buy price x size of trade (0.9875 minus 0.9749) multiplied by 100.000 = USD 1260 Profit Remember that trading EUR 100,000 as we have done in our examples, does not mean that you have to put up euro 100,000 yourself. On a 2% margin means that you have to deposit 2.0% of euro 100,000, which is euro 2,000 on margin as a guarantee for the future performance of your position.Further ReadingTo see how you can trade the Forex market and benefit from our toolbox of information and live quotes, please proceed to the Forex Quick Start found under the Trading menu of SaxoTrader.
History of Forex
Pre-Currency Trading Era – The 1950s
Entering into the 1950s, the United States of America had a distinct advantage over war-torn Europe. While Germany was heavily sanctioned, England, France, Italy, and several other Old World nations were just coming to terms with the heavy investment needed to rebuild their countries.As a way to make it easier for the rest of the world to rebuild, the Bretton Woods Agreement was adopted. It was innocuously simple: in an effort to keep the United States of America (USA) from buying everything in sight, the Bretton Woods Agreement kept the USA in check by requiring all foreign currencies be pegged to the US Dollar. Some pegs were strong, some pegs were weak, but at the end of the day they never moved more than 1% in any direction. Like today's problem with the Chinese Yuan, forced to a peg against the dollar, it kept a constant, controlled flow of US dollars out of the country.The peg would not have been so bad if not for the fact that the US dollar also had a unique relationship with gold. Just like currencies, gold was pegged to the dollar at a fixed value of US$35/ounce. What made it even worse was that US currency, at the time, was directly exchangeable for gold. This strategy was fine as long as the Fort Knox gold reserves exceeded $23 billion.After World War II, the USA became the primary economic super power. Many foreign countries began to acquire US currency in lieu of gold. The dollar gained prominence in a way no other currency ever had before.At the same time, we began to see the rebuilding of the Old World and foreign trade began to gain momentum. In 1950, foreign countries held US $8 billion. We also saw the oil business begin its ascent as a prominent import/export industry.
The 1970's United States Currency Policy Meltdown
Once again, we are hit with the triumvirate of war, the restrictive gold standard, and dollars in foreign banks.This time, each problem was feeding directly off of the others. The Vietnam Conflict had drained our gold reserves heavily. By 1970, Fort Knox only held US$12 Billion.The growth of the oil business and the increase in foreign trade caused a boom in the demand for US dollars in foreign banks. Over US$ 47 Billion was sitting in overseas banks.On paper, our gold reserves were over-leveraged by almost 4 to 1. As a nation, we did not know how to react to such an overbearing assault on our currency. Then along came the invention of the Eurodollar to make our nightmare worse.Foreign banks with US dollars would make low-interest loans in US dollars to importers and exporters. Although the dollars were never repatriated, the US was still on the hook to exchange these “credit”-created dollars for the gold we kept on reserve.Then came a miracle in disguise . The Bretton Woods Agreement collapsed. In the over-leveraged gold-dollar environment, many countries began to feel frustrated with the artificial peg.In blatant defiance to the agreement in 1971, Germany declared that they would float the Deutsche mark. They were tired of the artificial peg that was keeping their economy depressed.In the first hour of trading, over US$1 billion were exchanged for Deutsche marks. For the first time, the public had voiced their opinion against being so heavily weighted with dollars.With Germany completely ignoring the Bretton Woods Agreement by floating their currency, the US government had nothing left to do but put the final nail in the coffin of the U.S.'s currency policy. The Bretton Woods Agreement was dissolved.Three short months after the Deutsche mark began to float, the US moved off of the gold standard. Gold was allowed to float freely like any other currency. Oil, although priced in US dollars, soon switched to a peg against gold. Gold and oil prices jumped ten-fold.The currency dynamics were soon changed on a global scale and it became accepted practice that countries began to float their own currency.
