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Learn best-practice risk and trade management for successful Forex and CFD trades.

Forex and Contracts-For-Difference (CFD) trading uses leverage, which can greatly multiply your profit or loss. The larger the potential profit, the greater the risk. In fact, before starting to trade Forex and CFD, you need to understand that risk acceptance is a prerequisite for leveraged trading.

Yes there are many Forex trading risks, but there are also various ways to reduce them. We will lead you through the basics of how to minimize your losses using Forex risk management strategies. However, please remember that our aim here is to share knowledge, not advise actions.

Before you start trading in Forex and CFDs, we have some recommendations.

Did you know?

• Read this guide to learn more about Forex trade and risk management

• Open a free, easy-to-use demo account so you can learn by doing without any risk

• Read our FAQs, before you start trading with a real account

What is risk management?

General trading risks

Your profit opportunities are always connected to comparable risks. Forex risk management can be seen as a brief-case containing numerous instruments, which you can use to help keep your trading losses low and potential gain high.

Forex trading risk management is based on four important principles, including:

• recognizing Forex risks

• analyzing and evaluating those risks

• finding solutions to reduce those risks

• managing and applying those solutions consistently

Assessing the market is a primary focal point for new and seasoned traders. Yes the right market position is important – but experienced traders consider risk management equally important.

Leverage effect

One of the main reasons for choosing to trade Forex and CFD is access to leverage. Why? Because leverage offers a reduced margin requirement when compared to a full investment - you put in less to potentially gain more. But remember, if the market does not react your way, you can also lose more too.

RHODIUM offers Forex trading leverage 100-to-one. At this leverage you can move 10,000 USD with a margin of just 100 USD.

The higher the leverage, the faster you gain profit or loss. If you lose, it may be because of over leveraging - meaning you chose a leverage level with a risk too high for you to manage. While trading with smaller investments is an attractive option for avoiding over-leveraging, it also reduces your potential profit. So, always carefully select your leverage according to your account volume.

Inaccurate market assessment

Forex and CFD trading is subject to consistent market movements and every order starts slightly in the negative because the spread (the difference between bid and ask price) gets deducted on order opening. With these points in mind, it's little wonder that your market assessment won't always be right and you will sometimes lose profit. But how much you lose, can be controlled by setting a stop loss mechanism at the final level you are prepared to accept loss. However, bear in mind that setting stop losses too narrowly, might lead to your order being closed on a minimal market movement.

Remember, not every trade will conclude in a profit.

Rapid market movements

The market is constantly influenced by news, opinions, trends and political decisions in milliseconds. Two examples from the many options, are:

• an influential central bank announcing a major interest rate decision, can cause huge gaps on the trade chart within seconds

• a professional market player employs large funds to intentionally cause a significant shift in a particular market

Even if you are actively paying attention to the market, it is not humanly possible to know every change before it happens. Our point? Set up automated stop mechanisms like the stop loss, to close your trading order for you. But remember, the stop loss cannot help you completely avoid loss - just indicate when action can be taken to reduce it.

Market gaps

These are significant leaps in price, that are shown on a trade chart. Market gaps usually occur when the markets are closed, but even open markets can react to unexpected economic news that causes trading orders to close far from the desired threshold. So why is this important?

Because even automated mechanisms like the stop loss, can only close orders at the next available quote after the jump. On EUR/USD chart may occure:

• an unusually large gap right after a weekend

• that there are no prices inside the gap, which makes it impossible for stop loss to trigger before the next attainable market price

Did you know?

In Forex trading terms, the gap represents negative slippage. But of course, a gap can also work in the opposite direction causing positive slippage – where you get more profit than your desired take profit would have produced.

Risk Management tools

Stop loss - knowing your limit

Quotes can move rapidly, especially when the market is volatile or nervous. A smartly placed stop loss usually reacts much faster than a human trader could, making it one of your most important Forex risk management tools. With our RHODIUM account, you can create a specific stop loss when opening an order or a general stop loss for all open orders.

Choosing the right stop loss is discussed in countless articles and reports, but there is no 'golden rule' for all traders or trades. For each trade, you need to choose the appropriate stop loss limit, by answering several questions.

• What is the trade's time frame (remember - the longer a trade is open, the more volatile it will probably be?

• What is the target price and when do I expect to reach it?

• What is my account size and current balance?

• Do I have any open positions?

• Does my order size match my account size, account balance, time frame and current market situation?

• What is the general market sentiment (e.g. volatile, nervous, awaiting news or other external factors?

• How long will this market stay open (e.g. is the weekend coming soon or is the market closed overnight)?

As there is no general rule for the stop loss limit, we suggest using our free demo account to learn by doing without taking risks. Here you can practice a few example trades and test various stop limits in different scenarios.

