Forex terms Glossary
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 firms in other countries for good and services.
Size of exposure of a single customer to a market related movement.
Total supply of goods and services in the economy from domestic sources (including imports) available to meet aggregate demand.
The Digibitssoftware program.
Describes a currency increasing or strengthening in response to a market reaction.
The simultaneous purchase and sale on different markets, of the same or equivalent financial instruments to profit from price or currency differentials.
Dividing funds among different investment alternatives in order to attempt to achieve diversification or maximum return.
The price at which the currency or instrument is offered for sale by Digibitsor another counterparty.
A specific instruction given to a dealer to buy or sell at the best rate that can be obtained. The term is synonymous with the term “at the market” or is implied by the customer issuing a “market order”.
“At or Better”
An order to deal at a specific rate / price or better.
A third party to which Customer grants trading authority or control over a Customer’s Forex Account. Digibits does not, by implication or otherwise, endorse or approve of the operating methods of the Authorized Agent. Digibits shall not be responsible with respect thereto.
A term used in the foreign exchange market for the US Dollar vs. British Pound rate.
The interest cost of financing securities or other financial instruments held.
Normally refers to an exchange transaction contracted for settlement on the day the deal is struck.
Cash on Deposit
Cash on Deposit equals the amount of funds deposited in the Forex account, plus or minus the realized closed position PL and other debits or credits such as rollovers, and commission (if any).
A bank, which is responsible for controlling a nation (or group of nations) monetary policy. The Federal Reserve is the central bank for the United States, the European Central Bank is the central bank of Europe, the Bank of England is the central bank of England and the Bank of Japan is the central bank of Japan.
Central Bank InterventionThe act by which a central bank or central banks enter the spot foreign exchange market and attempt to influence unbalanced supply and demand forces through the direct purchase (or sale) of foreign exchange.
When you hold a CFD (Contract for Difference), you agree to settle the difference between the price when you open the position and the price when you close the position of an underlying asset. You do not pay anything up front when you open a position, but are instead charged a financing cost. Conversely, if you have a short position, you are credited/paid interest.
The Commodity Futures Trading Commission, the US Federal regulatory agency for futures traded on commodity markets, including financial futures.
An individual who studies graphs and charts of historical data in an attempt to find trends that will help predict the direction and magnitude of a particular investment product.
Client or Customer
A Forex Account holder. The Client can be an Individual, Money Manager, corporate entity, trust Forex account, Co-Owner or any legal entity that has an interest in the value of the Forex account.
A transaction that is opposite in direction and magnitude to an existing position that has the effect of realizing a gain or loss.
Chicago Mercantile Exchange
Any good exchanged during commerce, which includes goods traded on a commodity exchange. Commodities are crude oil (CL), Natural Gas (NG), Gold, Silver, white, corn and etc.
The fee that a broker may charge clients for dealing on their behalf.
An electronic or printed notice that describes all the relevant details of a transaction.
IndexMonthly measure of the change in the prices of a defined basket of consumer goods including food, clothing, and transport. Countries vary in their approach to rents and mortgages.
The rate for a specific currency pair that is used to convert (or sweep) non-US dollar profits/losses into dollars at the closing time.
A bank that has limited access to certain financial markets and therefore must use the services of another bank to conduct certain transactions. Correspondent banks are usually small. Agreements with other banks allow it to provide necessary services for Forex account holders without incurring the expense of setting up a branch in another city or country.
The second currency in a currency pair. In the Currency Pair EURUSD, the Counter Currency is the USD.
The other entity or party with whom the exchange deal is being transacted.
The risk attached to a transaction by virtue of its association to a particular country. This involves examination of economic, political and geographical factors of a particular country.
The act of performing a transaction that closes out a position.
The risk that a debtor will not repay; more specifically the risk that the counterparty does not have the currency promised to be delivered.