New Rules of Currency
In 1971, the Smithsonian Agreement replaced the Bretton Woods Agreement and authorized “forward currency contracts”, adding validity to the Eurodollar phenomenon. It didn’t work. A year later the European Joint Float was established. It, and the Smithsonian Agreement, were scrapped in 1973. Even though they were dissolved the concept of “forward currency contracts” stayed as part of the banking system.Once currencies began to “free-float”, they immediately moved away from their gentlemanly 1% fluctuations on either side to huge price ranges, going anywhere from 20-25% daily.From 1970-1973, the total foreign exchange volume went from US$25 Billion to US$100 Billion. With oil prices up, gold prices up, and an economy still reeling from the rapid currency shift, “stagflation”, rising inflation while real incomes remained the same, soon hit the United States.
Today's Currency World
In the 30 years since the collapse of the last gentlemanly agreement on currency rates, many momentous events have occurred that have affected currencies worldwide. The Japanese yen gained prominence because of Japan's heavy export relationship with the United States. The USSR collapsed. We have had several undeclared wars, the south Asian economies have risen and collapsed, and several investor bubbles have come and gone.Each time, currencies have come away with a newly earned respect by the masses. There has also been a constant element of surprise that keeps you guessing what's next.Current conditions, such as the United States' perpetual war on “terror”, the permanent introduction and dominance of the euro currency, the steady O.P.E.C. increases in oil prices, and gold's renaissance as a store of value, will likely have a tremendous impact on the future of what it means to trade currencies.This could be a fundamental shift in the next phase of currency development.
Why Forex
How to trade on Forex
How to earn in Forex Trading
Forex Tip
Forex Trading FAQ
Forex Trading Glossary
Glossary of Forex Trading Terms
A-
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 which are traded in the cash market.
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 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 by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.
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. It includes private and public sector demand for goods and services within the country and the demand of consumers and 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. Appreciation - Describes a currency strengthening in response to market demand rather than by official action.
Arbitrage - The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials. The exchange rate differential or Swap points. May be derived from Deposit Rate differentials. Arbitrage channel - The range of prices within which there will be no possibility to arbitrage between the cash and futures market. Around - Used in quoting forward "premium / discount". "Five-five around" would mean five point on either side of the present spot value.
Asset Allocation - Dividing instrument funds among markets to achieve diversification or maximum return.
Ask - The price at which the currency or instrument is offered.
Asset - In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal.
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.
Authorized Dealer - A financial institution or bank authorized to deal in foreign exchange.
B -
Back Office - Settlement and related processes.Backwardation - Term referring to the amount that the spot price exceeds the forward price.
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 - United States Dollars. The currency to which each transaction shall be converted at the close of each position.
Basis - The difference between the cash price and futures price.
Basis point - For most currencies, denotes the fourth decimal place in exchange rate and represents 1/100 of one percent (.01%). For such currencies as the Japanese Yen, a basis point is the second decimal place when quoted in currency terms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms.
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 market - A prolonged period of generally falling prices.
Bear - An investor who believes that prices are going to fall.
Bid - The price at which a buyer has offered to purchase the currency or instrument. Book - The summary of currency positions held by a dealer, desk, or room. A total of the assets and liabilities. If the average maturity of the book is less than that of the assets, the bank is said to be running a short and open book. Passing the Book refers normally to transferring the trading of the Banks positions to another office at the close of the day, e.g. from London to New York.
Bretton Woods - The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
Broker - Brings buyers and sellers together for a commission paid by the initiator of the transaction. Brokers do not take market positions.
Bull market - A prolonged period of generally rising prices.
Bull - An investor who believes that prices are going to rise.
Bundesbank - Central Bank of Germany.
Buying Rate - Rate at which the market and a market maker in particular is willing to buy the currency. Sometimes called bid rate.
C -
Cable - A term used in the foreign exchange market for the US Dollar/British Pound rate.
Capital Risk - The risk arising from a bank having to pay to the counter party with out knowing whether the other party will or is able to meet its side of the bargain. see Herstatt.
Carry - The interest cost of financing securities or other financial instruments held.
Cash Delivery - Same day settlement.
Cash market - The market in the actual financial instrument on which a futures or options contract is based.
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 selling a future contract on the asset. A reverse cash and carry is possible by selling an asset and buying a future.
Cash Settlement - A procedure for settling futures contract where the cash difference between the future and the market price is paid instead of physical delivery.
Central Bank - A nations main regulatory bank. Traditionally, its primary responsibility is development and implementation of monetary policy.
