Basic Terms

1.Currency Pair

Money is a country custom currency. The most common trading of eight currencies (USD , JPY, GBP, CHF, CAD, AUD, NZD) are called major currencies and all other currencies are called To currency. The currency pair is the currency of two currencies that cross the currency quoted, for example EUR / USD .

2.Direct Trade

Refers to the international foreign exchange market, a country’s currency is directly exchanged with the dollar is straight, simple to understand: all direct contact with the dollar are straight, for example: EUR / USD, USD / CAD and so on.

3.Cross Pair / Cross Trade

There is no US dollar for the cross currency exchange rate offer, which is not linked to the dollar, such as (EUR / GBP), (GBP / JPY).

4.Exchange Rate

Foreign exchange rate (FXRate, Foreign Exchange Rate) is the currency of another country to represent the price of the currency, such as USD / CHF exchange rate of 1.0022, it means that 1 US dollars equal to 1.0022 Swiss francs.

5.Big Chart Quote

Refers to the first few digits of the exchange rate. These figures are rarely changed in normal market volatility and are therefore often omitted from the quotation of traders, especially when the market activity is frequent. For example, the dollar / yen exchange rate is 107.30 / 107.35, but in the oral quotation is not the first three digits, only reported “30/35”.

6.Fixed Exchange Rate

Fixed exchange rate is based on the amount of gold in the currency, forming a fixed ratio between the exchange rate. This exchange rate is either adjusted by the input and output of gold, or under the control of the monetary authorities, fluctuates within the statutory range, and thus has relative stability. It is basically fixed, the exchange rate fluctuation is limited to a defined range of exchange rates.

7.Floating Exchange Rate

Floating exchange rate refers to the exchange rate of a country’s currency according to the market money supply and demand changes, let its free fluctuations, governments and central banks in principle, no restrictions, nor to assume the obligation to maintain the exchange rate stability, The exchange rate is the floating exchange rate system. Its formal universal implementation, is the 20th century, the late 70s after the dollar crisis intensified after the start.

8.Cross Rate

Refers to the development of the basic exchange rate, the local currency exchange rate for other foreign currencies can be applied through the basic exchange rate, so that the exchange rate is the cross exchange rate, also known as the exchange rate (also called cross-disk). Foreign exchange transactions often involve two non-dollar currencies trading, while the international financial market quotations are mostly dollars in another currency quotation, this time, the need for exchange rate sets.

9. Inter-Bank Rate

Also known as inter-bank exchange rate, refers to the inter-bank foreign exchange trading exchange rate. It is higher than the buying rate, lower than the selling rate, generally between the two in the middle of the price. Foreign exchange banks to the interbank exchange rate plus a certain difference after the decision on the customer exchange rate. The bank exchange rate is the wholesale price and the customer exchange rate is the retail price.

10. Base Currency / Quoted Currency

According to the definition of exchange rate, its expression is a unit of the base currency can be exchanged for the number of units of the standard currency, that is: the number of fixed-price method under the fixed currency is called the base currency (Base Currency), the number of changes in the currency is the standard currency (Quoted Currency). For example, EUR / USD is quoted at 1 euro equal to the number of dollars, so the benchmark currency is EUR, the price of USD .

11. Direct Quotation

Also called to meet the price, that a certain unit (usually 1) of the foreign currency as the standard, to calculate how much of the domestic currency to pay the offer. That is, the national currency as the standard currency, foreign currency as the benchmark currency. The vast majority of countries in the world use the direct price method, USD / JPY 113.307, that $ 1 = 113.37 yen.

12. Indirect Quotation

Also called the receivable price, that a certain unit (usually 1) of the national currency as the standard, to calculate how much foreign currency should be quoted. That is, the national currency as the benchmark currency, foreign currency as the standard currency, such as GBP / USD 1.06025, that 1 pound = 1.06025 US dollars

13. Interest Rate Swap

Interest rate swap refers to the exchange of interest rates and floating interest rates in the same amount of funds with the same amount of money, the same amount of debt (the same principal) and the same maturity. This exchange is the two sides, such as Party A to a fixed interest rate in exchange for the floating rate of Party B, Party B at the floating rate in exchange for a fixed rate of Party A, so called interchangeable. The purpose of interchange is to reduce capital costs and interest rate risk.

14. Currency Swap

Currency swaps refers to the same amount of money, the same period, the same interest rate method, but the currency of the exchange of different debt funds, but also for different interest rates of currency exchange. In simple terms, the exchange of money between the two currencies is the currency, the debt and debt relationship between them has not changed.