Order size

Even the best traders do not achieve profitable trades every time. In fact, a good quota of Forex trades ranges between 5 to 8 profitable trades out of 10. So it's clearly important to calculate your order sizes with enough trade capital available to outlast market movements.

Choosing leverage

As you know, choosing too high leverage (over leveraging) will increase your risk and a few negative trades can ruin your overall trading result.

External factors

Remember to consider external factors in your Forex risk management strategies. There are numerous examples of factors that can influence trading quotes, such as:

• power outages and/or a failing internet connection

• being busy or distracted by office work

Added value services

You may already know that RHODIUM has been delivering easy, professional access to financial traders for years. But did you know we also provide exclusive safeguards and service packages free of charge?

Stop out

The stop out level or margin call, is another helpful automated MT4 tool because it helps protect you from greater losses in open markets by:

• constantly monitoring the margin level and updating it in real-time

• sending you a warning when your account reaches a margin level of 100%, by lighting the balance in your terminal window red

• closing open position in your RHODIUM account at 30% margin level

Managing risk in extraordinary events

The Swiss central bank unexpectedly decoupled Switzerland from the Euro on January 15, 2015. Panicked trades ensued, causing an enormous surplus on one side of the market. This led to a severe lack of liquidity, making trades near impossible through significant market peaks. As there was virtually no liquidity for a while, stop losses experienced large delays that were far off their intended target values. This led to significant rejections and losses as well as considerably negative account balances for countless traders.

This kind of extremely rare event is known as a Black Swan. So what, you may ask? At RHODIUM we are big on providing clear, open information that helps you prepare successful Forex trading risk strategies and in the case of a Black Swan - we are letting you know that there's no chance to prepare! In the Swiss central bank case, two things where made clear:

• unpredictable events can lead to game-changing alterations

• even central banks can change their mind

All joking aside, Black Swan events can not be planned for or calculated. So as a general rule for successful Forex and CFD leveraged trading - never trade money you can not afford to lose in the worst case scenario.

Know the big picture

The Forex and CFD trading market offers exciting profit opportunities via daily long and short orders. But remember, it can also deliver big losses if you do not practice effective trade and risk management. Identifying your weakest links and managing them correctly can help limit your losses, because as you now know - you may win 8 of 10 times, but one loss can instantly remove those gains.

We know that the psychological factors around initial trade failure can be disheartening for beginners, but it is important to understand that loss is part of the overall trading experience. Before making your first live trade, understand:

• that losses are unavoidable

• how to psychologically handle losses before they even occur

This article serves as a trader's risk management overview, by offering explanations together with useful countermeasures for general Forex and CFD trading risks. However, RHODIUM does not provide investment consultancy so please:

• use this basic information to improve your personal risk management

• be aware that this information only helps you limit your risks - it is not a guarantee or safeguard

But hey, don't forget that Forex and CFD trading is not all doom and gloom either! Selecting suitable risk management measures and consistently exercising them, can significantly improve your profit/loss ratio for successful trading.

Risk Management Forex & CFD trading

Identify Risk

Identify possible risks in trading products with leverage.

Choose method

Develope risk management strategies that fit your trading preferences.

Control measures

Continuously control the measures you have taken and open positions.

Apply constantly

Apply strategies you have developed continuously in your trade management.


MT4 Frequently Asked Questions

1. My charts are blank and keep saying Waiting for update.

When switching between accounts, the charts may say Waiting for Update. To fix the problem do the following, please:

• Close all the market windows and restart the platform again.

• Open a new market watch/windows.

2. I get Invalid account message.

To fix the problem check the server address and password, please.

3. I get the Not Enough Money message when I try to place a trade.

Most likely that you don’t have enough balance to trade with the leverage you have chosen or you try to trade large volume (lots). To calculate which leverage and volume are best for you and also what margin you need to open a trade, please, use this formula:

Example: An order with the volume of 0.1 lot EURUSD at 1.3975 and with 1:100 leverage.

The required margin is:

To fix the problem try the following:

• Change the lot you want to trade.

4. I cannot trade — the New Order button is not active (grey).

You have used your Investor’s password instead of the Trader’s password to log into the MetaTrader. Please choose in the menu File → Login and use your Trader’s password to enter the system.

5. I cannot trade — No Connection message in the right bottom corner of the MetaTrader.

Click the connection bars in the right bottom corner of the MetaTrader, choose Rescan Servers.

If you still see No Connection – try this:

• Click on the connection bars again and select RHODIUM Trading Server.

• Choose menu Tools → Options → Server tab in the MetaTrader.

• Unselect check box Data Center Auto Configuration.

• Close and open the MetaTrader again.

6. I cannot trade— message Common Error or Trade Context busy.

It means that at this moment there are too many requests come to the server or you have slow connection with the trading server. Click the connection bars in the right bottom corner of the MetaTrader, choose Rescan Servers. After that close and open the MetaTrader 4 again.