Cross Currency Contract
A spot contract to purchase or sell one foreign currency in exchange for another specific foreign currency. The currencies exchanged are not the US Dollar.
A Foreign Currency or US Dollar.
The two currencies in a foreign exchange transaction. The “EURUSD” is an example of a currency pair.
Customer Forex Account
ApplicationThe Digibits application that all clients and customers must fill out and submit for acceptance by Digibits before a transaction is to take place.
EasingA decline in interest rates initiated by the central.
ECUEuropean Currency Unit.
Either way market
In the Euro Interbank deposit market where both bid and offer rates for a particular period are the same.
Provided part of the Client’s Forex account including open positions which are tied to the balance and floating (Profit/Loss) by the following formula: Balance + Profit + Swap. These are the funds on the Client’s Forex account reduced by the current loss on the open positions and increased by the current profit on the open positions.
The exchange currency of the European Union
The interest rates quoted for Euro-currencies over specific periods.
A currency deposited outside its country of origin.
US dollars deposited in a bank (US or non US) located outside the USA.
The group formerly known as the European Community.
A physical location where instruments are traded and often regulated. Examples: the New York Stock Exchange, the Chicago Board of Trade.
A system of controlling inflows and out flows of foreign exchange, devices include licensing multiple currencies, quotas, auctions, limits, levies and surcharges.
A less broadly traded currency.
The expiration date is the date of the settlement of the futures / options contracts.
G7The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.
G10G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.
The act of buying a CFD on foreign exchange, CFD on spot metals, CFD on stock, CFD on futures and other financial derivatives. For example, if a trader bought the EURUSD, he would be “going long” the Euro.
The act of selling a CFD on foreign exchange, CFD on spot metals, CFD on stock, CFD on futures and other financial derivatives. For example, if a trader sold the EURUSD, he would be “going short” the Euro.
Good till canceled (GTC order)
A specific instruction to a broker (ex. FOREX 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.
SEE: Good till canceled.
Indicative quoteA market-maker’s price which is not “firm” or “firm quotation.”
Initial margin requirementThe minimum Margin Balance necessary to establish a NEW Open Position. Digibits reserves the right to change the Initial Margin requirement at its sole discretion. The Initial Margin requirement can be expressed as a percentage or can be calculated by the Leverage Ratio. For example, a $100,000 position in USDCHF would require $200 of margin given a 0.2% Margin Requirement. Expressed as a leverage ratio, if 1:500 leverage ratio is used a $100,000 position would require the same Initial Margin ($100 000/1:500 = $200).
The interbank market is the over-the-counter market of dealers that make markets in foreign exchange to one another.
Buy or sell action by a central bank in an attempt to affect the value of its currency. Concerted intervention refers to action by a number of central banks to influence the value of exchange rates.
Intra day position
Open positions run by a client of Digibits within the day. Usually squared by the close.
The trader who is opening and closing positions, like CFD, currencies, stocks, futures, metals, options, during one working day.
A person or legal entity that introduces customers to Digibits often in return for compensation in terms of a fee per transaction. Introducing Brokers are prevented from accepting margined funds from their clients.
LeverageThe control of a large speculative position through the use of a small amount of capital.
Limit orderA Limit Order is a Customer Order to Buy or Sell a specific amount of a Currency Pair at a specific user defined price. A Limit Order does not guarantee execution; rather it guarantees only that if execution occurs, it will be at the stated Limit Price. Note that sometimes the market briefly touches a limit price, only to immediately retreat back away from the limit price level with very little if any volume traded. Under such circumstances the Limit Order may not have be executed and the limit order will remain in effect, until that time when the order can be executed or until the Customer cancels the order. A Limit Order specifies that execution should be attempted after the market reaches or goes through a set price level – the limit price. Once issued, the limit order will be held pending until the limit price is reached. Once the market hits or goes through the limit price, the order is triggered and the Digibits dealer attempts to execute the order at the Limit Price.
The price that the trader specifies when entering a Limit Order.
