The Foreign Exchange Rate

The Exchange Rate Change

The exchange rate smallest change for the final figure (is 1 pip), for example:

The EUR/USD smallest change is 0.0001
USD/JPY smallest change is 0.01

Quoted Price

All quoted prices can be divided into direct quoted price and the indirect quoted price, for example:

The direct quoted price currency includes: EUR/USD, GBP/USD, AUD/USD, NZD/USD ......
The indirect quoted price currency includes: USD/JPY, USD/CHF, USD/CAD ....

For example, the EUR/USD quoted price is 1.2653, which means each euro could convert to 1.2653 US dollars, while the USD/JPY quoted price is 107.65, which means that each US dollar could convert to 107.65 Japanese Yen.

The buying price and the selling price of the foreign currency is decided by the bank or the broker house, customer decides only the buying trend. For example, the EUR/USD quoted price general demonstration is 1.2652/57, which means the broker house is willing to buy Euro dollar at the price of 1.2652, and sell at the price of 1.2657. At this time, the price difference between the buyer and the seller (pip difference) is 5 pips, for foreign exchange trading, the smaller the point means the trading cost is lower and the chance of profit making is much larger.

Forex Glossary Terms

American-style option An option contract that may be exercised at any time before it expires.

Ask The quoted price at which a customer can buy a currency pair. Also referred to as the 'offer', 'ask price', or 'ask rate'.

Base Currency For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.

Bid The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate'.

Bid/Ask Spread The point difference between the bid and ask (offer) price.

Call A call option gives the option buyer the right to purchase a particular currency pair at a stated exchange rate.

Counterparty The counterparty is the person who is on the other side of an OTC trade. For retail customers, the dealer will always be the counterparty.

Cross-rate The exchange rate between two currencies where neither of the currencies are the US dollar.

Currency pair The two currencies that make up a foreign exchange rate. For example, USD/YEN is a currency pair.

Dealer A firm in the business of acting as a counterparty to foreign currency transactions.

Euro The common currency adopted by eleven European nations (i.e., Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) on January 1, 1999.

European-style option An option contract that can be exercised only on or near its expiration date.

Expiration This is the last day on which an option may either be exercised or offset.

Forward transaction A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date. This term may also be used to refer to transactions that the parties expect to offset at some time in the future, but these transactions are not true forward transactions and are governed by the federal Commodity Exchange Act.

Interbank market A loose network of currency transactions negotiated between financial institutions and other large companies.

Leverage The ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as 'gearing'.

Margin See Security Deposit.

Offer See ask.

Open position Any transaction that has not been closed out by a corresponding opposite transaction.

Pip The smallest unit of trading in a foreign currency price.

Premium The price an option buyer pays for the option, not including commissions.

Put A put option gives the option buyer the right to sell a particular currency pair at a stated exchange rate.

Quote currency The second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency.

Rollover The process of extending the settlement date on an open position by rolling it over to the next settlement date.

Retail customer Any party to a forex trade who is not an eligible contract participant as defined under the Commodity Exchange Act. This includes individuals with assets of less than $10 million and most small businesses.

Security deposit The amount of money needed to open or maintain a position. Also known as 'margin'.

Settlement The actual delivery of currencies made on the maturity date of a trade.

Spot market A market of immediate delivery of and payment for the product, in this case, currency.

Spot transaction A true spot transaction is a transaction requiring prompt delivery of and full payment for the currency. In the interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.

Spread The point or pip difference between the ask and bid price of a currency pair.

Sterling Another term for British currency, the pound.

Strike price The exchange rate at which the buyer of a call has the right to purchase a specific currency pair or at which the buyer of a put has the right to sell a specific currency pair. Also known as the 'exercise price'.

Security Commissions

Albania	Albanian Securities Commission
Argentina	Comision Nacional de Valores
Australia	Australian Securities and Investments Commission
Bahamas	Securities Commission of the Bahamas
Bangladesh	Securities and Exchange Commission
Bermuda	Bermuda Monetary Authority
Brazil	Comiss�o de Valores Mobili�rios
Canada	Alberta Securities Commission
China	China Securities Regulatory Commission
Colombia	Superintendencia de Valores
Czech Republic	Czech Securities Commission
Denmark	Finanstilsynet
Egypt	Capital Market Authority
French Polynesia	Commission des Operations de Bourse
Hong Kong	Securities and Futures Commission
India	Securities and Exchange Board of India
Indonesia	Capital Market Supervisory Agency
Iraq	Iraq Securities Commission
Japan	Financial Services Agency
Jordan	Jordan Securities Commission
Kenya	Capital Markets Authority
Malaysia	Malaysia Securities Commission
Mexico	Comision Nacional Bancaria y de Valores
New Zealand	New Zealand Securities Commission
Pakistan	Securities & Exchange Commission of Pakistan
Peru	Comision Nacional Supervisora de Empresas y Valores
Philippines	Securities and Exchange Commission
Russian Federation	Federal Commission for the Securities Market of the Russian Federation
Singapore	Monetary Authority of Singapore
South Africa	Financial Services Board
South Korea	Korea Financial Supervisory Commission
Sri Lanka	Securities and Exchange Commission
Switzerland	Commission Federale des Banques
Thailand	Securities and Exchange Commission
Turkey	Capital Markets Board
United Arab Emirates	Securities and Commodities Authority
United Kingdom	Financial Services Authority
United States of America	United States Securities and Exchange Commission

