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FOREX Lexicon Dictionary

Many of the terms used are English speaking. As a result, some people may not understand the words used by brokers and others in relation to the Forex market. This lexicon will try to clarify some of your questions about Forex

At the Price Stop-Loss Order

A Stop-Loss order that will be executed at the requested rate regardless of market conditions.

Ask Price

Ask for price, this is the lowest price acceptable to the buyer.

Bull Market

A market characterized by rising prices.


The commission earned by a broker.


An agent, who executes orders to buy and sell currencies and related tools for a commission or on a trade. Brokers are agents who work on commission, not directors or agents acting on their own account. In the foreign exchange market the broker tries to act as an intermediary between banks bringing together buyers and sellers for a commission paid by the originator or by both parties. There are four or five main brokerage operations, by subsidiaries and associates of subsidiaries in many countries.

Break Even Point

The price of a financial value at which the option buyer recoups his stake, meaning that he is making neither a loss nor a gain. In the case of a call option, the breakeven point is the strike price plus the stake.

Bid Price

The bid is the highest price the seller offers for a particular currency at a specific time. The difference between demand and supply is the spread. Together the two prices constitute a quote, the difference between the two is the spread. The supply-demand spread is reported as a percentage cost to deal in currency exchange (Forex).

Bear Market

A market in which a price reduction suddenly appears against a background of widespread pessimism (opposite of the bull market).


The type of money a country uses. It can be exchanged for other currencies in the forex market, so each currency has a relative value to others.


A transaction where the purchase of one security and the sale of another are the same, or the purchase of a security and its sale belong to the same trader.


An agreement to buy or sell for a specified quantity of a particular currency or option during a specified month at a future date (see the futures contract).

Contract Expiration Date

The date by which a change must be provided to fulfill the contractual clauses. For options, the last day on which the option holder can exercise his right to buy or sell a trade value or currency.


The fees that a broker can charge to his clients to take care of the management of their financial wealth on their behalf.

Closed Position

A transaction that leaves the trade with a net zero commitment in the market with respect to a particular currency. The act of taking profits or losing money when stopping a transaction in the Forex market.

Day Trading

A daily foreign exchange transaction which is a foreign exchange transaction that automatically renews every night at 22:00 (GMT time) starting on the day the position was taken until the time it is closed. The transaction ends in one of the following events :

1. Fence initiated by you.
2. The daily exchange rate has reached your preset Stop-Loss rate.
3. On the date of the end of the transaction chosen by you.

As long as the transaction is open, it is charged with renewal commissions every night at 22:00 GMT.


The total amount of money loaned to a borrower or country. Banks have placed rules to prevent overexposure to any single borrower. In trading operations, it is the potential to run a profit or a loss from fluctuations in market prices.


A currency much less traded on the Forex market.

Exchange Rate Risk

The potential loss that could be incurred from an unfavorable movement in the exchange rate.

Economic Indicator

Statistics that shows current economic growth rates and trends like retail sales and employment.

FX – Foreign Exchange

Foreign currency exchange, Forex.

Futures Contract

A contract traded on a futures exchange that requires delivery of a defined quality and quantity of a commodity, currency, or instrument for a specified number of months, if not liquidated before the contract n ‘expires.

Fundamental Analysis

Analysis based on economic and political factors.

Forward Rate

The rate at which a foreign currency contract is finalized today for settlement of a future specified date and which is decided at the time of entry into the contract. The decision to subtract or add points is determined by the difference between the security deposit rate for the two currencies involved in the transaction. The base currency with a higher interest rate will be deducted from the quoted currency by a lower interest rate in the market at its term. At the end of the transaction, the forward points are subtracted from the purchase rate. Likewise, the currency on purchase with a lower interest rate will be calculated, and the forward points are added to the starting rate to obtain the forward rate.

Forex – Foreign Exchange

The abbreviation for foreign currency

Foreign Exchange – Foreign currency exchange

The buying or selling of one currency against the sale or purchase of another.

Intra Day Position

Open positions are used by a dealer during the day. Usually closed at the end of the day in the Forex market.

Interest Rate Swaps

An agreement to swap exposures to the “floating” or fixed interest rate and vice versa. There is no financial exchange of the amount invested at the base. The principal amount is notional as at the end of the tenure finance only gross margins related to the interest payments (whether paid or received) are exchanged.

Intra Day Position

Open positions are used by a dealer during the day. Usually closed at the end of the day in the Forex market.

Interest Rate Risk

The potential for losses resulting from changes in interest rates.

Initial Margin

The security deposit required by the broker before a client can trade / transact a deal to have some ease in the event of a trade loss.


Continuous rise in the level of general prices, together with a relative decline in purchasing power. Sometimes referred to as excessive movement in such price points.


A market position where the client has bought a currency that they have not previously owned by betting on the positive rise in the rate against the opposing currency of the pair. For example : long dollars / euro.


The ability of a market to accept large transactions without having a major impact on interest rates.

Liquidation – Position closing

Any transaction that offsets or closes a previously established position.

Limit Order – Reserved Day Trading Deal

An order to execute a Day Trading at a rate predefined by the client, when and if such a rate is reached in real market time. The limit rate is higher than the rate existing at the time of booking. The reservation order lasts for a period defined by the customer, and is associated by the collateral values necessary to facilitate the potential monetary transaction of the day, when and if activated, under the predefined conditions.


In terms of foreign currency, an obligation to provide a counterparty with a quantity of money with respect to a balance sheet standing at a specified future date or with respect to a positively unmatured transaction or position.

Margin Call

A request for additional funds to cover positions.