Any transaction that offsets or closes out a previously established position.
The Forex account value level that initiates the liquidation of all the trader’s open position at the best price or exchange rate available at that moment. Liquidation occurs when the Forex Account Value is not sufficient to maintain the current open position(s). The trader can prevent liquidation by depositing additional margin into the Forex account, or by closing out existing open position(s).
Liquidation Level Excess/Deficit
Remaining Forex Account Value before automated liquidation is triggered. The level is equal to the Forex Account Value Liquidation % * Margin. If loss on open position(s) exceeds this amount, Digibits will automatically liquidate ALL open positions. The level is represented graphically as the top of the brown level in the Digibits Margin Monitor.
The term used to describe the amount of volume available to buy or sell at a point in time.
The term used to describe a trader who has opened a new position by buying a CFD on foreign exchange, CFD on spot metals, CFD on stock, CFD on futures and other financial derivatives.
Loss in Excess of their Margin Deposit
There exists the opportunity for clients to lose more than the margin that they initially pledge to open and maintain a position.
A unit measuring the transaction amount, equalling to 100.000 of base currency (i.e 1 lot = 100.000 of base currency in the case of a CFD on currency pairs).
Net Interest Rate DifferentialThe difference in interest rates from the countries of two different currencies. For example, if the spot next rate for the Euro is 3.0 % and the spot next rate in the US is 1.25%, the interest differential is 1.75% (3.0% – 1.25% = 1.75%).
NettingThe method of settling under which only the differences in the traded currencies are settled at the close.
Digibits Demo Forex AccountDigibits maintains a demo Forex account that is a full feature replica of the Forex Trading account used by authorized Digibits margined clients to enter into contracts to buy and sell CFD on foreign exchange, CFD on spot metals, CFD on stock, CFD on futures and other financial derivatives from Digibits . The demo Forex account allows potential Digibits clients to get used to the actual Forex trading platform’s functionality and features without risking their capital by executing contracted trades. Since, the Froex demo account does not involve actual deals or contracts, any profit or loss generated by using the Forex demo account do not accrue nor are they an obligation of the demo customer. It is strictly for demonstration purposes only.
FOREX Trading AccountThe Forex Account used by authorized Digibits customers to trade CFD on foreign exchange, CFD on spot metals, CFD on stocks, CFD on futures and other financial derivatives for the purpose of speculating on the direction of the currency / stock / future / metals rates movements. Any transactions done on the Forex Trading Account is a legally binding contract that the client is responsible for as per the Customer Agreement and other documents presented and signed by the client.
Digibits Risk Disclosure document
The Digibits Risk Disclosure outlines the risks associated with opening an Forex account with Digibits . All clients who have a financial interest in Digibits are required to read and sign the document in order to open a Forex account.
The term used to describe the entire space on a client’s computer screen that is home to all the other Digibits windows that allow the client to monitor positions and profit and losses, Pending Orders, quotes, Chart Window, etc.
The smallest measure of movement for a foreign exchange rate.
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).
A dealer who buys or sells stock for his/her own account.
The unwinding of a position to realize a profit.
RangeThe difference between the highest and lowest price of a future recorded during a given trading session.
RateThe price of one currency in terms of another, normally against USD.
The profit and loss generated from closed positions.
A market that is regulated usually by a governmental agency that issues a number of guidelines and restrictions designed to protect investors.
Resistance Point or Level
A price recognized by technical analysts as a price which will usually stop a movement of a foreign exchange rate from going higher. If a resistance level is “broken” the technician will conclude that the price movement of the instrument will continue to go higher.
Right hand side
Corresponds to the Ask or Offer price of a foreign exchange rate. For example, given a price of 0.9630 – 0.9635, the right hand side is 0.9635. The right hand side is the side that a client would buy at.
The amount of money the Customer is willing to put at risk and, which if lost would not, change the Customer’s lifestyle or the Customer’s family lifestyle.
