Forex Terms

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Day Trading - Opening and closing the same position or positions within the same trading session.

Dealer - One who acts as a principal or counterpart to a transaction; places the order to buy or sell.

Deficit - A negative balance of trade (or payments); expenditures are greater than income/revenue.

Delivery - An actual delivery where both sides transfer possession of the currencies traded.

Deposit - The borrowing and lending of cash. The rate that money is borrowed/lent at is known as the deposit rate (or depo rate). Certificates of Deposit (CD`S) are also tradable instruments.

Depreciation - A decline in the value of a currency due to market forces.

Derivatives - Trades that are constructed or derived from another security (stock, bond, currency, or commodity). Derivatives can be both exchange and non-exchange traded (known as Over the Counter or OTC). Examples of derivative instruments include Options, Interest Rate Swaps, Forward Rate Agreements, Caps, Floors and Swap options.

Devaluation - The deliberate downward adjustment of a currency`s value versus the value of another currency normally caused by official announcement.

Economic Indicator - A statistic that indicates current economic growth and stability issued by the government or a non-government institution (i.e. Gross Domestic Product (GDP), Employement Rates, Trade Deficits, Industrial Production, and Business Inventories).

Efficient Market - A market in which the current price reflects all available information from past prices and volumes.

End Of Day (or Mark to Market) - Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur, hence, it only shows a profit or loss when realized. The mark-to-market method values the trader`s book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.

Estimated Annual Income - Projected yearly earnings.

Euro - The currency of the European Monetary Union (EMU) which replaced the European Currency Unit (ECU).

European Central Bank - The Central Bank for the European Monetary Union.

European Monetary Unit - The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. Currently, the Euro exists only as a banking currency and for paper financial transactions and foreign exchange. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

Exchange Rate Risk - See Currency Risk.

Economic Exposure - The risk on a company’s cash flow stemming from foreign exchange fluctuations.