ABA - a digital code used by the American Bankers Association to define a bank.

Annualized - Extrapolates the behavior of an element (such as volatility) from a certain time period to a full year.

Ask - The price at which sellers offer currencies to buyers.

Base Currency - The currency which other currencies are quoted against.

Basis Point - One hundredth of one percentage point. A change from 5.25% to 5.75% is said to be a 50 basis point move. See 'Point' for currency moves.

Bid - The price that a buyer is willing to pay to purchase a given currency and sell another at a particular time.

Central Bank - A Government institution in control of the nation's monetary policy and the printing of that nation's currency.

Consumer Price Index (CPI) - A measure of the average amount (price) paid for a market basket of goods and services by a typical U.S. consumer in comparison to the average paid for the same basket in an earlier base year.

Cross Rates - The exchange rate between two currencies expressed as the ratio of two foreign exchange rates that are both expressed in terms of a third currency. Foreign exchange rate between two currencies other than the U.S. dollar, the currency in which most exchanges are usually quoted.

Currency - means money denominated in the lawful currency of a country.

Current Account - A category in the balance of payments account that includes all transactions that either contribute to national income or involve the spending of national income.

Currency pair - Exchange rate relationship between two currencies, where one currency is expressed in terms of the other. For example, USD-DEM (US dollar against German mark) is a currency pair.

Day Trading - refers to opening and closing the same position(s) before the close of that day's trading. Associated with speculative trading.

Deficit Spending - A term which refers to the situation wherein he government spends more than it receives in taxes.

Directional quality - The percentage of forecasts in the right direction.

Discount Rate - The interest a private bank pays for a loan from the US Federal Reserve System.

Dollar rate - The exchange rate of a foreign currency as quoted against the US dollar (USD). Some currencies are typically only quoted against the US dollar, such as the Algerian dinar (DZD) and the Andorran franc (ADF). The exchange rate of the Algerian dinar against the Andorran franc is thus computed from DZD-USD and ADF-USD.

EMS - European Monetary System

Euro - The currency of the European Monetary Union (EMU). This is the amalgamation of the following currencies, after Jan. 1, 2002 these currencies will be considered legacy currencies. Germany Deutsche Marks, Italy Lira, Austria Schillings, France Franc, Belgium Francs, Netherlands (Dutch) Guilders, Finland Markka, Portugal Escudo, Greece Drachmas, Ireland Punt, Luxembourg Francs, Spanish Pesetas.

Exchange rate - The number of one currency needed to buy another.

Exchange rate risk - The potential loss that could be incurred from a movement in bid/ask prices, or exchange rates. For traders, risk is measured by the open currency position.

Exposure -The sensitivity of a firm's cash flows to changes in exchange rates.

Federal Debt - The current dollar sum of obligations equal to the accumulated past deficits minus surpluses of the United States government.

Federal Open Market Committee (FOMC) - The body that is responsible for setting the interest rates and credit policies of the Federal Reserve System. A 12-member committee consisting of the seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank presidents. The Committee sets objectives for the growth of money and credit. These objectives are implemented through purchases and sales of U.S. government securities in the open market. The FOMC also establishes policy relating to System operations in the foreign exchange markets.

Federal Reserve System - The central bank of the United States, with responsibility for implementing the country's monetary policy and regulating member banks of the System. The Fed was created in 1913 and is composed of 12 regional Federal Reserve Banks and a national Board of Governors.

Financial institution - An organization primarily established to offer and perform financial services. Examples of financial institutions include brokerages and banks.

Fiscal Policy - Government policy regarding taxation and spending. Fiscal policy is made by Congress and the Administration.

Fixed Exchange Rate - Official rate set by monetary authorities for one or more currencies

Floating Exchange Rate - Floating exchange rates refer to the value of a currency as decided by supply and demand.

Forecast - A statistical analysis of the markets whereby a percentage chance is assigned to a given price movement occurring. A forecast of the foreign exchange markets is similar to a weather report in that both assign a probability to the occurrence of an identified market or climatic change.

Forecasting services - Financial services that provide professional traders and investors with an unbiased second opinion and reliable support throughout the financial decision-making process. Any professional with international business relations can use the forecasting services to reduce there foreign exchange risks due to currency price fluctuations and get up-to-date information anytime.

