401. One Cancels the Other Order

Two orders that are submitted simultaneously. If either one is executed, the other one is automatically canceled.

402. Open Order

Buy or sell order that does not expire until canceled. In theory the order does not expire. However, it usually does so at the end of the trading month rather than lasting forever.

403. Open Outcry

An area of an exchange floor (called a “pit”) where buyers and sellers meet to negotiate prices. Typically seen today for only a handful of commodities such as soybeans and rice, a series of “bids” and “offers” are made until two counterparties reach an agreed price. Due to the noise and hectic activity in a busy pit, participants have developed an intricate series of hand signals used to communicate transaction details.

404. Open Position

A position whether long or short that is subject to market fluctuations and thus profits or losses. See also Closed Position

405. Options

The right, but not the obligation, to buy (long call) or sell (long put) an underlying asset.

406. Order

Instructions to buy or sell

407. Oscillators

Technical analysis tools that provide buy and sell signals, characterized by a signal that oscillates between overbought and oversold levels

408. OTC

See Over the Counter.

409. Out of the Money

When the strike price of the option is more expensive than the underlying asset’s current price

410. Over the Counter

Refers to trading that is not done over a formal exchange. Traditional forex is traded over the counter, meaning traders entered into forex transactions with one another over telephones or electronic devices. Counter refers to counterparty, in that with forex one trades with a counterparty instead of through an exchange. In online forex trading, the counterparty is the market maker.

411. Overbought

A currency pair is overbought when its price rises much more quickly than usual in response to net buying. Once overbought, the pair is then expected to make a contrarian move, meaning its price is expected to fall.

412. Overheated Economy

An economy with inflation and high interest rates.

413. Overnight

Trades that extend past the current trade day into the next.

414. Overnight Limit

The maximum amount of a net long or short position that a dealer can carry over into the next dealing day

415. Overnight Position

A dealer’s net position that is carried into the next trading day.

416. Oversold

A currency pair is oversold when its price falls much more quickly than usual, declining too far in response to net selling. Once oversold, the pair is then expected to make a contrarian move, meaning its price is expected to rise

417. Owner

The account holder, the name under which a forex account is held

418. Par

The official value of a currency

419. Par Spread

The term used to describe the situation where the bid and ask prices for a forward spread rate are identical.

420. Paris

Nickname for the US Dollar-French Franc currency pair before the French Franc was converted to the Euro.

421. Parity

See Purchasing Power Parity

422. Partial Lot

Some brokerages allow trading in partial lots, which are fractions of 100,000 units that normally make up a full lot. Trades typically range from 1 to 10,000,000 units

423. Pegged

A system where a currency’s value is tied with that of another currency. For example, the Chinese yuan with the US dollar. Most pegs are allowed to deviate within a small band.

424. Petrodollars

Refers to the forex reserves as a result of oil sold by oil producing nations

425. Pip

The smallest upward or downward price movements quoted in forex. In EUR/USD, a movement of 0.0001 is one pip (for example, from 140.005 to 140.004 euro). In USD/JPY, a movement of 0.01 is one pip (for example, from 116.32 to 116.31 yen).

426. Pipette

One-tenth of a pip. Many forex brokers quotes rates down to the pipette.

427. Point & Figure Charts

Technical analysis graphs that focus solely on price without any consideration of time

428. Political Risk

Changes in government policy or to a wider extent, government instability that might have negative effects on the currency

429. Position

A trade that is still in effect. See Open Position and Closed Position.

430. Premium

See Carry

431. Premium Spread

Refers to the situation where the bid price of a forward spread rate is greater than the ask price.

432. Price

The cost of purchasing a second currency in terms of a first currency.

433. Price Transparency

The ability of all market participants to trade at the same price.

434. Principal Value

The original amount invested.

435. Principals

Refers to the major currencies that are traded: USD, EUR, CHF, AUD, CAD, NZD, and JPY.

436. Producer Price Index

An economic indicator that gauges the month-to-month price change that producers receive for their output

437. Profit Taking

Closing a position in order to realize a gain.

438. Purchasing Power Parity

Refers to functional equivalency. It is the relationship between the amount of currency needed to buy a common good in one country and the amount needed to buy the same good in the second country. This is one way to establish an exchange rate between two currencies.

439. Put

See long put.

440. Put Writer

The writer of a put option is another name for the seller of a put.

441. Quantitative Analysis

A technique used to analyze an observed behavior by employing complex mathematical and statistical modeling, measurement, and research

442. Quantitative Easing

Quantitative easing is a monetary tool used by central banks to encourage spending within an economy. It works by making more money available to commercial banks thereby increasing the liquidity levels which “eases” the availability of money within the system. One of the most well-known instances of quantitative easing remains the Bank of Japan’s attempts to fight domestic deflation in the early 2000s. Interest rates during this time were already close to zero and further cuts could not be implemented so the Bank flooded commercial banks with excess funds to promote lending and by extension, encourage spending.

443. Quote

When both a bid and ask price are provided for a currency pair

444. Quote Currency

The second currency of two in a currency pair. For the EUR/USD, USD is the quote currency. The exchange rate quoted is how many units of the second currency you will receive for one unit of the base currency. See Base Currency.

445. Rainbow Option

An option that has two or more underlying assets. The option only pays out when all the underlying assets act accordingly.

446. Rally

A period where prices surge upward

447. Range

The difference between the highest and lowest price of a currency pair during a given trading period.

448. Rate

The price at which one currency can be bought or sold for another currency

449. Rate Differentials

The difference between the highest and lowest price of a currency pair during a given trading period.

450. Rate of Return

The percentage of money gained or lost on an investment relative to the amount of money invested.

