Forex glossary of terms
Forex glossary - F
Face value, or par value - the value at which a bond is sold.
Fast Market - Rapid movement in a market caused by strong interest by buyers and/or sellers. In such circumstances price levels may be omitted and bid and offer quotations may occur too rapidly to be fully reported.
Fed - The United States Federal Reserve. Federal Deposit Insurance Corporation Membership is compulsory for Federal Reserve members. The corporation had deep involvement in the Savings and Loans crisis of the late 80s.
Fed Funds - Cash balances held by banks with their local Federal Reserve Bank. The normal transaction with these fund is an inter bank sale of a Fed fund deposit for one business day. Straight deals are where the funds are traded overnight on a unsecured basis.
Fed Fund Rate - The interest rate on Fed funds. This is a closely watched short term interest rate as it signals the Feds view as to the state of the money supply.
FEDAI - Foreign Exchange Dealers Association of India) is an association of all dealers in foreign exchange which sets the ground rules for fixation of commissions and other charges and also determines the rules and regulation relating to day-to-day transactions in foreign exchange in India. The FEDAI has commonly recognised 38 currencies for dealing.
Federal Deposit Insurance Corporation - A regulatory agency of the US created to oversee that bank deposits are insured against bank failures. It was created in 1933 to restore confidence in the banking system. It insures up to US $100,000 per banking institution.
Federal National Mortgage Association - A privately owned but US government sponsored corporation that trades in residential mortgages. Its activities are funded by the sale of instruments commonly known as Fannie Maes.
Federal Reserve Board - The board of the Federal Reserve System, appointed by the US President for 14 year terms, one of whom is appointed for four years as chairman.
Federal Reserve System - The central banking system of the US comprising 12 Federal Reserve Banks controlling 12 districts under the Federal Reserve Board. Membership of the Fed is compulsory for banks chartered by the Comptroller of Currency and optional for state chartered banks.
Fibonacci Numbers - Derived from a sequence of numbers in which each successive number is the sum of the two previous numbers, Fibonacci numbers are used frequently in hypothesizing which rates assets will gravitate towards. Namely, there are four popular Fibonacci studies - arcs, fans, retracements, and time zones. The use of Fibonacci numbers is widespread in the currency market. The red lines may be used as short-term support and resistance levels, while the blue lines represent long- term levels.
Fill-or-kill order (FOK) - A limit order that must be filled immediately or canceled.
Fiscal Policy - Use of taxation as a tool in implementing monetary policy.
Fixed Exchange Rate - Official rate set by monetary authorities for one or more currencies. In practice, even fixed exchange rates are allowed to fluctuate between definite upper and lower bands, leading to intervention by the central bank.
Fixing - A method of determining rates by normally finding a rate that balances buyers to sellers. Such a process occurs either once or twice daily at defined times. Used by some currencies particularly for establishing tourist rates . The system is also used in the London Bullion market.
Flag and Pennant - Shaped like a flagpole with a penant, this formation is characterized by an upward movement with a large slope followed by a period of consolidation. It is considered a bullish pattern overall, as the pattern is expected to continue rising.In the above example the British Pound rallied from $1.53 to $1.57 then declined to $1.54 level while fluctuating in a very tight range (the flag formation) and then broke out to the $1.58 level.
Flat/Square - Where a client has not traded in that currency or where an earlier deal is reversed thereby creating a neutral (flat) position. example - you bought $500,000 then sold $500,000 = FLAT .
Flat on a failure - A recommendation to take profits on a long trade if the rate tests but fails to break the specified level.
FLEX options - Flexible term options providing more expiration dates and a broader range of strike prices, available in American- or European-style.
Flexible exchange rate system - a system that allows a currencys exchange rate to be determined freely via international currency markets.
Float - (1) see Floating exchange rate. (2) Cash in hand or in the course of being transferred between banks. (3) Federal Reserve Float arises from the system where cheques sent to the Federal Reserve Banks are credited sometimes in advance of the depositing bank loosing the reserve.
Floating Exchange Rate - When the value of a currency is decided by the market forces dictating the demand and supply of that particular currency.
