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Glossary of Forex (Foreign Exchange) Terminology  D – F



Day Trading
– Refers to trades which are opened and closed on the same day.


Dealer – An individual who acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.


Deficit – A negative balance of trader’s payments.


Delivery – An FX trade where both sides make and take actual delivery of the currencies traded.


Derivative – An instrument that changes in value depending the price movements of a related or underlie such as commodity, equity or currency


Devaluation – Devaluation is a decrease in value of currency in response to market demand




Economic Indicator – Economic indicators consists of GDP, foreign investment, and the trade balance reflect the general health of an economy. They are indicators of supply and demand for that currency shifts.


End of Day Order (EOD) – Buy or sell order at a specified price. This order remains valid until the end of the trading day.


EURO –The currency of the European Monetary Union (EMU) since 2002. Members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.


European Central Bank (ECB) – the Central Bank for the new European Monetary Union.




Federal Deposit Insurance Corporation (FDIC) – The regulatory agency responsible regarding administration of bank depository insurance in the US.


Federal Reserve System – It is the central bank of the United States. They are in charge of executing the country’s monetary policy and regulating member banks of the System. The Fed was created in 1913 to provide nation with safer, more flexible, and stable financial system.


Fixed Exchange Rate– Official rate set by monetary authorities.


Floating Exchange Rates – Floating exchange rates refer to the value of a currency as decided by supply and demand


Flat/square – Used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.


Foreign Exchange – (Forex, FX) means the purchase of one currency while selling for another simultaneously. This market of exchange has more buyers and sellers and daily volume than any other in the world. Taking place in the major financial institutions across the globe, the forex market is open 24-hours a day.


Forward Contract – It fixes the exchange rate for future delivery at a date to be agreed by both participants. A deposit (or a minimum margin) is usually required in forward transactions.
EX) if I want to lock in today’s rate to buy $10,000 USD at 1.5820 Canadian for the next 4 months, I will have the ability to purchase up to $10,000 USD at this rate.


Forward Rates (Swaps) – A Forward Rate refers to a cash price of 2 currencies’ interest difference for a fixed term. Forward rates can be calculated easily given the fixed term interest rates of each currency and the current spot rate


Forward Trading – Forward trading is process of making the opposite trade of a spot trade in a given period of time. Often investors will swap their trades forward for anywhere from a week or two up to several months depending on the time frame of the investment. Even though a forward trade is set for a future date, the position can be closed out at any time. The closing part of the position is then swapped forward to the same future value date.


Forward points – The pips added to or subtracted from the current exchange rate to compute a forward price.


Fundamental Analysis – The efforts on the economic forces of supply and demand that causes price movement. The Fundamentalist studies the causes of market movement, whereas the Technician studies the effects.


Futures Contract – An obligation to exchange a worthy or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange- Traded Contacts – ETC), versus forwards, which are considered Over the Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.

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