Running a position
The act of keeping open positions in hopes of a speculative gain.
“Take the Offer”A verbal market order whereby the customer wants Digibits to pay the Ask or Offer price for a customer desired amount of lots.
Technical CorrectionAn adjustment to price not based on market sentiment but technical factors such as volume and charting.
A market condition in which trading volume and liquidity is low and in which usually bid and ask quotes are wider than normal.
A minimum change in price, up or down.
Tomorrow next (Tom next)
Simultaneous buying of a currency for delivery the following day and selling for the spot day or vice versa.
The date on which a trade occurs.
A software application where a trader can give an order to execute a transaction on that customers behalf.
The date on which a trade occurs.
The buying or selling of CFD on foreign exchange or other derivatives resulting from the execution of an order.
When a dealer quotes a bid and ask price for foreign exchange transactions to a customer.
Value DateFor exchange contracts it is the day on which the two contracting parties exchange the currencies which are being bought or sold. For complete description see the chapter on trading. 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. The enquirer is the party who must make sure that his spot day coincides with the one applied by the respondent. The forward months maturity must fall on the corresponding date in the relevant calendar month If the one month date falls on a non-banking day in one of the centers then the operative date would be the next business day that is common. The adjustment of the maturity for a particular month does not effect the other maturities that will continue to fall on the original corresponding date if they meet the open day requirement. If the last spot date falls on the last business day of a month, the forward dates will match this date by also falling due on the last business day. Also referred to as maturity date.
The customer support area for Digibits in charge of Forex Account setup, funds transfers into and out of the customer Forex account, trade reconciliation issues, customer inquiries, and other activities that do not directly involve the buying or selling of a currency pair.
Balance of Payments
A systematic record of the real economic transactions during a given period for a particular country. Countries are either in a balance of payment excess or balance of payment deficit. Prolonged balance of payment deficits could lead to restrictions in capital transfers, and or decline in currency values.
Balance of Trade or Trade Balance
In general terms, the value of exports less imports for a particular country. A balance of trade deficit is when a country imports more than it exports. A balance of trade surplus is when a country exports more than it imports. If a country is in a prolonged trade deficit condition, the currency versus its trading partners should decline or weaken making the cost of imports more expensive and exports cheaper for the trading partners.
Line of credit granted by a bank to a customer, also known as a “line”.
Banking day (or Business day)
Any day that commercial banks are open for business in the financial center of the country whose currency a position is taken.
Bank of Japan or BOJ
The central bank of Japan.
The first currency in a currency pair. In the currency pair EURUSD, the Base Currency is the EUR. When entering a contract with DIGIBITS, the base currency remains constant at a contracted lot value amount. For example, if a lot is 100,000, the customer who transacts to buy 1 lot of EURUSD at a currency rate of 0.9900 would be contracting to exchange 100,000 EUR for $99,000 USD.
A term used predominantly in the UK for the rate used by banks to calculate the interest rate charged to borrowers. Top quality borrowers will pay a small amount over base rate while lesser quality credits will pay a rate much higher than the base rate.
A measure used for describing interest rates, equal to one hundredth of a percentage point (0.01%).
A situation whereby there exists prolonged period of generally falling prices for a particular investment product.
The condition in the market where investors or traders who are short an investment product are forced to cover their position because a rising market condition, has inflicted losses on the Forex account.
An investor who believes that price of an investment product is going to fall.
The execution of an order at the next available price taking into consideration the volume available to buy or sell at that price and the quantity and volume of orders that precede the customers order.
The price at which Digibits (or another counterparty) offers to buy the currency pair from a customer.
The price of a financial instrument / security expressed in terms of whole quote amount, instead of including any decimal values. For example, a financial instrument is trading at 210.52 would have big figure of 210. Many traders do not include the big figure when providing quotes, especially for currencies, because they assume other traders already know them. The big figure is also called a handle.