Foreign Exchange - The exchange of foreign currency. On the foreign exchange market, foreign currency is bought and sold for immediate (spot) or forward delivery

Foreign Exchange Market - A condition or area where buyers and sellers are in contact to buy and sell foreign currencies. Foreign exchange markets exist wherever and whenever currencies are bought and sold, and are not necessarily confined to cities.

Forex - Industry term - Same as Foreign Exchange

Forward Contract - A forward contract fixes the exchange rate for future delivery at a date to be agreed by both participants. A deposit (or a minimum margin) is usually required in forward transactions. For example, if I want to lock in today's rate to buy $10,000 USD at 1.5820 Canadian for the next 4 months, I will have the ability to purchase up to $10,000 USD at this rate.

Forward Value - This term denotes an agreement to purchase or sell currency at a rate agreed today but for settlement at an agreed fixed date in the future.

Fundamental Analysis - focuses on the economic forces of supply and demand that causes price movement. The Fundamentalist studies the causes of market movement, whereas the Technician studies the effects.

FX - an abbreviation of Foreign Exchange

Hedging - A hedging transaction is a purchase or sale of a financial product, having as its purpose the elimination of loss arising from price fluctuations. With regards to currency transactions it would protect one against fluctuations in the foreign exchange rate. (see Forward Contract)

Initial Claims  - Initial jobless claims measure the number of filings for state jobless benefits. This report provides a timely, but often misleading, indicator of the direction of the economy, with increases (decreases) in claims potential signaling slowing (accelerating) job growth. On a week-to-week basis, claims are quite volatile, and many analysts therefore track a four week moving average to get a better sense of the underlying trend. It typically takes a sustained move of at least 30K in claims to signal a meaningful change in job growth.

Interbank Rates - The Foreign Exchange rates at which large international banks quote other large international banks.

Interbank prices - Currency prices that reflect market rates for transactions of US $1 million or more. Interbank prices are different from retail prices.

ISO - The International Standards Organization, a worldwide standard-setting body. We use ISO 4217 currency codes in all of our services.

Limit Order - This is a simple mechanism that allows a client to place an order to buy or sell a currency at an exchange rate that is better than the current market rate. Should the exchange rate reach the level of the client's order, the transaction will automatically be completed. Such orders are placed in an effort to optimize dealing but it should be noted that exchange rates move up and down and the placement of a Limit Order does no guarantee execution and is placed at the client's risk.

Long position - A market position where a trader has bought a currency she previously did not own. A long position is normally expressed in terms of the base currency.

Margin - a cash deposit provided by a client as collateral to cover a forward position.

Market - The city to whose financial institutions a Trading Model is constrained. Trading Models follow and act upon the price quotes originating from these banks and financial institutions. The market of a given Trading Model simply maintains differences in opening and closing times in order to ensure that Trading Models only trade when the market is open and its recommendations can be followed. Trading Model markets exist for a number of the world's financial capitols.

Market Maker - A financial institution or individual making consistent buy and sell quotations in a selection currencies. A market maker must hold or have ready access to the amounts quoted, that is carry an inventory.

Monetarists - Followers of Milton Friedman who focus on the effect of money and monetary policy on changing price and employment levels.

Monetary Policy - The federal governments attempt to change aggregate demand through money supply changes.

Money Markets - Refers to financial investments that are generally under one year in duration and generally only open to banks and other financial institutions

Offer - The price, or rate, that a willing seller is prepared to sell at.

Open position - Any deal which has not been settled by physical payment or reversed by an equal and opposite deal for the same date.

Option Forward - This term denotes a forward contract where the settlement date is not fixed but is between two agreed dates in the future. Such contracts are beneficial to clients in that have a future commitment but the date of settlement is not yet fixed. When the settlement date is known payments will be made in the normal way. If the settlement becomes due after the further date, a contract can be extended though this may result in an alteration to the exchange rate. A deposit or margin is required to secure option forward transactions.

Overbought - Situation where price movement has risen 150% faster or stronger than normal, rising too far in response to net buying. A price movement that becomes overbought is expected to soon make a contrarian move. In other words, the price of the currency pair is expected to soon fall.

