The difference between the price of a derivative contract and the underlying cash market price. Fair value means there are no arbitrage opportunities between the two prices.
The Federal Reserve Bank, the central bank of the United States, or the FOMC (Federal Open Market Committee), the policy-setting committee of the Federal Reserve.
Figure / The figure
Refers to the price quotation of ’00’ in a price such as 00-03 (1.2600-03) and would be read as ‘figure-three.’ If someone sells at 1.2600, traders would say ‘the figure was given’ or ‘the figure was hit.
When an order has been fully executed.
Fill or kill
An order that, if it cannot be filled in its entirety, will be cancelled.
First In First Out (FIFO)
All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.
One of approximately 5 times during the FX trading day when a large amount of currency must be bought or sold to fill a commercial customer’s orders. Typically these times are associated with market volatility. The regular fixes are as follows (all times NY):
5:00am – Frankfurt
6:00am – London
10:00am – WMHCO (World Market House Company)
11:00am – WMHCO (World Market House Company) – more important
8:20am – IMM
8:15am – ECB
Flat or flat reading
Economic data readings matching the previous period’s levels that are unchanged.
Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 and then sold $500,000, thereby creating a neutral (flat) position.
Floating Exchange Rate
When the value of a currency is allowed to fluctuate according the market forces controlling the demand and supply of that particular currency.
Federal Open Market Committee, the policy-setting committee of the US Federal Reserve.
Foreign exchange (forex, fx)
The simultaneous buying of one currency and selling of another. The global market for such transactions is referred to as the “forex” or “FX” market.
The type of account a forex trader opens with a retail forex broker. Forex accounts come in many forms, but the first that is opened is often the forex demo account.
An examination of the changes in the forex market that are used by a trader to determine whether to buy or sell a currency pair at any time. Forex analysis could be technical in nature, using charting tools, or fundamental, using economic indicators and/or news-based events.
A trading strategy that is used by forex traders who attempt to make a profit on the inefficiency in the pricing of currency pairs. The strategy involves reacting quickly to opportunities, and is usually accomplished through the use of computers.
Firms that provide currency traders with access to a trading platform that allows them to buy and sell foreign currencies. A currency trading broker, also known as a retail forex broker, or forex broker, handles a very small portion of the volume of the overall foreign exchange market. Currency traders use these brokers to access the 24-hour currency market.
Forex Charting Software
An analytical, computer-based tool used to help currency traders with forex trading analysis by charting the price of various currency pairs along with various indicators. Forex charting software packages are used by many traders to determine the direction on any given currency pair.
A charting package that allows a trader to view historical currency exchange rates. Currency charts are provided within forex charting software, which usually comes free of charge when a trading account is opened with a forex broker. As with charts used for trading other securities, like stocks or futures, they are used primarily by the technical analyst, or chartist.
A transaction implemented by a forex trader to protect an existing or anticipated position from an unwanted move in exchange rates. By using a forex hedge properly, a trader who is long a foreign currency pair can be protected from downside risk, while the trader who is short a foreign currency pair can be protected against upside risk.
Forex Market Hours
The hours during which trading takes place and forex market participants are able to buy, sell, exchange and speculate on currencies. The forex market is open 24 hours a day and five days a week. Due to the fact that the market operates in multiple time zones, trading can take place at any time.
Forex Pivot Points
A set of indicators developed by floor traders in the commodities markets to determine potential turning points, also known as “pivots”. Forex pivot points are calculated to determine levels in which the sentiment of the market could change from “bullish” to “bearish.” Currency traders see pivot points as markers of support and resistance.
A trading strategy used by forex traders to buy a currency pair and then to hold it for a short period of time in an attempt to make a profit. A forex scalper looks to make a large number of trades and earn a small profit each time.
Forex Signal System
A set of analyses that a forex trader uses to determine whether to buy or sell a currency pair at any given time. Forex signal systems could be based on technical analysis charting tools or news-based events.
Forex Trading Robot
A computer program based on a set of forex trading signals that helps determine whether to buy or sell a currency pair at any one time. Forex robots are designed to remove the psychological element of trading, which can be detrimental.
An abbreviation of foreign exchange.
The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.
The pips added to or subtracted from the current exchange rate to calculate a forward price.
A name for the index of the top 40 companies (by market capitalization) listed on the French stock exchange. FRA40 is also known as CAC 40.
The activities carried out by the dealer, normal trading activities.
The name of the UK 100 Index.
A sum of money or other resources saved or made available for a specific purpose.
The assessment of all information available on a tradable product to determine its future outlook and therefore predict where the price is heading. Often non-measurable and subjective assessments, as well as quantifiable measurements, are made in fundamental analysis.
A contract to buy a commodity or security on a future date at a price that is fixed today. Unlike forward contracts, futures are generally traded on organized exchanges and are marked to market daily.
An obligation to exchange a good or instrument at a set price and specified quantity grade at a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange- Traded Contacts – ETC), versus Forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.