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 studies graphs and charts of historic data to find trends and predict trend reversals which include the observance of certain patterns and characteristics of the charts to derive resistance levels, head and shoulders patterns, and double bottom or double top patterns which are thought to indicate trend reversals.
Clean float - An exchange rate that is not materially effected by official intervention.
Closed position - A transaction which leaves the trade with a zero net commitment to the market with respect to a particular currency.
Commission - The fee that a broker may charge clients for dealing on their behalf.
Confirmation - A memorandum to the other party describing all the relevant details of the transaction. Contract - An agreement to buy or sell a specified amount of a particular currency or option for a specified month in the future (See Futures contract).
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 exercise price and expiry.
Convertible currency - A currency that can be freely exchanged for another currency (and or gold) without special authorization from the central bank.
Copey - Slang for the Danish krone.
Correspondent Bank - The foreign banks representative who regularly performs services for a bank which has no branch in the relevant centre, e.g. to facilitate the transfer of funds. In the US this often occurs domestically due to inter state banking restrictions.
Counterparty - The other organisation or party with whom the exchange deal is being transacted.
Countervalue - Where a person buys a currency against the dollar it is the dollar value of the transaction.
Country risk - The risk attached to a borrower by virtue of its location in a particular country. This involves examination of economic, political and geographical factors. Various organisations generate country risk tables.
Cover -
(1) To take out a forward foreign exchange contract.
(2) To close out a short position by buying currency or securities which have been sold.
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.
Credit Risk - Risk of loss that may arise on outstanding contracts should a counter party default on its obligations.
Cross deal - A foreign exchange deal entered into involving two currencies, neither of which is the base currency.
Cross rates - Rates between two currencies, neither of which is the US Dollar.
Current Account - The net balance of a country's international payment arising from exports and imports together with unilateral transfers such as aid and migrant remittances. It excludes capital flows.
D -
Day trader - Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.
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 - One who, as opposed to a broker, acts as a principle in all transactions, buying and selling for its own accounts.
Deflator - Difference between real and nominal Gross National Product, which is equivalent to the overall inflation rate.
Delivery date - The date of maturity of the contract, when the exchange of the currencies is made This date is more commonly known as the value date in the FX or Money markets.
Delivery Risk - A term to describe when a counterparty will not be able to complete his side of the deal, although willing to do so.
Depreciation - A fall in the value of a currency due to market forces rather than due to official action.
Desk - Term referring to a group dealing with a specific currency or currencies.
Details - All the information required to finalize a foreign exchange transaction, i.e. name, rate, dates, and point of delivery.
Devaluation - Deliberate downward adjustment of a currency against its fixed parities or bands, normally by formal announcement.
Direct quotation - Quoting in fixed units of foreign currency against variable amounts of the domestic currency.
Dirty Float - Floating a currency when the rate is controlled by intervention by the monetary authorities. -
E -
Easing - Modest decline in price.
Economic Indicator - A statistics which indicates current economic growth rates and trends such as retail sales and employment.
ECU - European Currency Unit.
EDI - Electronic Data Interchange.
Effective Exchange Rate - An attempt to summarize the effects on a country's trade balance of its currency's changes against other currencies.
EFT - Electronic Fund Transfer.
EMS - European Monetary System.
European Monetary System - A system designed to stabilize if not eliminate exchange risk between member states of the EMS as part of the economic convergence policy of the EU. It permits currencies to move in a measured fashion (divergence indicator) within agreed bands (the parity grid) with respect to the ECU and consequently with each other.
Exchange control - Rules used to preserve or protect the value of a countries currency.
Exotic - A less broadly traded currency.
Exposure - In foreign exchange, a potential for gain or loss because of movement in foreign exchange rate. There are three primary types of exposure:
Economic: The change in future earning power and cash flow arising from a change in exchange rates. In effect, it represents a change in the value of a company holding foreign currency.
Transnational: A potential gain or loss arising from transactions that will definitely occur in the future, are currently in progress, or could have already been completed. A signed but not shipped sales contract, a receivable or foreign currency payment collected but not converted to local currency would all be examples of transaction exposure.