A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate. Bonds are used by companies, municipalities, states and U.S. and foreign governments to finance a variety of projects and activities.
Break or Break out
Term used to describe a sudden or rapid fall in instruments pricing away from a consolidated range.
An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread.
Commission charged by a broker.
A prolonged period of generally rising prices for a particular investment product.
An investor who believes that prices of particular investment products are going to rise.
The Central Bank of Germany.
Any day on which commercial banks are open for business other than Saturday or Sunday in the principal financial center of the country in whose currency a position is taken.
Specifies the highest price at which the purchase of the Base Currency in a Currency Pair can be executed. The limit price in a Buy limit order should be BELOW the current BID price.
A Buy Stop is a Stop Order that is placed ABOVE the current Ask price and is not activated until the market Ask price is at or above the Stop Price. The buy stop order, can be execute at the not requested price.
Daily Cut-off (or Close of Business Day)The single point in time that signifies the end of that Business Day. The Trade Date of any Contract entered into after the Daily Cut-off shall be considered executed on the next Business Day. The Daily Cut-off will occur at a time selected on any Business Day solely by Digibits and may be changed at the discretion of PAXFOREX.
Day OrderAn order that if not executed on the specific day is automatically canceled.
A listing of all the deals that were executed over a specified time period, usually the trading day.
The date on which a transaction is agreed upon.
The primary method of recording the basic information relating to a transaction.
An individual or firm acting as a principal, rather than as an agent, in the purchase and/or sale of foreign exchange. Dealers trade for their own Forex account and risk.
Generally speaking, the group of dealers that facilitate the pricing and execution of customer orders.
A fall or decline in the exchange rate of a currency due to market forces
Depth of market
A measure of the size of volume available for transaction purposes for a particular currency pair at a specific point in time.
All the information required to finalize a foreign exchange transaction, i.e. name, rate, and dates.
The deliberate downward adjustment of a currency against its fixed parities or bands, normally initiated by a formal announcement by a country.
Net of tax and fixed personal spending commitments.
The interest rates applicable to deposits in the country of origin.
The term used by Digibits representative to indicate that a verbal deal has been executed.
The sale of a security (usually an equity or stock) at a price lower than the previous one.
Fast marketThe rapid movement of prices or rates in a market caused by disequilibria in supply and demand conditions from buyers and /or sellers. In such circumstances rates or prices may not be readily available to clients until orderly markets resume.
Fed Fund RateThe short term (overnight) rate pegged by the Federal Reserve Bank used to conduct monetary policy and affect changes in the money supply that causes changes in the level of activity in the United States economy.
Cash balances held by banks with their local Federal Reserve Bank.
The United States Federal Reserve Bank.
Federal Open Market Committee
Also known as the FOMC. The body of individuals that decide the course of monetary policy that will be conducted in United States. The FOMC is directly responsible for pegging the Federal Funds rate and the Discount Rate. Both rates are influential in controlling the levels of money supply growth and the levels of economic activity in the United States.
Federal Reserve Board
The board of the Federal Reserve System, appointed by the US President for 14 year terms, one of whom is appointed for four years as chairman.
Federal Reserve System
The central banking system of the US comprising 12 Federal Reserve Banks controlling 12 districts under the Federal Reserve Board. Membership of the Fed is compulsory for banks chartered by the Comptroller of Currency and optional for state chartered banks.
Fill or Filled
A deal that has been executed on behalf of a Customer’s Forex Account given a Customer’s Order. Once filled, an Order cannot be canceled, amended or waived by Customer.
A verbal price given in response to a request for a firm rate at which the quoting party is willing to execute a deal for a reasonable amount for spot settlement.
Use of taxation as a tool in implementing monetary policy.
The monthly calendar dates similar to the spot. There are two exceptions. For detailed description see value dates.
Fixed exchange rate
Official rate set by monetary authorities. Often the fixed exchange rate permits fluctuation within a band.
