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Glossary of Forex Trading Terms N - S

- N -

Net Position - The amount of currency bought or sold which have not yet been offset by opposite transactions.

- O -

Odd Lot - A non standard amount for a transaction.

Offer - The price at which a seller is willing to sell. The best offer is the lowest such price available.

Offset - The closing-out or liquidation of a futures position.

Off-shore - The operations of a financial institution which although physically located in a country, has little connection with that country's financial systems. In certain countries a bank is not permitted to do business in the domestic market but only with other foreign banks. This is known as an off shore banking unit.

Overnight limit - Net long or short position in one or more currencies that a dealer can carry over into the next dealing day. Passing the book to other bank dealing rooms in the next trading time zone reduces the need for dealers to maintain these unmonitored exposures.

Overnight - A deal from today until the next business day.

- P -

Parity - (1) Foreign exchange dealer's slang for your price is the correct market price. (2) Official rates in terms of SDR or other pegging currency.

Parities - The value of one currency in terms of another.

Pegged - A system where a currency moves in line with another currency, some pegs are strict while others have bands of movement.

Pip - One unit of price change in the bid/ask price of a currency. For most currencies, it denotes the fourth decimal place in an exchange rate and represents 1/100 of one percent (.01%).

Position - 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).

Profit Taking - The unwinding of a position to realize profits.

- Q -

Quote - An indicative price. The price quoted for information purposes but not to deal.

- R -

Rally - A recovery in price after a period of decline.

Range - The difference between the highest and lowest price of a future recorded during a given trading session.

Rate - (1) The price of one currency in terms of another, normally against USD. (2) Assessment of the credit worthiness of an institution.

Reaction - A decline in prices following an advance.

Reciprocal currency - A currency that is normally quoted as dollars per unit of currency rather than the normal quote method of units of currency per dollar. Sterling is the most common example.

Resistance Point or Level - A price recognized by technical analysts as a price which is likely to result in a rebound but if broken through is likely to result in a significant price movement.

Revaluation - Increase in the exchange rate of a currency as a result of official action.

Revaluation rate - The rate for any period or currency which is used to revalue a position or book.

Risk management - The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to foreign exchange involves among others consideration of market, sovereign, country, transfer, delivery, credit, and counterparty risk.

Risk Position - An asset or liability, which is exposed to fluctuations in value through changes in exchange rates or interest rates.

Rollover - An overnight swap, specifically the next business day against the following business day (also called Tomorrow Next, abbreviated to Tom-Next).

Round trip - Buying and selling of a specified amount of currency.

- S -

Same day transaction - A transaction that matures on the day the transaction takes place.

Selling rate - Rate at which a bank is willing to sell foreign currency.

Settlement date - The date upon which foreign exchange contracts settle.

Settlement Risk - Where a payment is made to a counter party before the counter value payment has been made. The risk is that the counter party's payment will not be received.

Short sale - The sale of a specified amount of currency not owned by the seller at the time of the trade. Short sales are usually made in expectation of a decline in the price.

Short-term interest rates - Normally the 90 day rate.

Sidelined - A major currency that is lightly traded due to major market interest being in another currency pair.

Slippage - Refers to the negative (or depreciating) pip value between where a stop loss order becomes a market order and where that market order may be filled.

Soft Market - More potential sellers than buyers, which creates an environment where rapid price falls are likely.

Spot - (1) The most common foreign exchange transaction. (2) Spot or Spot date refers to the spot transaction value date that requires settlement within two business days, subject to value date calculation.

Spot next - The overnight swap from the spot date to the next business day.

Spot price/rate - The price at which the currency is currently trading in the spot market.

Spread - (l)The difference between the bid and ask price of a currency. (2) The difference between the price of two related futures contracts.

Square - Purchase and sales are in balance and thus the dealer has no open position.

Squawk Box - A speaker connected to a phone often used in broker trading desks.

Squeeze - Action by a central bank to reduce supply in order to increase the price of money.

Stable market - An active market which can absorb large sale or purchases of currency without major moves.

Standard - A term referring to certain normal amounts and maturities for dealing.

Sterilization - Central Bank activity in the domestic money market to reduce the impact on money supply of its intervention activities in the FX market.

Sterling - British pound, otherwise known as cable.

Stocky - Market slang for Swedish Krona.

Stop-Loss order - Order to buy or sell at the best available price when a given price threshold has been reached.

Support levels - When an exchange rate depreciates or appreciates to a level where (1) Technical analysis techniques suggest that the currency will rebound, or not go below; (2) the monetary authorities intervene to stop any further down ward movement. See resistance point.

Swap price - A price as a differential between two dates of the swap.

Swap - The simultaneous purchase and sale of the same amount of a given currency for two different dates, against the sale and purchase of another. A swap can be a swap against a forward. In essence, 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 in the price differential between the two sides of the transaction.

Swissy - Market slang for Swiss Franc.

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