15. Currency Warrant

There are currently six currency warrants, including AUD / USD AUD / USD, USD / JPY USD / JPY (C) and Put Warrants (P) to choose from. Example, USYEN @ EC809, US on behalf of the dollar, YEN on behalf of the yen, C for the subscription, if the subscription card is optimistic about the dollar, bearish yen; put the card is a bearish dollar, optimistic about the yen. Optimistic about the same one at the same time bearish another.

16. Transaction Costs

The difference between the bid price and the selling price is also the cost of a trading round. A trading round refers to a buy (or sell) transaction of the same number, the same currency pair, and a sell (or buy) transaction that is used to offset. In the example of EUR / USD in Table 4.1, the transaction cost is three points. The formula for calculating transaction costs is: transaction cost = selling price – bid price

17. Rollover

The rollover is the process of extending the original delivery date of a transaction to another date. The cost of this process is determined by the difference between the two currencies.
Forex trading with margin can increase your purchasing power. If your margin account has $ 2,000 and the allowable leverage is 100: 1, you can get a maximum bid of $ 2,000,000 in foreign exchange because you only have to pay one percent of the purchase price as a mortgage The In other words, you have a purchasing power of $ 2,000,000.

18. Option

Option means that the right to buy or sell a certain quantity of a particular commodity at a particular price at a particular time in the future. It is a financial instrument based on the futures, giving the buyer (or holder) the right to buy or sell the underlying asset. The holder of the option may choose the right to buy or not to buy, sell or not to sell within the time limit of the option, he may enforce the right, or give up the right, and the seller of the option only has an option contract The obligation to specify. There are stock options, stock options, interest rate options, commodity options, and foreign exchange options, depending on the subject matter on the option contract.

19. Binary Options

Also known as digital options, fixed income options, is the transaction form of the most simple one of the financial trading tools. There are only two possible outcomes of the binary option at maturity, based on whether the underlying asset is below or below the strike price for a specified period of time (for example, the next hour, day, week, etc.) income. If the underlying asset moves to meet the pre-determined start conditions, the binary option trader will receive a fixed amount of income, otherwise the loss of a fixed amount of part of the investment, that is, fixed income and risk.

20. Interest Arbitrage

Interest Arbitrage refers to the investor or borrower at the same time using the difference between the two interest rates and currency exchange rate difference, the flow of capital to make a profit. Arbitrage is divided into offset arbitrage and non-offset arbitrage two.

21. Arbitrage of exchange

Arbitrage of exchange refers to the use of different foreign exchange market foreign exchange difference in a foreign exchange market to buy a currency, while in another foreign exchange market to sell the currency to earn profits. In the set of foreign exchange market due to the number of different, divided into two sets of arbitrage, triangular sets of arbitrage and multi-angle arbitrage.

22. Counterparty

In the foreign exchange market transactions, want to buy a product, must also have another person to sell the product, the transaction can be reached, this supply and demand to form a liquidity, and the recipient of the order has become a counterparty. In other words, when you make money, the counterparty lose money; when you lose money, the opponent to win money. When the broker becomes the customer’s counterparty, it is the B-book model; when the broker’s first-level liquidity provider: medium-sized banks, market makers and other customers to become the counterparty, is the A-Book.

23. A-Book / B-Book

When the broker becomes the customer’s counterparty, it is the B-book model; when the broker’s first-level liquidity provider: medium-sized banks, market makers and other customers to become the counterparty, is the A-Book.

24. Pending Order

Pending order refers to the customer specified transaction currency, the amount and the transaction target price, once the offer to meet or exceed the customer specified price, that is, the implementation of the customer’s instructions to complete the transaction, the transaction price for the bank’s real offer. The linked rate should be better than our current exchange rate, otherwise, press the real-time exchange rate. The pending order is valid on that day. Before the transaction, the customer can also take the initiative to withdraw the unsetting instructions. After the order is made, the amount of the pending order is immediately frozen and the amount can not be used for payment or other purposes during the trading day unless the transaction is canceled.
There are four types of pending orders: buy limit , sell limit, buy stop , sell stop .

25. Slippage

Slippage refers to a transaction or pending order transactions, the actual order transaction price and the difference between the default price of a transaction phenomenon. Because the transaction through the Internet, are inevitably the emergence of investors – the server – the bank between the three times or even the price confirmation so there will be a slippage. At the same time lack of liquidity, market volatility, large data released when the reasons are caused by slippage.

Risk Disclaimer:Forex margin trading carries a high level of risk to your capital, may not be appropriate for all investors. Investors shall carefully consider your financial condition and affordability before trading any financial product. Trading could lead to profits as well as loss of your investment capital, you may lose all your initial invested capital. Please ensure you've read all the risk warning before trading.

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