FOREX GLOSSARY

Below is the list of glossary that is commonly used in forex .trading for your easy reference Appreciation - A currency is said to 'appreciate' when it .strengthens in price due to market demand Arbitrage - The simultaneous buying and selling of an equal and opposite position in a related market, in order to take .advantage of small price differentials between markets Ask (Offer) Price - The price at which the market is prepared to sell a specific Currency in the Foreign Exchange. For example, in the quote GBP/USD 1.7625/29, the ask price is 1.7629; meaning .you can buy one Great British Pound for 1.7629 U.S. Dollar Bar Chart - A type of chart which consists: the high and the low prices, which form the vertical bar. Closing price and opening .price are represented by a right tick and a left tick respectively Bear Market - Declining trend or prices Bid Price - The bid is the price at which the market is prepared to buy a specific Currency in a Foreign Exchange. For example, in the quote GBP/USD 1.7625/29, the bid price is 1.7625; meaning .you can sell one Great British Pound for 1.7625 U.S. Dollar Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission in a financial market .Bull Market Rising trend or prices Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price and represents

the high and the low of certain period with wicks at the upper and .the lower extreme Carry Trade The simultaneous selling of a currency with a low interest rate, while purchasing currencies with higher interest rates. Examples are the JPY crosses such as GBP/JPY and .EUR/JPY Central Bank - A bank, administered by a national government, which regulates the behavior of financial institutions and manages a country's monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank .is the Bundesbank Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future .movements Closed Position - The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This results in liquidation (squaring up) of the .position .Commission - A transaction fee that a broker may charge clients Confirmation - A document exchanged by counterparts to a .transaction that states the terms of said transaction Currency - Any form of money issued by a government or .central bank and used as legal tender and a basis for trade Daily Charts - Each bar or candle in a chart represents the daily .price movements

Day Trading - A short term trading style. Refers to open and .closing out positions within the same day Dealer - An individual or firm that acts as a principal or .counterpart to a transaction Depreciation - A fall in the value of a currency due to market .forces Devaluation - The deliberate downward adjustment of a .currency's price, normally by official announcement Divergence - When an indicator and a price chart dont yield the .same peaks/bottoms. It is an indication of the trend exhaustion Economic Indicator - A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product .(GDP), inflation, etc End Of Day Order (EOD) - An order to buy or sell at a specified price. This order remains open until the end of the .trading day which is typically 5PM ET European Central Bank (ECB) - the Central Bank for the new .European Monetary Union .Federal Reserve (Fed) - The Central Bank for the United States .Fill Price - The price at which a buy or sell order was executed Federal Open Market Committee (FOMC) The committee that sets money supply targets in the U.S. which tend to be .implemented through Fed Fund interest rates etc

Forward Points - The pips added to or subtracted from the .current exchange rate to calculate a forward price Fundamental Analysis - Analysis of economic and political information with the objective of determining future movements .in a financial market G7 - The seven leading industrial countries, being US , Germany, .Japan, France, UK, Canada, Italy Going Long - The purchase of a stock, commodity, or currency .for investment or speculation Going Short - The selling of a currency or instrument for .speculation 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 income .earned from investment or work abroad Good Till Cancelled Order (GTC) - An order to buy or sell at a specified price. This order remains open until filled or until the .client cancels Hedge - A position or combination of positions that reduces the .risk on an existing investment position .High/Low - Refers to the high and low of a certain period Hourly Chart - Each bar or candle in a chart represents the .hourly price movements

Inflation - An economic condition whereby prices for consumer .goods rise, eroding purchasing power Initial Margin - The percentage of the price of a security or .amount of money required to enter a transaction .Interbank Rate - The rate at which the major banks trade Intervention Action taken by central banks to affect its .currency Leading Indicators - Statistics that are considered to predict .future economic activity Liquidation - The closing of an existing position through the .execution of an offsetting transaction Liquidity - The ability of a market to accept large transaction .with minimal to no impact on price stability Long position - A position that appreciates in value if market .prices increase Margin - The required equity that an investor must deposit to .collateralize a position Margin Account An account that allows leverage buying on credit and borrowing on currencies already in the account. Interest is charged on any borrowed funds and only for the period .of time that the loan is outstanding Margin Call - A request from a broker or dealer for additional funds. It occurs when the value of a trading account falls below .the maintenance margin

Market Maker - Institution willing to buy and sell at the quoted .bid and ask prices .Market Risk - Exposure to changes in market prices One Cancels the Other Order (OCO) - stands for one cancels other order. Through the execution of this order, cancels the .other part of the same order Open position - An active position (long or short) with corresponding unrealized P&L, which has not been offset by an .equal and opposite deal Over the Counter (OTC) - Transactions are not conducted over .an exchange Overnight Position - A trade that remains open until the next .business day .Order - An instruction to execute a trade at a specified rate Price Transparency The ability of all market participants to .see or deal at the same price .Rally - A recovery in price after a period of decline Resistance - Price level at which a currency pair had trouble breaking through. At this level the sellers gained control of the market outnumbering the buyers. If the price approaches to this .level again, the market is likely to hold again Retracements - Correction phase after a considered uptrend or .downtrend

Risk Management - the employment of financial analysis and trading techniques to reduce and/or control exposure to various .types of financial risk Roll-over - Settlement of a transaction is rolled forward to another value date, the cost of this is the interest rate differential .between the two currencies Settlement - The process by which a trade is entered into the .books and records of the counterparts to a transaction Short Position - An investment position that benefits from a .decline in market price Slippage - This occurs when the market orders (including stop losses) are not getting filled at ones expected price. This happens when the market moves too fast for the broker to execute the .order close to the expected price .Spread - The difference between the bid and ask price Support - Price level at which a currency pair had trouble breaking through. At this level the buyers gained control of the market pushing the prices higher. If the price approaches to this .level again, the market is likely to hold again Swap - A transaction which moves the maturity date of an open .position to a future date Swing Trading A type of trading that attempts to capture profits from a financial market by leaving the position open for more than a day. Forex Trading To Riche$ 2008 ForexTradingPower.com 55

Technical Analysis A technique used to try and predict future movements of a currency pair based solely on past price .movements and volume data

Transaction Costs - The costs incurred by a trader when buying .(or selling financial instruments (spread, commissions, etc .Transaction Date - The date on which a trade occurs Turnover - The number or volume of transactions traded over a .specific period of time Two-Way-Price - When both, bid and ask prices are quoted in a .transaction Variation Margin Funds, which are required to bring the equity in a trading account back up to the initial margin level, .calculated on a day-to-day basis Value Date - The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., .exchanging payments Volatility (Vol) - A statistical measure of a market's price .movements over time Weekly charts - Charts for which each candlestick or bar .represents the data of one week movements Whipsaw - Describes highly volatile price movements and .reversals in the market