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Forex Dictionary

Term Equivalent terms Definition
Fiat Currency Nonconvertible paper money, fiat currency has no intrinsic value and is backed by nothing other than trust in the government issuing the currency. Most currencies are fiat currencies and as such, they are all subject to inflation. In a fiat currency system, the currency value fluctuates up and down in response to demand and supply pressures, which allows traders to speculate on future currency values.
Fibonacci Indicators The Fibonacci Fans and Bands are multiple support/resistance lines drawn on charts derived from the Fibonacci number series.
Fill or Kill Usually a large order that must be executed immediately and completely, or else it is cancelled. Considered the opposite of a good til cancelled (GTC) order. It differs from an immediate or cancel (IOC) in that an IOC may be only partially filled, while an FOK must be entirely filled.
Fill Price The price at which a buy or sell order is executed, and may or not be the investor’s requested price, depending on the type of order.
Financial Risk The possibility that a business won't be able to meet its financial obligations; a higher proportion of debt increases the likelihood that the firm will be unable to make the required interest and principal payments. Broadly, it is any risk that results from giving money to another person or entity. Lending money carries the financial risk that the borrower will not repay, and purchasing assets carries the financial risk that the asset price may depreciate or not be sold.
Finex Futures and Options currency trading at the New York Cotton Exchange (NYCE), with a trading floors in New York City and Dublin, helping create a 24-hour market for most FINEX contacts.
Fiscal Policy Government policies related to spending and taxing for the specific purpose of influencing the economy. Debate is on scope. Tight fiscal policy adherents (Austrian School) argue that government acts best when it acts least, promoting low taxes and spending; loose policy adherents (Keynes) believe that government should play a larger role in promoting economic well-being.
Fisher Effect A theory stating that a currency’s real interest rate is equal to its nominal interest rate less the inflation rate; if inflation rises, real interest eventually rises, and if inflation falls, real interest rate will fall. Thus, increasing inflationary expectations result in increasing interest rates.
Fixed Exchange Rate Pegged Exchange Rate A policy whereby the central bank maintains an official rate for their currency, often intervening to keep the rate fixed within a limited range. The government may decide to link the value to another currency or to a valuable commodity like gold. For example, under the Bretton Woods System, most world currencies fixed themselves to the US Dollar, which in turn was fixed to gold. Nowadays, a country adopting this policy will fix its currency to a more dominant currency, such as the US Dollar, and it must hold enough dollars in reserve to account for all the currency in circulation.
Flat / Square Dealer jargon indicating your position is 0 as you have done the opposite of your original trade. For instance, you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.
Floating Exchange Rates An exchange rate determined by market forces, otherwise called a floating exchange rate, i.e., it changes from day to day and is dependent on supply and demand rather than say, a pegged exchange rate set by government fiat.
Foreign Exchange Forex FX Is the simultaneous buying of one currency while selling another; for instance, the buying of pounds and selling of dollars (buy GBP/USD). This market of exchange has more buyers and sellers and daily volume than any other in the world and takes place between governments, banks and speculators across the globe, 24 hours a day.
Foreign Market Centers The first to open up is Frankfort, followed by London (largest), New York, Sydney, and Tokyo. Trading passes from one center to the next, the traders in one bank's dealing desk handing off the trading book to their colleagues in another center.
Forex Charting Software Forex charting software packages providing analytical tools to assist currency traders determine the direction of currency pairs.
Forex Demo Account Free Forex Practice Account, trading software and charts that allow for prospective clients to test trading ideas and sharpen trading skills without financial risk.
Forward The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved. Alt: A transaction that settles at a future date.
Forward Contract Fixes the exchange rate for future delivery at a date to be agreed upon by both participants. For instance, the trader agrees to buy $10,000 USD at 90.70 Yen in the next 4 months, thus allowing him to purchase up to $10,000 at this agreed upon rate, and this contract must be honored whether price the rate goes to 80 Yen or 100 Yen.
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 Investors can swap their trades forward for anywhere from a week or two up to several months depending on the time frame of the investment, and the position can be closed out at any time.
Fundamental Analysis Focuses on the economic forces of supply and demand that causes price movement, such as interest rates, GDP, inflation, unemployment, trade balance, and so on. The Fundamentalist studies the causes of market movement, whereas the Technician studies the effects.
Fundamental Trader Fundamentalist A trader who uses fundamental analysis to determine market direction
Funding Currencies Low interest rate currencies.
Futures An obligation to exchange a good or instrument at a specific price on a pre-determined 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 and NOT traded on an exchange.
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