A method of determining rates by normally finding a rate that balances buyers to sellers. Such a process occurs either once or twice daily at defined times. Used by some currencies particularly for establishing tourist rates.
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.
Unrealised profit (loss) of open positions at current prices of the underlying currencies, contracts or stocks, equity indexes, precious metals or any other commodities available for trading.
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.
The term “Foreign Exchange” generally refers to off exchange trading in foreign currency. It may also refer to currency trading on exchanges such as the IMM at the Chicago Mercantile Exchange.
“Forex” is a popular short name for foreign exchange and generally refers to off exchange trading in foreign currency.
A deal with a value date greater than the spot value date.
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 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. 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.
Funds not used as the guarantee to open positions, calculated as: Free Margin = Equity – Margin. Remaining funds a customer can use to open a new position(s) or increase the amount of an existing position(s) = Margin. It is represented in the Digibits trading platform.
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.
Standard contracts where the traders involved, purchase or sell underlying instrument / asset with a pre-determined quality and size for a specific future date (expiration date) at the current market price.
“FX” is a popular acronym for Foreign Exchange. Foreign Exchange generally refers to off exchange trading in foreign currency.
“Hit the bid”Term used to describe the action of a seller of a currency pair when wanting to sell at the market bid side.
HolderBuyer of a CFD on foreign exchange, CFD on spot metals, CFD on stocks, CFD on futures and other financial derivatives.
KiwiSlang for the New Zealand dollar.
Maintenance MarginThe minimum margin, which an investor must keep at Digibits to maintain an open position.
Maintenance Margin Excess/ DeficitRemaining funds against which a trader can maintain/hold a position(s) until a Margin Call is triggered. Maintenance Margin Excess/Deficit = Forex Account Value/Maintenance % * Margin. It is represented graphically as the top of the red level in the Digibits Margin Monitor.
“Make a market”
A dealer is said to “make a market” when a quoted bid and ask price is given to a trader. The price represents the firm prices that the dealer is ready to buy or sell.
The aggregate amount of customer cash pledged against the aggregate Open Position(s). The margin pledged is a function of Maximum Trading Leverage Ratio. The higher the leverage, the lower the pledged Margin. The lower the leverage, the higher the Margin needed to carry the position.
Mathematically, Margin = Open Position Amount / Maximum Trading Leverage Ratio. For example, a EURUSD 100,000 EUR position at Maximum Trading Leverage Ratio 1:500 will require pledged Margin equal to 100,000/500 or €200.
Note: To calculate margins for currency pairs, where USD is NOT the Base (First) Currency (e.g. EURUSD, GBPUSD…) and crosses (EURJPY, GBPJPY…), the Margin amount is converted into USD using the average exchange rate(s).
Example: Customer buys 1 lot of EURGBP when the price is 0.8300. The average exchange rate EURUSD is 1.2905. Therefore, margin requirements for 100 000 EUR with leverage 1:500 is €200 (100 000 / 500 = 200). The margin requirements in USD is €200 multiply by the exchange rate EURUSD 1.2905 and equals €200 * 1.2905 = 258.1 USD
A demand for additional funds to be deposited in a Forex account to meet margin requirements because of adverse exchange rate movements.
Index characterizing the Forex account, calculated as: Equity/Margin.
Mark to Market
The daily adjustment of a Forex account to reflect unrealized profits and losses.
A market maker is a person or firm authorized to create and maintain a market in an instrument.
A Market Order is an order to buy or sell a chosen currency pair at the current market price. A Market Order will be executed at the price displayed at the moment user clicks the “Place” button, but only if the currency price remains within a price range (for example, 5 pips) set by the PAXFOREX.
The Market Watch is the section in the Digibits Window that displays the quotes of major currencies and crosses and allows access to Digibits charts.