Currency Directory

Country	Capital	Currency	Currency Symbol
Afghanistan	Kabul	Afghanistan Afghanis	AFN
Albania	Tirana	Albania Leke	ALL
Algeria	Algiers	Algeria Dinars	DZD
Argentina	Buenos Aires	Argentina Pesos	ARS
Australia	Canberra	Australian Dollar	AUD
Bahamas	Nassau	Bahamas Dollars	BSD
Bahrain	Manama	Bahrain Dinar	BHD
Bangladesh	Dhaka	Bangladesh Taka	BDT
Barbados	Bridgetown	Barbados Dollars	BBD
Bermuda	Hamilton	Bermuda Dollars	BMD
Brazil	Brasilia	Brazil Reais	BRL
Bulgaria	Sofia	Bulgaria Leva	BGN
Canada	Ottawa	Canadian Dollar	CAD
Chile	Santiago	Chile Pesos	CLP
China	Beijing	China Yuan	CNY
Colombia	Bogota	Colombia Pesos	COP
Costa Rica	San Jose	Costa Rica Colones	CRC
Czech Republic	Prague	Czech Republic Koruny	CZK
Denmark	Copenhagen	Danish Krone	DKK
Dominican Republic	Santo Domingo	Dominican Republic Pesos	DOP
Eastern Caribbean States	Castries	East Caribbean Dollars	XCD
Egypt	Cairo	Egypt Pounds	EGP
Estonia	Tallinn	Estonia Krooni	EEK
Fiji	Suva	Fiji Dollars	FJD
French Polynesia	Papeete	Comptoirs Francais du Pacifique Francs	XPF
Hong Kong	Hong Kong Central	Hong Kong Dollar	HKD
Hungary	Budapest	Hungary Forint	HUF
Iceland	Reykjavik	Iceland Kronur	ISK
India	New Delhi	Indian Rupee	INR
Indonesia	Jakarta	Indonesia Rupiahs	IDR
Iran	Tehran	Iran Rials	IRR
Iraq	Baghdad	Iraq Dinars	IQD
Israel	Jerusalem	Israel New Shekels	ILS
Jamaica	Kingston	Jamaica Dollars	JMD
Japan	Tokyo	Japanese Yen	JPY
Jordan	Amman	Jordan Dinars	JOD
Kenya	Nairobi	Kenya Shillings	KES
Kuwait	Kuwait	Kuwaiti Dinar	KWD
Lebanon	Beirut	Lebanon Pounds	LBP
Malaysia	Kuala Lumpur	Malaysian Ringgit	MYR
Mauritius	Port Louis	Mauritius Rupees	MUR
Mexico	Mexico City	Mexico Pesos	MXN
Morocco	Rabat	Morocco Dirhams	MAD
New Zealand	Wellington	NewZealand $	NZD
Norway	Oslo	Norwegians Krone	NOK
Oman	Muscat	Omani Riyal	OMR
Pakistan	Islamabad	Pakistan Rupee	PKR
Peru	Lima	Peru Nuevos Soles	PEN
Philippines	Manila	Philippines Pesos	PHP
Poland	Warsaw	Poland Zlotych	PLN
Qatar	Doha	Qatari Riyal	QAR
Romania	Bucharest	Romania New Lei	RON
Russian Federation	Moscow	Russia Rubles	RUB
Saudi Arabia	Riyadh	Saudi Riyal	SAR
Singapore	Singapore	Singapore Dollar	SGD
Slovakia	Bratislava	Slovakia Koruny	SKK
South Africa	Pretoria	South Africa Rand	ZAR
South Korea	Seoul	South Korea Won	KRW
Sri Lanka	Colombo	Sri Lanka Rupees	LKR
State of Croatia	Zagreb	Croatia Kuna	HRK
Sudan	Khartoum	Sudan Pounds	SDG
Sweden	Stockholm	Swedish Korona	SEK
Switzerland	Bern	Swiss Franc	CHF
Taiwan	Taipei	Taiwan New Dollars	TWD
Thailand	Bangkok	Thai Bhat	THB
Trinidad & Tobago	Port-of-Spain	Trinidad and Tobago Dollars	TTD
Tunisia	Tunis	Tunisia Dinars	TND
Turkey	Ankara	Turkey New Lira	TRY
United Arab Emirates	Abu Dhabi	U.A.E Dirham	AED
United Kingdom	London	UK Pound Sterling	GBP
United States of America	Washington, DC	US Dollar	USD
Venezuela	Caracas	Venezuela Bolivares Fuertes	VEF
Vietnam	Hanoi	Vietnam Dong	VND
Zambia	Lusaka	Zambia Kwacha	ZMK