Translation: The potential for change in reported earnings and/or the book value of the consolidated company equity accounts, as the result of a change in foreign exchange rates used to translate the foreign currency statements of subsidiaries and affiliates known as accounting exposure.
- F -
Fast market - Rapid movement in a market caused by strong interest by 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.
Fed Fund Rate - The interest rate on Fed funds. This is a closely watched short term interest rate as it signals the Feds view as to the state of the money supply.
Fed - The United States Federal Reserve. Federal Deposit Insurance Corporation Membership is compulsory for Federal Reserve members. The corporation had deep involvement in the Savings and Loans crisis of the late 80s.
Federal Reserve System - The central banking system in the United States. Fill or Kill - An order which must be entered for trading, normally in a pit three times, if not filled is immediately canceled.
Fisher Effect - The relationship that exists between interest rates and exchange rate movements, so that in an ideal situation interest rate differentials would be exactly off set by exchange rate movements. See interest rate parity.
Fixed exchange rate - Official rate set by monetary authorities. Often the fixed exchange rate permits fluctuation within a band.
Flexible exchange rate - Exchange rates with a fixed parity against one or more currencies with frequent revaluation's. 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.
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 Exchange - The purchase or sale of a currency against sale or purchase of another.
Forex - Term commonly used when referring to the foreign exchange market.
Forex Club - Groups formed in the major financial centers to encourage educational and social contacts between foreign exchange dealers, under the umbrella of Association Cambiste International.
Forward margins - Discounts or premiums between spot rate and the forward rate for a currency. Normally quoted in points.
Forward Operations - Foreign exchange transactions, on which the fulfillment of the mutual delivery obligations is made on a date later than the second business day after the transaction was concluded.
Forward Outright - A commitment to buy or sell a currency for delivery on a specified future date or period. The price is quoted as the Spot rate minus or plus the forward points for the chosen period.
Forward Rate - Forward rates are quoted in terms of forward points , which represents 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 concerned 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. Therefor 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 Reserves - Total reserves held by a bank less the reserves required by the authority.
Front Office - The activities carried out by the dealer , normal trading activities. Fundamentals - The macro economic 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.
FX - Foreign Exchange.
- G -
G7 - The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.
G10 - G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.
Gap - A mismatch between maturities and cash flows in a bank or individual dealers position book. Gap exposure is effectively interest rate exposure.
Going long - The purchase of a stock, commodity, or currency for investment or speculation.
Going short - The selling of a currency or instrument not owned by the seller. Gold Standard - The original system for supporting the value of currency issued. The was that where the price of gold is fixed against the currency it means that the increased supply of gold does not lower the price of gold but causes prices to increase.
Good until canceled - An instruction to a broker that unlike normal practice the order does not expire at the end of the trading day, although normally terminates at the end of the trading month.
Grid - Fixed margin within which exchange rates are allowed to fluctuate.
Gross Domestic Product - Total value of a country's output, income or expenditure produced within the country's physical borders.
Gross National Product - Gross domestic product plus " factor income from abroad" - income earned from investment or work abroad.
- H -
Hard currency - Any one of the major world currencies that is well traded and easily converted into other currencies.
Head and Shoulders - A pattern in price trends which chartist consider indicates 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. The price then rises steeply again to the head before more profit taking causes the the price to drop to around the same level as the shoulder. A further modest rise or level will indicate a that a further major fall is imminent. The breach of the neckline is the indication to sell.
Hedge - The purchase or sale of options or futures contracts as a temporary substitute for a transaction to be made at a later date. Usually it involves opposite positions in the cash or futures or options market.
Hedged position - One open buy position and one open sell position in the same currency.Hit the bid - Acceptance of purchasing at the offer or selling at the bid.
- I -
IMF - International Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates. The IMF supports countries with balance of payments problems with the provision of loans.
IMM - International Monetary Market part of the Chicago Mercantile Exchange that lists a number of currency and financial futures Implied volatilityA measurement of the market's expected price range of the underlying currency futures based on the traded option premiums.
Implied Rates - The interest rate determined by calculating the difference between spot and forward rates.
Indicative quote - A market-maker's price which is not firm.
Inflation - Continued rise in the general price level in conjunction with a related drop in purchasing power. Sometimes referred to as an excessive movement in such price levels.