Maximum Trading Leverage Ratio
Leverage expressed as a ratio, available to open a new position(s). For example, a leverage ratio of 1:500 allows a client the ability to control a $100,000 lot position with $200 of margin ($100,000 / 500 = $200).
A way of smoothing a set of price/rate data by taking the average price of data range of values.
OCO Order (One Cancel the Other Order)A One Cancels the Order is a Stop and Limit orders set simultaneously, whereby once either one is executed, the other is canceled. For example, an OCO may be place to close an existing position either with a Limit (take profit), or with a protective Stop (stop loss).
OfferThe price at which a dealer is willing to sell. The Offer is also called the Ask or Ask Price.
Offered market – Temporary situation where offers exceed bid.
Old lady of Threadneedle Street, a term for the Bank of England, the central bank of England.
Omnibus Forex Account
An Forex account maintained by one broker with another in which all of the Forex accounts of the former are combined and carried only in its name, rather than designated separately.
Deal of purchase (sale) not covered by the opposite sale (purchase) of the contract.
An option is a derivative financial instrument that establishes a contract between two parties concerning the buying or selling of an asset at a reference price during a specified time frame. During this time frame, the buyer of the option gains the right, but not the obligation, to engage in some specific transaction on the asset, while the seller incurs the obligation to fulfill the transaction if so requested by the buyer. The price of an option derives from the value of an underlying asset (commonly a stock, a bond, a currency or a futures contract) plus a premium based on the time remaining until the expiration of the option. Other types of options exist, and options can in principle be created for any type of valuable asset.
An option which conveys the right to buy something is called a call; an option which conveys the right to sell is called a put. The price specified at which the underlying may be traded is called the strike price or exercise price. The process of activating an option and thereby trading the underlying at the agreed-upon price is referred to as exercising it. Most options have an expiration date. If the option is not exercised by the expiration date, it becomes void and worthless.
Clients directions either electronically via the Digibits Trading Platform, verbally to enter into a specific CFD contract with Digibits by buying or selling a specified CFD now or at a time when the price meets the clients specific requirements.
OTC Margined Foreign Exchange
Over-the-Counter (Off-exchange) Foreign Exchange markets, in which markets participants, such as PAXFOREX, enter into privately negotiated Contracts or other transactions directly with each other for which margin is deposited and pledged against outstanding positions.
A deal from today until the next business day.
QuoteConsists of the Bid and Ask for a currency pair, stocks, CFDs contract and etc.
SecuritySecurity is a financial instrument representing financial value. It’s broadly categorized into:
– Debt securities such as:
o Banknotes and bonds
– Derivatives contracts:
o like forwards, futures, options.
– Equity securities
Same day transactionA transaction that matures on the day the transaction takes place.
Specifies the lowest price at which the sale of Base Currency in a Currency Pair can be executed. The limit price in a Sell limit order should be ABOVE the current ASK price.
A Sell Stop is a Stop Order that is placed BELOW the current Bid price and is not activated until the market Bid price is at or below the stop price. The sell stop order, once triggered, becomes a market order to sell at the current market price.
The date by which an executed order must be settled by the transference of instruments or currencies and funds between buyer and seller.
Having an open position that was created by selling a currency. If the client sold the EURUSD, he is said to be “Short” the currency pair (sold the base currency). If a client bought the EURUSD, he would be long the currency pair, but short USD currency. Foreign exchange transactions assume being long one currency and short another.
Buying to unwind a short position of a particular currency pair
Sophisticated Foreign Exchange Investor
Investor possessing sufficient knowledge, experience and/or capitalization to trade in Foreign Exchange market or other financial markets. The investor has to decide for him/herself if CFD on foreign exchange, CFD on spot metals, CFD on stock, CFD on futures and other financial derivatives are suitable investment vehicle for his or her purposes.
(1) Risk of default on a sovereign loan; (2) Risk of appropriation of assets held in a foreign country.