451. Ratio Spread

Holding an unequal amount of long and short options positions. Two short and one long is a popular ratio spread strategy.

452. Reaction

When prices fall after a period of advance.

453. Realized P/L

The profit and loss that is generated by closing a position

454. Reciprocal Currency

A currency pair involving the US Dollar in which the US Dollar is not the first currency quoted. An example is the euro which is the base currency when paired with the US dollar. EUR/USD is the way of quoting these two currencies.

455. Regulated Market

A market in which a government agency monitors and regulates industry activity to protect investors. An example is forex trading in the United States.

456. Repurchase Agreements

When the central bank buys or sells a security to a government securities dealer with the promise to sell it back or repurchase it a short while later. This act has the effect of injecting or removing reserves from the banking system in order to meet central bank strategies for implementing monetary policy.

457. Resistance

Resistance Point or Level

458. Resistance Point or Level

A ceiling which prices aren’t able to penetrate because there is consistent selling activity at that price level.

459. Retail FX Market

Comprises a wide range of non-institutional traders, from large organizations to individual investors. In less than 10 years, a relatively small number of online currency brokers and market makers have had a massive effect on this market by efficiently exploiting technology, driving a five-fold decrease in the cost of trading.

460. Retail Slide

The sale of services, goods, or commodities in small quantities directly to consumers

461. Revaluation Rate

A rate, possibly historical (as in the closing rate for the previous trading day), which is used to revalue a dealer’s position or book

462. Right Hand Slide

Refers to the ask or offer price. This is the price at which traders buy

463. Risk

See Foreign Exchange Risk

464. Risk Capital

The amount of money one could risk without impinging on one’s accustomed lifestyle

465. Risk Management

The use of strategies to control or reduce financial risk. An example is a stop-loss order that minimizes maximum loss

466. Roll Over

Extending the settlement value date on an open position to the next trade date.

467. Rollover Credit

Amount credited to a trader’s account when the long currency of a currency pair has a higher yielding interest rate than the shorted currency.

468. Rollover Debit

Amount debited from a trader’s account because of an overnight rollover, when the long currency of a currency pair has a lower yielding interest rate than the shorted currency.

469. Rollover Rate

Generally, the daily rollover interest rate is the amount a trader either pays or earns, depending on the currency pairs in question..

470. Round Lot

In most cases, 100,000 units of a currency.

471. S/N Roll

See Spot/Next Roll.

472. Same Day Transaction

A position that is opened and closed on the same day.

473. Sell Short

Selling a currency pair that involves being short the base currency and long the quote currency, with the intent of buying the currency pair at a later time when prices are lower in order to make a profit.

474. Sell Limit Order

An order to enter a position only at a specified price (the limit) or higher. FXTrade limit orders are executed as soon as the market price reaches the quote.

475. Sell Stop

A limit order with a limit placed below the current market price. Once triggered, the limit order becomes a market order

476. Selling Rate

Same as the Ask or Offer rate.

477. Settlement

The physical delivery of currencies made when a contract matures. In forex, it is usually two days after the trade. In practice, traders don’t take delivery, but profits and losses are applied directly to their account balance.

478. Settlement Date

In forex, the date when physical delivery must take place. For most currency pairs it is two days after the trade date. However, the USD/CAD currency pair settles one day after its trade date.

479. Settlement Risk

Loss as a result of one’s counter-party being unable to settle.

480. Short

Selling a currency pair that involves being short the base currency and long the quote currency, with the intent of buying the currency pair at a later time when prices are lower in order to make a profit.

481. Short Call

An option that obliges the seller to sell the underlying asset to the buyer.

482. Short Covering

Buying the exact same units of a currency pair to offset an earlier short sale of the same currency pair.

483. Short Position

When a currency pair is short, the first currency is sold while the second currency is bought. To go short on a currency means that you sell it. A short position is normally expressed in terms of the base currency.

484. Short Put

An option which obliges the seller to buy the underlying asset from the buyer

485. Short Sale

See Selling Short.

486. Short Squeeze

When short sellers frantically scramble to cover their short positions as the market is experiencing a sharp upward movement. The attempt exacerbates the problem because more buying makes the prices higher and more difficult for other short sellers to cover their positions

487. Shout Option

An option that lets the holder lock in profits while continuing to participate in the movement of the underlying asset.

488. Sidelined

When there is above ordinary interest in a currency pair, other major currency pairs that are thinly traded as a result of this are considered sidelined.

489. Soft Market

Where there are more sellers than buyers resulting in the potential for a quick downtrend

490. Sovereign Risk

Risk that a country will default on its bonds.

491. Speculative

The condition where there is no guarantee that money will be made and tremendous risk that you will lose all your capital. The attraction to speculative trading is that you can make a great deal of money very quickly. However, you can also lose it just as fast.

492. Spike

A larger than usual price movement. It can be caused by a financial institution entering an erroneous price that appears as a valid price, even though it gets corrected almost immediately

493. Spot

Buying and selling forex with the current date’s price for valuation, but where settlement usually takes place in two days.

494. Spot Market

Buying and selling forex with the current date’s price for valuation, but where settlement usually takes place in two days.

495. Spot/Next Roll

Extending the settlement value date on an open position to the next trade date

496. Spread

The value difference between the bid and ask price of a currency pair

497. Square

A condition where all positions in a dealer’s books are closed

498. Squeeze

Central bank attempts to reduce the money supply in order to increase the price of money.

499. Stable Market

A market that can accommodate huge volumes of buying and selling without large moves. For example, the trading of the EUR/USD pair

500. Sterilization

The process by which central banks offset intervention in the forex market by activities in the domestic money market