Initial margin - The margin required by a Foreign Exchange firm to initiate the buying or selling of a determined amount of currency.
Inter-bank rates - The bid and offer rates at which international banks place deposits with each other. The basis of the Interbank market.
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 arbitrageur, the profit on the transaction may create a loss. 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 6%, a forward premium of 3% for the Japanese Yen against sterling 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. It is the interest cash flows be they 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. US dollar and Swiss Franc are examples.
Intervention - Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
- K -
Kiwi - Slang for the New Zea land dollar.
- L -
Leading Indicators - Statistic that are considered to precede changes in economic growth rates and total business activity, e.g. factory orders.
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.
Limit order - A request to deal as a buyer or seller for a foreign currency transaction at a specified price, or at a better price, if obtainable.
Liquidation - Any transaction that offsets or closes out a previously established position. Liquidity - The ability of a market to accept large transactions.
- M -
Maintenance margin - The minimum margin which an investor must keep on deposit in a margin account at all times in respect of each open contract.
Make a market - A dealer is said to make a market when he or she quotes bid and offer prices at which he or 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 required direction.
Margin call - A claim by one's broker or dealer for additional good faith performance monies usually issued when an investor's account suffers adverse price movements.
Margin - The amount of money or collateral that must be, in the first instance, provided or thereafter, maintained, to ensure against losses on open contracts. Initial must be placed before a trade is entered into. Maintenance or Variation margin must be added to initial to maintain against losses on open positions. Sometimes herein the amount that needs to be present to establish or thereafter maintained is sometimes herein referred to as necessary margin.Mark to market - The daily adjustment of an account to reflect accrued profits and losses often required to calculate variations of margins.
Market maker - A market maker is a person or firm authorized to create and maintain a market in an instrument.
Market order - An order to buy or sell a financial instrument immediately at the best possible price.
Micro economics - The study of economic activity as it applies to individual firms or well defined small groups of individuals or economic sectors.
Mid-price or middle rate - The price half-way 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.
Monetary Base - Currency in circulation plus banks' required and excess deposits at the central bank.
Moving Average - A way of smoothing a set of data, widely used in price time series.
- N -
Net Position - The amount of currency bought or sold which have not yet been offset by opposite transactions.
- O -
Odd Lot - A non standard amount for a transaction.
Offer - The price at which a seller is willing to sell. The best offer is the lowest such price available.
Offset - The closing-out or liquidation of a futures position.
Off-shore - The operations of a financial institution which although physically located in a country, has little connection with that country's financial systems. In certain countries a bank is not permitted to do business in the domestic market but only with other foreign banks. This is known as an off shore banking unit.
Overnight limit - Net long or short position in one or more currencies that a dealer can carry over into the next dealing day. Passing the book to other bank dealing rooms in the next trading time zone reduces the need for dealers to maintain these unmonitored exposures. Overnight - A deal from today until the next business day.
- P -
Parity -
(1) Foreign exchange dealer's slang for your price is the correct market price.
(2) Official rates in terms of SDR or other pegging currency.
Parities - The value of one currency in terms of another.
Pegged - A system where a currency moves in line with another currency, some pegs are strict while others have bands of movement.
Pip - One unit of price change in the bid/ask price of a currency. For most currencies, it denotes the fourth decimal place in an exchange rate and represents 1/100 of one percent (.01%). Position - The netted total commitments in a given currency. A position can be either flat or square (no exposure), long, (more currency bought than sold), or short ( more currency sold than bought).
Profit Taking - The unwinding of a position to realize profits.
- Q -
Quote - An indicative price. The price quoted for information purposes but not to deal.
- R -
Rally - A recovery in price after a period of decline. Range - The difference between the highest and lowest price of a future recorded during a given trading session.
Rate -
(1) The price of one currency in terms of another, normally against USD.
(2) Assessment of the credit worthiness of an institution.
Reaction - A decline in prices following an advance.
Reciprocal currency - A currency that is normally quoted as dollars per unit of currency rather than the normal quote method of units of currency per dollar. Sterling is the most common example.