7. I cannot place an order — message Invalid Stop Loss/Take Profit.

Please, make sure you’ve chosen the correct values for Stop Loss/Take Profit.

8. I cannot open an order — message Requote.

You can get this message in volatile market. It means, the price has changed since you clicked the Buy or Sell button in your MetaTrader 4. To avoid Requotes select checkbox Enable maximum deviation from quoted price and set the deviation level at 3 pips.

9. Account history disappeared from my MetaTrader 4.

Right click inside the Account History tab in the MetaTrader and choose All History (or other interval) in the context menu.

10. I don’t see all currency pairs in the Market Watch list in the MetaTrader.

Right click on any currency pair in the Market Watch window and choose Show All in the context menu.

11. How to install an Expert Advisor (EA) in the MetaTrader?

Please, take these steps to install an Expert Advisor (EA):

• Save the file with your EA into the expertsfolder on your computer. The default folder is: C:\Program Files\MetaTrader\experts. However, if you installed your MetaTrader to another location, you may have to choose a different folder.

• Open the MetaTrader, enable the Navigator window, click Expert Advisors. You should be able to see your EA in the list.

• Double-click on your EA or drag and drop it onto the chart to activate.

• Adjust the necessary EA settings in the pop up window, click OK. If you have installed your EA successfully, you will see a smiley in the right top corner of your chart. The logs of all operations performed by your EA are available in the MetaTrader, Terminal window, Experts and Journal tabs.

12. How do I install an Indicator in the MetaTrader?

Please, take these steps to install an Indicator:

• Save the file with your Indicator into the indicators folder on your computer. The default folder is: C:\Program Files\MetaTrader\experts\indicators. However, if you installed your MetaTrader into a different location, you may have to choose a different folder.

• Open the MetaTrader, enable the Navigator window, click Indicators. You should be able to see your Indicator in the list.

• Double-click on your Indicator or drag and drop it onto the chart to activate.

• Adjust the necessary Indicator settings in the pop up window, click OK. If you have installed your Indicator successfully, you will see the confirmation in the MetaTrader, Terminal window, tab Journal tab.

13. My MetaTrader gets disconnected.

Click the connection bars in the right bottom corner of the MetaTrader, choose Rescan Servers.

If you still see No Connection – try this:

• Click on the connection bars again and select RHODIUM Trading Server.

• Choose menu Tools → Options → Server tab in the MetaTrader.

• Unselect check box Data Center Auto Configuration.

• Close and open the MetaTrader again.

14. What is the difference between Balance, Equity, Margin, Free Margin, Margin Level?

Balance shows the funds in your account based on the closed trades only. When you close a trade, its profit/loss is added/deducted to/from your account Balance.

Equity = Account Balance + Floating profit/loss of the open trades.

If you have no open trades, Balance and Equity show identical values. If you have open trades in the account, Balancewill stay fixed until you close a trade and Equity will be changing all the time according to the current profit/loss that you are making.

Margin – the funds that you have used to open a trade. See the Margin calculation formula. 

Free Margin = Equity – Margin.

These are the funds that you can use to open more trades.

Margin Level (%) = Equity/Margin*100%.

15. I keep receiving blank News messages into my MetaTrader. What is the problem?

The MetaTrader receives only the news titles to alert a trader that an event has taken place. For detailed news information and analysis, please, check the internet.

16. I do not see the News tab in the Terminal window in the MetaTrader.

The News tab will appear as soon as the first news gets to your MetaTrader. News get to your MetaTrader only while you are online. If a news message is sent out while you are offline, you will not get it when you log into your account later.

17. How can I generate a trading Statement for my account?

Trading Statements are e-mailed to clients at the end of every Trading Day (if a Client has traded on that day) and Month (even if a Client has not traded in that month, a Statement will be sent anyway). If you need a Trading Statement for a specific time period, you can generate it from your MetaTrader Account History. Right click inside theAccount History tab in the MetaTrader, select Save as Report (or Save as Detailed Report), save the file on your computer.

18. How do I download historical data from the History Center in the MetaTrader?

Select menu Tools → History Center in the MetaTrader and choose the currency pair for which you need the historical prices. To download the historical data, please, take these steps:

• Log in to your account in the MetaTrader and close all charts; leave only the chart for which you need the data.

• Right click on the chart, select Properties, Common tab. Select option Offline Chart.

• Close and re-open the MetaTrader window.

• Select menu Tools → History Center in the MetaTrader.

• Choose the currency pair and the timeframe on the left.

• Click Download.

• Wait till the download is complete and close the MetaTrader.

• Open the MetaTrader folder on your computer, open folder History. The default folder is usually: C:\Program Files\MetaTrader\history\downloads, but if you have installed the MetaTrader to another location, the folder may be different. You should see the folder with the price history files. For example EUR USD.

