Of course, the basis for any quality education is built on understanding the language associated with a particular field of study. This holds especially true in respect to international currency exchange and investing. Like medicine and advanced algebra, money matters include an extensive list of acronyms, analogies and an extensive vocabulary that defines and directs the actions of those involved in exchange and investing. We have compiled a brief list of these terms in the hopes that they might shed a little light on the complex world of international finance.
Market Terms
Bear – An individual who predicts that market prices will fall.
Bear Market - A market demonstrating falling prices.
Bull – An individual who predicts that market prices will rise.
Bull Market – A market demonstrating rising prices.
Cash Market – A market revolving around the purchase and sale of cash assets.
Correction – A correction is defined as the sudden, rapid change in direction of a market. Typically, these changes take place more quickly that the original movement and are generally considered advantageous to market performance.
Cross Rate - An exchange rate that does not involve the US Dollar.
Forex – This is the abbreviation of for the Foreign Exchange Market, the term most commonly used in reference to the exchange of currency internationally.
Day Trading – This refers to the position of a rate that stays the same at both the close and open of the daily market.
Banking Terms and Institutions
Central Bank of the Republic of China (Taiwan) – Formerly known as the Central Bank of China, this is the national bank responsible for control of the Taiwan dollar.
European Central Bank – The ECB is the central financial institution behind the European Union and the supporting framework of the Euro.
Federal Reserve – Also known as “The Fed”, this refers the central bank of the United States, and the institution backing the US dollar.
FOMC – Federal Open Market Committee – This is the organization responsible for controlling US monetary policy and determining US interest rates.
Brokerage Terms
Exchange Deprecation Rate – This refers to the comparison of two or more forms of currency in which one form is drastically less valuable that the others.
Floating Exchange Rate – A floating exchange rate is a rate that is predominately determined by supply and demand, and is not dictated by a governing body.
Hedging – This type of transaction centers around the purchase or sale of a currency to protect it against future fluctuation of foreign exchange rates.
Settlement – The conversion of one currency into another.
While we have only skimmed the surface of currency exchange and international investment lingo, there are certain bits of information that help make this knowledge particularly useful. For instance, a significant portion of the jargon revolves around the US dollar and its value in relation to other currencies. This is due to the fact that the US dollar is considered the most valuable and tradable currency in the world. It is followed closely by the Euro.
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