The foreign exchange is perhaps, the biggest international market that exists in the world today with an annual turnover of more than $1.2 trillion. Although there are no real time exchanges or markets like stock exchanges or commodities markets, forex trade goes on round the clock across all time zones. With the advent of the information technology and the advancements made in the IT sector, the world of forex has become more compact and close-knit. There was a time when only bankers and big time speculators or investors were involved in this segment.
Nowadays, you would find even housewives dabbling in forex markets as technology has enabled many individuals to reap the benefits in this segment through online forex trading. We at UFX Tools have listed some of the most commonly used terms in the forex markets and foreign exchange trade that the trader can use for referral purposes.
- Appreciation: When the international exchange value of a currency goes up vis-à-vis some of the most traded currencies, it is said to have appreciated. For instance, if you are paying more US dollars to purchase a certain amount of Euros, then the value of Euro is said to have appreciated in terms of the greenback.
- Ask Rate: Ask rate is the price at which any currency or financial instrument is put up for sale as in bid offer or spread.
- Asset Allocation: It is a convention or a standard practice followed when an investor allocates his investment in different market segments in such a way that risk is minimized by complete diversification. The underlying objective is to maximize returns on investment. This forex trading strategy is used copiously.
- At the price stop loss order: When a speculator or an investor requests his broker to issue a stop-loss order at the desired price level irrespective of the market situation.
- Backoffice: The sections and departments in the forex trading platforms and brokerage firms that help in carrying out the financial transactions.
- Bar Chart: A bar chart is essentially comprised of four significant parts- the opening price, the high and the low prices, and the closing price that are indicated with different bars.
- Base Currency: When you are dealing with a currency pair, say the EURUSD pair, the currency quoted first that is the EUR, is said to be the base currency and the USD is the term currency. In most of the financial markets, the USD is the base currency for quotations. That means the exchange rates of all currencies are expressed as units of $1. The Euro, Pound and the Australian Dollar are notable exceptions.
- Bid or Ask Spread: When a trader is about to proceed with a transaction, he bids for a price which is distinct from the offer price and the spread is the difference between the offer price and the bid price.
- Book: In all forex trading systems a ‘book’ contains a cornucopia of a trader’s total positions.
- Clearing: Clearing refers to the mechanism of settling a trade.
- Forward Points: To find out the forward price, the forex trading brokers either add the pips or deduct it from the prevailing exchange rate of a currency.