Floor - (1) An agreement with a counterparty that sets a lower limit to interest rates for the floor buyer for a stated time.(2) A term for an exchanges trading area (cf. screen based trading), normally the trading area is referred to as a pit in the commodities and futures markets.
Floor broker - An exchange member who is paid a fee for executing orders for clearing members or their customers. A floor broker executing orders must be licensed by the CFTC.
Floor trader - An exchange member who generally trades only his or her own account or for an account controlled by him or her. Also referred to as a local.
FOMC - Federal Open Market Committee, the committee that sets money supply targets in the US which tend to be implemented through Fed Fund interest rates etc.
Foreign Exchange - The purchase or sale of a currency against sale or purchase of another.
Foreign Position - It means a position under which one party hereto agrees to purchase from or sell to the other party hereto an agreed amount of foreign currency.
Forex - An abbreviation of foreign exchange Forex Deal - The purchase or sale of a currency against sale or purchase of another currency. The maximum time for a deal is defined when the deal opens, the deal can be closed at any moment until the expiry date and time. A deal cannot be closed on its first 3 minutes, due to technical reasons.
Forward Contract - Sometimes used as synonym for "forward deal" or "future". More specifically for arrangements with the same effect as a forward deal between a bank and a customer.
Forward Cover Taking - forward contracts to protect against movements in the exchange rate.
Forward Deal - A deal with a value date greater than the spot value date.
Forward Points - The interest rate differential between two currencies expressed in exchange rate points. The forward points are added to or subtracted from the spot rate to give the forward or outright rate depending on whether the currency is at a forward premium or discount.
Forward Rate - The rate at which a foreign exchange contract is struck today for settlement at a specified future date which is decided at the time of entering into the contract. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefor the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate.
Full service broker - See Broker Fundamental analysis - The study of supply and demand information to help project futures prices.
Fundamentalist - One who engages in fundamental analysis.
Fundamentals - or fundamental economic conditions such as economic growth, inflation, fiscal balance, political stability that are used to gauge a currencys valuation through an analysis of the broader economic picture of a country. As opposed to technicals, by which traders mean indicators derived from statistical analysis of a currencys past trading patterns.
Futures - A term used to designate all contracts covering the purchase and sale of financial instruments or physical commodities for future delivery on a commodity futures exchange.
Futures commission merchant (FCM) - A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and, who, in connection with solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts. The FCM must be licensed by the CFTC.
Futures contract - A standardized agreement, traded on a futures exchange, to buy or sell a commodity at a specified price at a date in the future. Specifies the commodity, quality, quantity, delivery date and delivery point or cash settlement.
Future Rate Agreements (FRAs) - FRAs are agreements that are made that allow for borrowing and lending at a constant interest rate for a specified period in the future.
Free Reserves - Total reserves held by a bank less the reserves required by the authority.
Front Office - The activities carried out by the dealer , normal trading activities.
Fundamental Analysis - The analysis of economic indicators and political and current events that could effect the future direction of financial markets. In the foreign exchange market, fundamental analysis is based primarily on macroeconomic events.
Fundamentals - The macro economic factors that are accepted as forming the foundation for the relative value of a currency, these include inflation, growth, trade balance, government deficit, and interest rates.
Funds - A term for USD/CAD/FungiblesInstruments that are equivalent, substitutable and interchangeable in law. May apply to certain exchange traded currency contracts offered on a number of exchanges.
Futures (Financial Futures) - Future contracts that commit both sides to an exchange/transaction of financial instruments, currencies or commodities at a future date and a predetermined price. Future contracts are similar to forward contacts, but future contracts can be traded in the futures markets. Can be used to hedge or speculate against the value of the asset at the expiry date.
Futures Exchange-Traded Contracts - They are firm agreements to deliver (or take delivery of) a standardized amount of something on a certain date at a predetermined price. Futures exist in currencies, money market deposits, bonds, shares and commodities. They are traded on an exchange with the clearing corporation gauranteeing the contract and moreover the trade is done on a mark to market basis.
FX - Foreign Exchange.
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