ForexTerminology

  • Quotation

    Displaying the price of one currency on terms of another currency. The quotation provides information about buy/sell rates for two currencies, and consists of these three components: Abbreviations of both currencies, buy price and sell price. A quotation for US Dollar vs. Euro would look like this: USD/EUR = 1.3599/1.3661.

  • Sell price (ASK)

    This is the rate at which the bank is willing to sell a specific foreign currency to clients. For example: You wish to buy $500 for your trip to the USA. Use the bank's sell price per USD to determine how many NIS you would have to pay for the $500.

  • Spot transaction

    Transaction to exchange two currencies at a pre-agreed rate. The client buys or sells one currency for another currency. For example: You buy US Dollars from the bank, paying the bank for them in Euros. The exchange transaction is made with the settlement (payment) occurring in two business days. A spot transaction is considered the most common, basic financial instrument for trading foreign currency.

  • Spread

    The difference between the buy (BID) rate and the sell (ASK) rate. The spread is measured in pips (see explanation below).

  • Swap transaction

    A bilateral transaction, combining a spot transaction and a forward transaction - in opposite directions. For example: You sell to the bank US Dollars for Australian Dollars (spot transaction). Concurrently, you agree with the bank an opposite transaction to be made at a future date, future amount and at a rate agreed in advance: You will sell to the bank Australian Dollars for US Dollars (forward transaction). A swap transaction is made when you wish to enter into a financial investment for a limited term, without being exposed to exchange rate risk. The transaction is used to hedge risk arising from change in rates of the currencies involved in the transaction, but also includes exposure to the risk that the counter-party to the transaction would not make the payment for the reverse conversion upon the future transaction date.

  • Trading room

    This is the key location for international trading activity (buy / sell) of various products, including: currencies, commodities or financial instruments (such as debentures, shares, ETFs etc.) Transactions are conducted using an elaborate electronic network, REUTERS, which provides current information about price levels on different markets around the world - in real time.

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