Trading CFD is speculative in that there is no guarantee that those who invest in Foreign Exchange or other derivatives will make any money. The conditions also exist that the client can lose his entire deposited margin making trading FX highly speculative. Those who trade Foreign Exchange or other derivatives should only risk that capital which is considered risk capital, defined as the amount of which if lost would not, change the Customer’s lifestyle or the Customer’s family’s lifestyle.
Spot or Spot date refers to the spot transaction value date that is two business days from the deals Trade Date. In instances where there is holiday, weekend or other day when the banks in the countries represented by the currencies in the currency pair are closed, the spot date will be adjusted forward to the next value date where the banks are open. In the case of US Dollar versus the Canadian dollar, the spot date is 1 business day forward from the Trade Date.
The price at which a currency pair is currently trading in the spot market.
Spot Settlement Basis
The standardized settlement procedure for foreign exchange transactions that sets the value date 2 business days forward from the Trade Date (see: Spot).
The difference between the bid and ask price for a CFD on foreign currency price, stocks, metals, commodities, indexes and etc.
The condition whereby the client’s purchases and sales are in balance and there is no open position.
A speaker connected to a phone often used in broker trading desks.
British pound, otherwise known as cable.
Stop loss order
A specific order entered by the client to close out a position if the price moves in the opposite direction of the position by a certain amount of pips. In most cases Stop Orders are executed as soon as the market reaches or goes through the Customer set Stop Price level. Once issued, the stop order will be held pending until the stop price is reached. Stop orders may be used to close out a position (Stop Loss), to reverse a position, or open a new position. The most common use is to protect an existing position (by limiting losses or protecting unrealized gains). Once the market hits or goes through the stop price, the order is activated (triggered) and Digibits will execute the order at the next available price. Unlike a Limit Order, a Stop Order does not guarantee execution at the stop price. Market conditions including volatility and lack of volume may cause a Stop order to be executed at a price different than the order.
Stop Price Level
The client entered price that activates a Stop Loss Order.
The stock of business entity represents the original capital paid into or invested in the business by its founders.
Stop out level/ Margin Call
Such condition of the Forex account when the open positions are forcedly closed by the Company at current prices.
SWAP or Rollover
At the end of each business day, Digibits will automatically debit or credit, all existing open positions, depending on the interest rate differential between the base currency and the counter currency and the direction of the client’s position. For example, if the client is long a currency pair where the overnight rate for the base currency is higher than the counter currency, the client will earn a small credit for positions held overnight. If the opposite is true, the client Forex account will be debited for the difference in the interest rate differential. The fundamental reason is if a client is long a higher yielding currency, he should benefit from being able to invest and earn a higher return overnight than what he has to pay for being short the lower yielding currency.
The credit (in base currency terms) added to a client’s Forex account that is long a higher yielding currency overnight.
The debit subtracted from a client’s Forex account that is long a lower yielding currency overnight.
Society for World-wide Interbank Telecommunications is Belgian based company that provides the global electronic network for settlement of most foreign exchange transactions. The society is also responsible for the standardization of the currency codes used for confirmation and identification purposes (i.e.. USD = US Dollars, EUR = The Euro, JPY = Japanese Yen)
Market slang for Swiss Franc.
Uncovered positionAnother term for an open position.
Underlying instrument / assetIt could be an instrument such as foreign currency, bonds, or shares or stocks or a commodity such as gold, crude oil, coffee, or even sugar. Whatever the underlying asset involved, it is by nature valuable on its own and very easy to sell.
Unrealized PL is the real time profit or loss on the current open position(s), given the current exchange rate(s). NOTE: The Unrealized PL is calculated using the price that the client would need to deal on to liquidate the position. For example, if the client were long EURUSD, the client would need to sell at the Bid side of the current market. PL is unrealized until the position is closed out. The PL will then be added or subtracted from the Cash on Deposit to get the new Cash on Deposit amount.
A transaction executed at a price greater than the previous transaction.
The legal tender of the United States of America.