Foreign Exchange UK Trading

Glossary

Foreign Exchange UK .com explains in simple english terms used in foreign exchange, foreign currency exchanges.

BACS - Bankers Automated Clearing Services - The process for Sterling clearing for domestic banks. Usually takes 3 business days.

CHAPS - Clearing House Automated Payment System - A faster means of making payments. Usually occurs on the same day.

Exposure: - The amount of money at risk due to Foreign Exchange movements.

Forward Rate: - The rate at which two currencies can be exchanged on a preset future date, e.g. sterling dollar exchange rate today for transfer in 3 months time.

Forward Points: - The difference between the spot rate and the forward rate.

Forward Contract: - A contract to exchange a specific amount of one currency for another on a future date at a predetermined rate.  A deposit is normally required for forward contracts.

GTC - Good Till Cancelled: - A GTC foreign exchange order will be left in the market until executed or cancelled by you.

Hedge: - Protection against future currency movements.

OCO - "One Cancels Other": - A combination of a 'Stop Loss' order and a 'Take Profit' order. When one of these two orders is executed, the other order is automatically cancelled.

Order: - You can leave an "order" with us to transact on your behalf if a particular exchange rate is reached.

Spot rate: - The foreign exchange rate at which two currencies can be exchanged in 2 days time.

Spot Transaction: - The exchange of one currency for another at a specified rate for settlement in 2 working days.

Stop Loss Order: - A stop loss order is a means of limiting your risk from adverse exchange rates. A currency level is set. If that currency level is reached, the trade is automatically executed in the market. The currency level used for a stop loss order is always worse than the current market price. This is a way to protect you from adverse changes in exchange rates without needing to constantly monitor the rate.

Take Profit Order: - Like a stop loss order, a take profit order first involves setting a currency level. Once that currency level is reached, the trade is executed in the market. The currency level used for a take profit order is always better than the current market price. This is a way to capitalize on improvements in exchange rates without needing to constantly monitor the rate.

Settlement Date: - The date for the exchange of payments.

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