FOREX GLOSSARY

Base currency is the first currency in the pair. Quote currency is the second currency in the pair.

USD	/	JPY	=	120.25
Base currency		Quote currency		Rate

This abbreviation specifies how much you have to pay in quote currency to obtain one unit of the base currency (in this example, 120.25 Japanese Yen for one US Dollar). The minimum rate fluctuation is called a point or pip.

Most currencies, except USD/JPY, EUR/JPY, CHF/JPY and GBP/JPY where a pip is 0.01, have 4 digits after the period (a pip is 0.0001), and sometimes they are abbreviated to the last two digits. For example, if EURUSD is traded at 1.2389/1.2394 the quote may be abbreviated to 89/94.

The currency pairs on Forex are quoted as the Bid and Ask (or Offer) prices:

	Bid		Ask
USD / JPY =	120.25	/	120.30

Bid is the rate at which you can sell the base currency, in our case it's US dollar, and buy the quote currency, i.e Japanese Yen.

Ask ( or Offer) is the rate at which you can buy the base currency, in our case US dollars, and sell the quote currency, i.e. Japanese Yen.

Spread is the difference between the Bid and the Ask price.

Pip is the smallest price increment a currency can make. Also known as a point. e.g. 1 pip = 0.0001 for EUR/USD, and 0.01 for USD/JPY.

Currency Rate is the value of one currency expressed in terms of another. The rate depends on the supply and demand on the market or restrictions by a government or by a central bank.

Lot Size is the number of base currency, underlying asset or shares in one lot defined in the contract specifications. For details refer to the Table 2.

Lot is an abstract notion of the number of base currency, shares or other underlying asset in the trading platform.

Transaction (or deal) size is lot size multiplied by number of lots.

Long Position is a buy position whereby you profit from an increase in price. In respect of currency pairs: buying the base currency against the quote currency.

Short Position is a sell position whereby you profit from a decrease in price. For currency pairs: selling the base currency against the quote currency.

Completed Transaction consists of two counter deals of the same size (open and close a position): buy then sell or vice versa.

Leverage is the term used to describe margin requirements: the ratio between the collateral and the value of the contract. 1:100 leverage means that you can control $100,000 with only $1,000 (1%).

Margin is the collateral required by Alpari (UK) to open and maintain a position.

Balance is the total financial result of all completed transactions and deposits/withdrawals on the trading account.

Floating Profit/Loss is current profit/loss on open positions calculated at the current prices.

Equity is calculated as balance + floating profit - floating loss.

Free margin means funds on the trading account, which may be used to open a position. It is calculated as equity less necessary margin.