Currency Transfers - Glossary

Foreign Exchange

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

PIP or Points

Most currencies are quoted in five digit figures, irrespective of the position of the decimal point. A PIP is the phrase used to describe the smallest part of an exchange rate. Example: on the rate of GBP/USD 1.6500 a pip is 0.0001. Accordingly if the rate moves up by 5 pips the resulting rate in the example will be 1.6505. A POINT is generally 100 pips. In the above example, if the rate moves up by 100 pips (one point) the resulting rate will be 1.6600.

Resistance

Resistance is a forecasted price level where the rate of exchange should encounter selling pressure, which should stop the price/rate from rising any further. Main market participants (Investment funds, Banks etc.) look for resistance and support levels to place orders and thus they become, to a large degree, self-fulfilling prophecies.

Support Levels

Support is a forecasted price level where the rate of exchange should encounter buying pressure, which should stop the price/rate from falling any further. Main market participants (Investment Funds, Banks etc.) look for support and resistance levels to place their orders and thus they become, to a larger degree, self-fulfilling prophecies.

Spread

The difference in prices between bid and ask rates. The inter-bank spread is considered the smallest and the variation between tourist buy & sell rates is generally the largest. For example foreign exchange brokers will give you a exchange rate based on the Bid if you are selling GBP and a exchange rate based on the ask if you are buying GBP see live exchange rates

Technical Analysis

Technical analysis is the study of market action, primarily through the use of charts, for the purposes of forecasting future prices and trends. Technical analysis provides details of SUPPORT and RESISTANCE levels. It further identifies trends and indicates when a trend is reversing. It is widely used by the main market players (the people who move the exchange rates with the volumes they trade) and accordingly has arguably become the most popular form of analysis in tracking and forecasting currency movements.

Bull, Bullish, Bull Market

A Bull is a person who believes that prices in the market will rise. This person would be considered Bullish. A Bull Market is a market that is rising (e.g. if the GBP vs USD exchange rate moves higher). If the advance is expected to continue, the market would be Bullish.

Bear, Bearish, Bear Market

A Bear is a person who believes that the prices in the market will decline. This person would be considered Bearish. A Bear Market is a market that is declining (e.g. if the GBP vs USD currency rate is falling). If the decline was expected to continue, the market would be Bearish.

Cable

Foreign Exchange Broker jargon for the GBP Pound v USD exchange rate. Alludes to the cable laid under the Atlantic, which linked the tickertape machines in New York and London.

Correction

This is a technical analysis term. When a market moves strongly in one direction and then pulls back, this pullback will be referred to as a correction. A correction, (which is a common occurrence in a bull (up) or bear (down) trend), is often sharper (i.e. occurs more quickly) than the preceding move. Corrections are a component of the overall trend (either up or down) and are not considered terminal to that trend (i.e. reversing it). Indeed, a correction usually strengthens the foundations of the trend to carry on and sustain further gains or further losses in the days/weeks ahead.

Consolidation

Another technical analysis term. It relates to a condition when the rates are moving in a sideways fashion, which is usually encountered after a market top or bottom.

Foreign Exchange Brokers

Foreign Exchange Brokers are companies that buy and sells currency.Needs to be regulated By Customs and Excise

Also see Contract Options