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© 1st Forex Trading Academy 2004
42
Glossary
GLOSSARY
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
A
Accrual
- The apportionment of premiums and discounts on forward exchange transactions that 
relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.
Adjustment
- Official action normally by either change in the internal economic policies to correct 
a payment imbalance or in the official currency rate or. Adjustment - Official action normally by 
either change in the internal economic policies to correct a payment imbalance or in the official 
currency rate or.
Appreciation
- A currency is said to ‘appreciate’ when it strengthens in price in response to market 
demand.
Arbitrage
- The purchase or sale of an instrument and simultaneous taking of an equal and 
opposite position in a related market, in order to take advantage of small price differentials between 
markets.
Ask (Offer) Price
- The price at which the market is prepared to sell a specific Currency in a Foreign 
Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. 
In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 
1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs.
At Best
- An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better
- An order to deal at a specific rate or better. 
B
Balance of Trade
- The value of a country’s exports minus its imports.
Bar Chart
- A type of chart which consists of four significant points: the high and the low prices, 
which form the vertical bar, the opening price, which is marked with a little horizontal line to the 
left of the bar, and the closing price, which is marked with a little horizontal line of the right of the 
bar.
Base Currency
- The first currency in a Currency Pair. It shows how much the base currency is 
worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 
then one USD is worth CHF 1.6215 in the FX markets, the US Dollar is normally considered the 
‘base’ currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other 
currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and 
the Australian Dollar.

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© 1st Forex Trading Academy 2004
43
Glossary
Bear Market
- A market distinguished by declining prices. 
Bid Price 
- The bid is the price at which the market is prepared to buy a specific Currency in 
a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the 
base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 
1.4527/32, the bid price is 1.4527; meaning you can sell one US dollar for 1.4527 Swiss francs.
Bid/Ask Spread
- The difference between the bid and offer price. 
Big Figure Quote
- Dealer expression referring to the first few digits of an exchange rate. These 
digits are often omitted in dealer quotes... For example, a USD/JPY rate might be 117.30/117.35, 
but would be quoted verbally without the first three digits i.e. «30/35».
Book
- In a professional trading environment, a ‘book’ is the summary of a trader’s or desks total 
positions.
Broker
- An individual or firm that acts as an intermediary, putting together buyers and sellers for a 
fee or commission. In contrast, a ‘dealer’ commits capital and takes one side of a position, hoping 
to earn a spread (profit) by closing out the position in a subsequent trade with another party.
Bretton Woods Agreement of 1944
- An agreement that established fixed foreign exchange rates 
for major currencies, provided for central bank intervention in the currency markets, and pegged 
the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon 
overturned the Bretton Woods agreement and established a floating exchange rate for the major 
currencies.
Bull Market
- A market distinguished by rising prices.
Bundesbank
- Germany’s Central Bank.
C
Cable 
- Trader jargon referring to the Sterling/US Dollar exchange rate. So called because the rate 
was originally transmitted via a transatlantic cable beginning in the mid 1800’s.
Candlestick Chart
- A chart that indicates the trading range for the day as well as the opening and 
closing price. If the open price is higher than the close price, the rectangle between the open and 
close price is shaded. If the close price is higher than the open price, that area of the chart is not 
shaded.
Cash Market
- The market in the actual financial instrument on which a futures or options contract 
is based. 
Central Bank
- A government or quasi-governmental organization that manages a country’s 
monetary policy. For example, the US central bank is the Federal Reserve, and the German central 
bank is the Bundesbank.

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