Resistance Point or Level - A price recognized by technical analysts as a price which is likely to result in a rebound but if broken through is likely to result in a significant price movement.
Revaluation - Increase in the exchange rate of a currency as a result of official action.
Revaluation rate - The rate for any period or currency which is used to revalue a position or book.
Risk management - The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to foreign exchange involves among others consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.
Risk Position - An asset or liability, which is exposed to fluctuations in value through changes in exchange rates or interest rates. Rollover - An overnight swap, specifically the next business day against the following business day (also called Tomorrow Next, abbreviated to Tom-Next).
Round trip - Buying and selling of a specified amount of currency.
- S -
Same day transaction - A transaction that matures on the day the transaction takes place. Selling rate - Rate at which a bank is willing to sell foreign currency.
Settlement date - The date upon which foreign exchange contracts settle. Settlement Risk - Where a payment is made to a counter party before the counter value payment has been made. The risk is that the counter party's payment will not be received.
Short sale - The sale of a specified amount of currency not owned by the seller at the time of the trade. Short sales are usually made in expectation of a decline in the price.
Short-term interest rates - Normally the 90 day rate.
Sidelined - A major currency that is lightly traded due to major market interest being in another currency pair.
Slippage - Refers to the negative (or depreciating) pip value between where a stop loss order becomes a market order and where that market order may be filled.
Soft Market - More potential sellers than buyers, which creates an environment where rapid price falls are likely.
Spot -
(1) The most common foreign exchange transaction.
(2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.
Spot next - The overnight swap from the spot date to the next business day.
Spot price/rate - The price at which the currency is currently trading in the spot market. Spread -
(l)The difference between the bid and ask price of a currency.
(2) The difference between the price of two related futures contracts.
Square - Purchase and sales are in balance and thus the dealer has no open position.
Squawk Box - A speaker connected to a phone often used in broker trading desks.
Squeeze - Action by a central bank to reduce supply in order to increase the price of money.
Stable market - An active market which can absorb large sale or purchases of currency without major moves.
Standard - A term referring to certain normal amounts and maturities for dealing.
Sterilization - Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the FX market.
Sterling - British pound, otherwise known as cable.
Stocky - Market slang for Swedish Krona.
Stop-Loss order - Order to buy or sell at the best available price when a given price threshold has been reached.
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 down ward movement. See resistance point.
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.
Swissy - Market slang for Swiss Franc.
-T-
Technical Correction - An adjustment to price not based on market sentiment but technical factors such as volume and charting.
Thin market - A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
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 cheque then clearance is not until Monday, the next working day. Higher interest rates for this period are thus available.
Tick - A minimum change in price, up or down. Today/Tomorrow - Simultaneous buying of a currency for delivery the following day and selling for the spot day, or vice versa. Also referred to as overnight.
Tomorrow next (Tom next) - Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.
Trade date - The date on which a trade occurs.
Tradeable amount - Smallest transaction size acceptable.
Transaction date - The date on which a trade occurs.
Transaction - The buying or selling of currencies resulting from the execution of an order.
Two Tier market - A dual exchange rate system where normally only one rate is open to market pressure, e.g. South Africa.
Two-Way quotation - When a dealer quotes both buying and selling rates for foreign exchange transactions.
- U -
Uncovered - Another term for an open position.
Under-valuation - An exchange rate is normally considered to be undervalued when it is below its purchasing power parity.
Up tick - A transaction executed at a price greater than the previous transaction.
- V -
Value Date - For a spot transaction it is two business banking days forward in the country of the bank providing quotations which determine the spot value date. The only exception to this general rule is the spot day in the quoting centre coinciding with a banking holiday in the country(ies) of the foreign currency(ies). The value date then moves forward a day.
Value Spot - Normally settlement for two working days from today. See value date. Volatility - A measure of the amount by which an asset price is expected to fluctuate over a given period. 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.
- W -
Wash trade - A matched deal which produces neither a gain nor a loss.
Whipsaw - Term for where a trader takes a position, then has to move against it triggering stop loss limits and liquidation of positions, then having to move in the original direction. Normally occurs in volatile markets.
Working day - A day on which the banks in a currency's principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both financial centre's are open for business (all relevant currency centers in the case of a cross are open).
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