Forex Terms

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Margin - Customers must deposit funds as collateral to cover any potential losses from adverse movements in prices.

Margin Call - A requirement from a broker or dealer for additional funds or other collateral to bring the margin up to a required level to guarantee performance on a position that has moved against the customer.

Mark to Market (or End Of Day) - 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.

Market Maker - A dealer who supplies prices and is prepared to buy or sell at those stated bid and ask prices. A market maker runs a trading book.

Market Order - An order to buy/sell at the best price available when the order reaches the market.

Market Risk - Risk relating to the market in general and cannot be diversified away by hedging or holding a variety of securities.

Maturity - The date a debt becomes due for payment.

Mine and Yours - To announce that a trader wants to buy he/she may say or type Mine. This would also be known as taking the offer. To sell he will use Yours. This would be known as `hitting the bid`.

Money Markets - Refers to investments that are short-term (i.e. under one year) and whose participants include banks and other financial institutions. Examples include Deposits, Certificates of Deposit, Repurchase Agreements, Overnight Index Swaps and Commercial Paper. Short-term investments are safe and highly liquid.

Net Worth - Amount of assets which exceed liabilities; May also be known as stockholders equity or net assets. For an individual -- the total value of all possessions such as houses, stocks, bonds, and other securities, minus all outstanding debts, such as mortgage and loans.

Off Balance Sheet - Products such as Interest Rate Swaps and Forward Rate Agreements are examples of `off balance sheet’ products. Also, financing from other sources other than equity and debt are listed.

Offer - The price, or rate, that a willing seller is prepared to sell at.

Offsetting Transaction - A trade that serves to cancel or offset some or all of the market risk of an open position.

One Cancels Other Order (O.C.O. Order) - A contingent order where the execution of one part of the order automatically cancels the other part.

Open Order - An order to buy or sell when a market moves to its designated price.

Open Position - A deal not yet reversed or settled and the investor is subject to exchange rate movements.

Options - An agreement that allows the holder to have the option to buy/sell a specific security at a certain price within a certain time. Two types of options – call and put. A call is the right to buy while a put is the right to sell. One can write or buy call and put options.

Order - An order is an instruction, from a client to a broker to trade. An order can be placed at a specific price or at the market price. Also, it can be good until filled or until close of business.

Overnight - A trade that remains open until the next business day.

Over The Counter (OTC) - Used to describe any transaction that is not conducted over an exchange.