Oversold - Situation where price movement has fallen 150% faster or stronger than normal, declining too far in response to net selling. A price movement that becomes oversold is expected to soon make a contrarian move. In other words, the price of the currency pair is expected to soon rise.

Point (or Pip) - One basis point: 0.0001 the term used in currency market to represent the smallest incremental move an exchange rate can make. It is one one-hundredth of a percent
For example, when a currency moves from 1.5720 to 1.5725 it has moved 5 points.

Portfolio - A selection of securities held by an investor or financial institution. Portfolios are designed primarily to spread investment risk.

Price movement - The change in the price of a currency over a specified time period.

Relative Strength - Indicates the forecasted price movements for each of the eight currencies in the Currency Ranking service due to expected medium-term rate fluctuations. The relative strength for each currency is computed from a correlation between a Trading Model-generated forecast and the currency's price history.

Repurchase Agreements - When the Federal Reserve makes a repurchase agreement with a government securities dealer, it buys a security for immediate delivery with an agreement to sell the security back at the same price by a specific date (usually within 15 days) and receives interest at a specific rate. This arrangement allows the Federal Reserve to inject reserves into the banking system on a temporary basis to meet a temporary need and to withdraw these reserves as soon as that need has passed.

Risk - The potential loss that an investor accepts when she makes an investment. Risk can also be defined statistically as the annualized standard deviation of returns.

Settlement - (1) The final stage of a transaction, actual physical exchange of one currency for another (2) is the process by which available funds have been instructed by a client of Cambridge for transfer via wire, draft or deposit to a multi-currency account and a designated receiver of such funds.

Settlement Date - Shall mean the agreed date on which client should ensure cleared funds have been paid to the Company and the day on which the Company, having received cleared funds, will arrange to pay foreign currency to the Client's designated account.

Short position - A market position where a trader has sold a currency he does not previously own. A short position is normally expressed in terms of the base currency.

Spot - This term denotes the settlement date of a transaction. Spot is always two working days after the date of the agreement of the transaction and is a market standard for deals requiring early settlement. It is possible for deals to be transacted for same-day or next day settlement depending on the time the transaction is concluded.

Spot Price - The current market price for a spot transaction.

Spot Rate - The current rate for a spot transaction.

Spread - The difference between the bid and offer prices. This is usually used for Interbank trade of currencies.

Stop-buy - A buy order for a currency price that is above the current "market," or current price, that becomes a market order when the specified price is reached. Stop-buys are used by traders to establish positions in markets which they perceive to be rising in value.

Stop-loss - A price specified by a trader at which he closes his position (buys or sells currencies to exit the market) to ensure that in case of a loss (prices which don't move in the expected direction) he is able to keep his loss in line with his risk profile.

Swift - Society of Worldwide Interbank Financial Telecommunications. It is a dedicated computer network that is set up to support fund transfer messages between member banks worldwide.

Technical Analysis - is analysis based on market action through chart study, volume, trends, moving averages, patterns, formations and many other technical indicators.

Time horizon - The period of time over which a forecast (such as a Directional Forecast or a Trading Recommendation) of the foreign exchange markets is made. Traders generally look at forecasts over several time horizons before making a trading decision.

Treasury Bill - Short-term U.S. government obligations sold at a discount from face value. Treasury bills generally are issued with 13-, 26- or 52-week maturities.

Treasury Bond - Obligations of the U.S. government that mature in 15 or more years and pay a specified coupon.

Treasury Note - Obligations of the U.S. government that mature in 2 to 10 years and pay a specified coupon

Trend - simply the direction of the market, usually broken down to three categories....major, intermediate and short-term trends. Three directions are also associated with a trend; that is, uptrend, downtrend, and a sideways trend.

US Prime Rate - The rate at which US banks will lend to their prime corporate customers

Value Date - The date that both parties of a transaction agree to exchange payments.

Vendor or supplier - A financial organization which collects, packages, and distributes up-to-the-minute price quotes from banks and other financial institutions.

Volatility - A measure of price fluctuations. The standard deviation of a price series is commonly used to measure price volatility.

Volume - represents the total amount of trading activity in a particular stock, commodity or index for that day. It is the total number of contracts traded during the day.