-The Forex quick guide for beginners and private traders

| Forex | Форекс
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The Forex quick guide for beginners and private traders

Quota (1) A limit on imports or exports. (2) A country's

subscription to the IMF.

Quote An indicative price. The price quoted for information

purposes but not to deal.

Rally A recovery in price after a period of decline.

page 100 of 110

Value Definition

Range The difference between the highest and lowest price of a

future recorded during a given trading session.

Rate The price of one currency in terms of another. It has the

same meaning as the term parities.

Ratio Calendar Spread Selling more near-term options than longer maturity options

at the same strike price.

Ratio Spread Buying a specific quantity of options and selling a larger

quantity of out-of-the-money options.

Reaction A decline in prices following an advance.

Real A price, interest rate or statistic that has been adjusted to

eliminate the effect of inflation.

Recession A decline in business activity. Often defined as two

consecutive quarters with a real fall in GNP.

Reinvestment Rate

The rate at which interest earned on a loan can be

reinvested. The rate may not attract the same level of

interest as the principal amount.

Repo Rate See "Repurchase Agreement".

Report French term for premium.

Repurchase Agreement

Agreements by a borrower where they sell securities with a

commitment to repurchase them at the same rate with a

specified interest rate.

Reserve Currency

A currency held by a central bank on a permanent basis as a

store of international liquidity. Reserve currencies are

typically Dollar, Deutschemark, and sterling.

Reserve Requirement The ratio of reserves to deposits, expressed as a fraction

prescribed by national banking authorities, including US.

Reserve Tranche

(French) The 25% of its quota to which a member of the IMF

has unconditional access, and for which there is no

obligation to repay.


Funds held against future contingencies, normally a

combination of convertible foreign currency, gold, and

SDRs. Official reserves are to ensure that a government can

meet near term obligations. They are an asset in the

balance of payments.

Resistance A price level at which the selling is expected to take place.

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.

Retail Price Index Measurement of the monthly change in the average level of

prices at retail, normally of a defined group of goods.

page 101 of 110

Value Definition

Retail Sales

Retail Sales are a measure of the total receipts of retail

stores. Monthly percentage changes reflect the rate of

change of such sales and are widely followed as an indicator

of consumer spending. Rises in Retail Sales are often

associated with a strong economy, and therefore an

expectation of higher short term interest rates that are

often supportive to a currency in at least the short term.

Reuter Dealing

A system for screen based trading that has been in

operation since the early 1980s. Reuter Dealing now has a

matching optional enhancement known as Dealing 2000-2.

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.

Reversal Process of changing a call into a put.

Risk management

The identification and acceptance, or offsetting of the risks

threatening the profitability or existence of an

organization. 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.

Risk Premium Additional sum payable, or return, to compensate a party

for adopting a particular risk.

Risk Reversal

A combination of purchasing put options with the sale of

call options. The put limits downside, while the call limits

the upside.


There are risks associated with any market. It means

variance of the returns and the possibility that the actual

return might not be in line with the expected returns. The

risks associated with trading foreign currencies are: market,

exchange, interest rate, yield curve, volatility, liquidity,

forced sale, counter party, credit, and country risk.

Rolling over The substituting of a far option for a near option of the

same underlying stock at the same strike/exercise price.


(1) Where the settlement of a deal is carried forward to

another value date, based on the interest rate differential

of the two currencies example: next day. (2) An overnight

swap, specifically the next business day against the

following business day (also called Tomorrow Next,

abbreviated to Tom-Next).

Running a Position Keeping open positions in the hope of a speculative gain.

Same Day Transaction A transaction that matures on the day the transaction takes


Sandwich Spread Same as a butterfly spread.

Scalping A strategy of buying at the bid and selling at the offer as

soon as possible.

page 102 of 110

Value Definition

SDR Special Drawing Right. A standard basket of five major

currencies in fixed amounts as defined by the IMF.

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

Series All options of the same class which share a common strike

price and expiration date.

Settlement Actual physical exchange of one currency for another.

Settlement Date It means the business day specified for delivery of the

currencies bought and sold under a Forex contract.

Settlement Price The official closing price for a future set by the clearing

house at the end of each trading day.

Settlement Risk Risk associated with the non-settlement of the transaction

by the counterparty.


A market position where the client has sold a currency he

does not already own, usually expressed in base currency


Short / Short Position A shortage of assets in a particular currency. See Short Sale.

Short Contracts Contracts with up to six months to deliver.

Short Covering Buying to unwind a shortage of a particular currency or


Short Forward Date/Rate

The term short forward refers to a period of up to two

months, although it is more commonly used with respect to

maturities of less than one month.

Short Sale

The sale of a currency futures not owned by the seller at

the time of the trade. Short sales are usually made in

expectation of a decline in the price.

Shorts See "Short Forward Date/Rate".

Short-Term Interest Rates Normally the 90 day rate.

SITC Standard International Trade Classification. A system for

reporting trade statistics in a common manner.

SOFFEX Swiss Options and Financial Futures Exchange, a fully

automated and integrated trading and clearing system.

Soft Market More potential sellers than buyers, which creates an

environment where rapid price falls are likely.

Split Date See Broken Date.


(1) The most common foreign exchange transaction. (2)

Spot refers to the buying and selling of the currency where

the settlement date is two business days forward.

Spot Month The contract month closest to delivery.

Spot Next The overnight swap from the spot date to the next business


Spot Price/Rate The price at which the currency is currently trading in the

spot market.

Value Definition

Spot Week A standard period of one week swap measured from the

current value date of the currency spot rate.


(1) The difference between the bid and ask price of a

currency. (2) The difference between the prices of two

related futures contracts. (3) For options, transactions

involving two or more option series on the same underlying


Square Purchases 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 sales or purchases

of currency without having any major impact on the interest


Stagflation Recession or low growth (stagnation) in conjunction with

high inflation rates.

Standard A term referring to certain normal amounts and maturities

for dealing.

Standard and Poor's (S&P)

A US firm engaged in assessing the financial health of

borrowers. The firm also lends its name to the S&P 500

Stock Index.


Central Bank activity in the domestic money market to

reduce the impact on money supply of its intervention

activities in the Forex market.

Sterling British pound, otherwise known as cable.

Stocky Market slang for Swedish Krona.

Stop Loss Order

Order given to ensure that, should a currency weaken by a

certain percentage, a short position will be covered even

though this involves taking a loss. Realize profit orders are

less common.

Stop Out Price US term for the lowest accepted price for Treasury Bills at


Straddle The simultaneous purchase/sale of both call and put options

for the same share, exercise/strike price and expiry date.


A bond with unquestioned right to repayment of principal

and interest at the specified dates with no additional

further rights or bonuses.

Straight Date See "fixed dates".

Strap A combination of two calls and one put.

Strike Price Also called exercise price. The price at which an option

holder can buy or sell the underlying instrument.

Strip A combination of two puts and one call.

Structural Unemployment Unemployment levels inherent in an economic structure.

page 104 of 110

Value Definition

Support Levels

A price level at which the buying is expected to take place.

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

downward movement. See Resistance Point.


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.

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

Swap Rate See "Forward Margin".

Swaption An option to enter into a swap contract.


Society for Worldwide Interbank Financial

Telecommunications is a Belgian based company that

provides the global electronic network for settlement of

most foreign exchange transactions.

Swissy Market slang for Swiss Franc.

Switch See Deposit Swap.


Options or futures that create a position that is able to be

achieved directly, but is generated by a combination of

options and futures in the relevant market. In foreign

exchange a SAFE combines two forward contracts into a

single transaction where settlement only involves the

difference in values.


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