(1) Difference between buy and sell rates, also used to indicate the discount or premium between buy or close position.
(2) For options, the sum required as a guarantee from the author of an option.
(3) When forward contracts in security deposit made to the clearing house in order to establish a futures position account.
(4) the percentage of reservations required by the US Federal Reserve to make a first credit transaction.

Marginal Risk

The fact that a client loses his position after entering into a futures contract. In such an event the issuer must close the commitment running the risk of having to pay the movement of the margin on the contract.

Market Value

The market price of a Forex position is at all times valued on the amount of national currency that could be bought at market rate in exchange for the amount of foreign currency to be delivered under a Forex contract.


The rate at which a dealer is willing to sell the currency.

Open Position

Any transaction that has not been finalized by a physical payment or has not been reversed by an equal and opposite transaction for the same value date. It can be termed as high risk and high return proposition.


A contract conferring the right but not the obligation to buy (call) or sell (offer) a specified quantity of a value at a specified price within a predetermined period of time.

Overnight Limit

Long or short position in one or more currencies that a dealer can carry forward to the next business day. Exceeding the next business day time zone reserve reduces the need for dealers to maintain these exposures unchecked.


The value of a currency in terms of other currencies.


Get the point. (0.0001 of one unit).


(1) 100 parts of one percent, normally 10,000 of any position rate. The movement of exchange rates are usually in terms of points.
(2) One percent on an interest rate of 8-9% for example.
(3) Minimum fluctuation or smallest increment of price movement.


The total exposure in a given currency. A position can be flat or at right angles (no exposure), long, (more money bought than sold), or short (more money sold than bought).

Profit Taking

The unfolding of a position for profit.

Put Option

A placed option confers the right but not the obligation to sell currencies, instruments or futures at the strike price of the option during a predetermined period of time.


An indicative price. The quoted price for the information but not for the transaction.


The difference between the highest and the lowest price of a futures contract recorded during a given trading session.


The price of one currency against others. It has the same meaning as the limit parities.


A price level at which the sale is expected to occur.

Retail Price Index

A measure of monthly changes in the average level of retail prices, normally of a defined group of commodities.


Increase in the exchange rate of a currency due to official action.

Risk management

Identifying and accepting risks threatening the profitability or existence of a trading account. With regard to foreign currencies this involves consideration between the market, the manager, the country, the transfers, the delivery, the credit, and the risk of the counterparty.

Spot Next

When a trade made on a given day continues in its position to the next business day.


(1) The most common of transactions on the exchange of foreign currencies.
(2) Item relates to currency buying and selling where the settlement date is two business days following.


A market position where the client has sold a currency they do not yet own. Usually expressed in basic currency terms.

Settlement Date

It means the business day indicated for the delivery of currencies bought and sold under a Forex contract.


Actual physical exchange of one currency for other currencies.

Selling Rate

The rate at which a bank is willing to sell the foreign currency.

Spot Price/Rate

The price at which the currency is currently traded in the market.


(1) The difference between supply and demand on the price of a currency.
(2) The difference between the price of two associated futures contracts.
(3) For options, transactions involving two or more option series on the same currency.

Stop Loss Order

Order made to ensure that when a currency weakens to a certain percentage that a short position will be hedged even though this involves taking a loss. Profit-taking orders are less common.

Strike Price

Also called strike price. The price at which an option holder can buy or sell the base instrument.

Support Levels

A price level at which purchases are expected to take place.


Simultaneous buying and selling of the same amount of a given currency on two different dates, versus selling and buying the others. An exchange can be an exchange for a better currency. Essentially, 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 as the price differential between the two transactions.

Technical Analysis

The study of the price which reflects the factors of supply and demand of a currency. Common methods are flags, trend lines, dips, rises, pennants, patterns, and dips.

Technical Correction

A price adjustment not based on market movement but on technical factors such as volume and charts.


A minimum change in the price, up or down.

Trade Date

The date on which a transaction is agreed.


The purchase or sale of securities resulting from the execution of an order.

Transaction Date

The date on which a transaction is agreed.

Transaction Exposure

The potential profits and losses generated by current foreign exchange transactions.

Value Date

For foreign exchange contracts, the day on which the two contracting parties exchange the currencies that are sold or bought. For a spot transaction, this is two forward days in the country of the bank providing the odds that determine the date of the spot value.

The only exception to this general rule is the quotation center spot day coinciding with a bank holiday in the country or countries of the currency (s). The value date then moves one day longer. The claimant is the party who must ensure that their spot day coincides with the day applied by the respondent.

The term months must fall on the corresponding date of the relevant calendar month. If the date of a month falls on a non-working day in one of the centers, the operational date will then be postponed to the next working day common to both centers. Adjusting the due date for a particular month does not affect other due dates which will continue to fall on the original corresponding date if they meet the open day condition.

If the last spot date falls on the last business day of a month, the forward dates will correspond to that date, expiring on the last business day. Also called due date.

Variation Margin

Funds required to be deposited by a client when a price movement has caused funds to fall below the stipulated percentage of the contract value.


A measure of the amount by which an asset price is expected to fluctuate over a period of time. In principle measured by the annual standard deviation of daily (historical) price changes. It can be implied in the pricing of futures contracts, implied volatility.

Working day

A day when the banks of a major currency financial center are open. For FX transactions, a business day only occurs if the bank of both centers (All relevant currency centers in the case of a crossover) is open. Or, from Sunday 11:00 p.m. to Friday 10:00 p.m. (Paris time).


Do the words used by traders and specialists in the Forex market sometimes leave you perplexed?


Find an answer to these questions here by simply locating the first letter of the word you are looking for.


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