Arbitrage
The purchase of securities on one market for immediate resale on another market
in order to profit from a price discrepancy. Ask
The price at which an instrument is offered. At
Best Instructions that are given to a dealer to buy or sell at the best rate
that is currently available in the market. Base
Currency The first currency quoted in any pair. Base
Point Refers to yield on bonds. Each percentage point of yield in bonds equals
100 basis points. Bid-Offer
Spread The difference in price between the buy (bid) and sell (offer) of a
currency or financial instrument. Bollinger
Bands A quantitative method which combines a moving average with the instrument's
volatility. The bands were designed to gauge whether the prices are high or low
on relative basis. They are plotted two standard deviations above and below a
simple moving average. Candlestick
Chart Introduced by the Japanese centuries ago, this form of charting uses
the same data available for standard bar charts but offers a much more visually
appealing chart. The different shapes for the candlesticks have different meanings
and certain combinations of candlesticks form their own analysis technique. These
charts consist of four major prices: high, low, open, close. Central
Bank A central bank provides financial and banking services for a country's
government and commercial banks. It implements the government's monetary policy,
as well, by changing interest rates. Central
Rate Exchange rates against the ECU adopted for each currency within the EMS.
Currencies have limited movement from the central rate according to the relevant
band. Cross-Rate
The exchange rate between two currencies. Currency
Type of money a country uses that can be traded for other currencies on the foreign
exchange market. Day
Trader Any investor or trader who liquidates all positions prior to the close
of that trading session. Dealer
An individual or firm who purchases over the counter securities for their own
account profiting or losing on them when sold. Dealers trade for their own account
and risk. European
Currency Unit A basket of the member currencies. As a composite unit, the
ECU consists of all the European Community currencies, which are individually
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