• Copy and paste the files from this folder into your Trading Server folder. For example: C:\Program Files\MetaTrader\history\Real 2 RHODIUM.

• Open the MetaTrader and open up a new chart for the currency pair you need.

*Please, note that the historical data is provided by the Metaquotes Software Corp. (MetaTrader 4 developer).

19. What do the digits in the right bottom corner of the MetaTrader stand for?

The digits in the right bottom corner of your MetaTrader display the traffic. The digit to the left of the “/” (slash) sign displays the Incoming traffic; the digit to the right of the “/” (slash) displays the Outgoing traffic.

Example: 370/2 Kb. Incoming traffic – 370 Kbs, outgoing traffic – 2 Kbs.

20. How do I set up Trailing Stop?

Trailing Stop is a complex stop-loss order in which the Stop Loss price is set at some fixed number of pips below or above the market price. If the market price moves in the direction that is profitable to the trader, the Stop Loss price changes proportionally, but if the currency price moves against you, the Stop Loss price does not change. This technique allows a trader to set a limit on the maximum possible loss without setting a limit on the maximum possible gain. You also do not have to watch the price on an-ongoing basis and modify the Stop Loss price manually.

*Trailing Stop is a Client Terminal side feature. For the trailing stop to continue modify the Stop Loss, the trading platform Meta Trader 4 must be running and connected to the Internet.

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Appreciation ― a currency is said to "appreciate" when it's price increases against a specific currency or group of currencies in response to market demand. 

Arbitrage ― the purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.

Around ― jargon used by dealers in quoting when the forward premium/discount is near parity. For example, "two-two around" would translate into 2 points to either side of the present spot price.

Ask Rate ― the rate at which a financial instrument if offered for sale (as in bid/ask spread).

Asset Allocation ― division of funds among different markets, instruments or investments to diversify risk and/or create exposure to areas considered attractive, consistent with an investor’s objectives.


Back Office ― the departments and processes related to the settlement of financial transactions.

Balance of Trade ― the value of a country’s exports minus its imports.

Base Currency ― the base currency is usually the currency in which an investor or issuer maintains its book of accounts. In the Forex markets, the US Dollar is normally considered the "base" currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The main exceptions to this rule are the Sterling, the Euro and the Australian Dollar.

Bear Market ― a market in which prices decline.

Bid Rate ― the rate at which a trader is willing to buy a currency.

Bid/Ask Spread ― the difference between the bid and offer price, and the most widely used measure of liquidity.

Big Figure ― the first few digits of an exchange rate, as referred to by dealers for simplicity. These digits change relatively slowly, and are omitted in dealer quotes, especially in times of high market activity when time is tight. For example, a USD/JPY rate might be 107.30/107.35, but would be quoted verbally without the first three digits i.e. "30/35".

Book ― in a professional trading environment, the "book" is the net positions of a dealing desk.

Broker ― an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a "dealer" commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade.

Bretton Woods Agreement of 1944 ― the agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US$35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.

Bull Market ― a market in which prices rise.

Bundesbank ― Germany’s Central Bank.


Cable ― trader slang referring to the Sterling/US Dollar exchange rate. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 1800s.

Candlestick Chart ― a chart indicating the trading range for the period as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.

Central Bank ― a government or quasi-governmental organization that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.

Chartist ― someone who uses charts and graphs and interprets historical data to find trends to predict future movements. Also referred to as Technical Trader.

Churning ― unethical practice employed by some brokers to increase their commissions by excessively trading in a client's account. It is also referred to as "churn and burn", "twisting" and "overtrading".

Clearing ― the process of settling a trade.

Contagion ― the tendency of an economic situation to spread from one market to another.

Collateral ― something given to secure a loan or as a guarantee of performance.

Commission ― a transaction fee charged by a broker.

Confirmation ― a document exchanged by the parties to a transaction that states the terms of said transaction.

Contract ― the standard unit of trading.

Counterparty ― participant in a financial transaction.

Country Risk ― risk associated with an international transaction, including but not limited to legal and political conditions.

Cross Rate ― the exchange rate between any two currencies that are considered non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/JPY quote would be considered a cross rate, whereas in UK or Japan it would be one of the primary currency pairs traded.

Currency ― form of money issued by a government or central bank and used as legal tender and a basis for trade.

Currency Risk ― the likelihood of an adverse change in exchange rates.


Day Trading ― refers to taking positions which are opened and closed on the same trading day.

Dealer ― someone who acts as a principal or counterparty to a transaction, hoping to earn a spread (profit) by closing out the position in a subsequent trade. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.

Delivery ― an Forex trade where both sides make and take actual delivery of the currencies traded.

Depreciation ― fall in the value of a currency against another currency or group of currencies.

Derivative ― a contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument. An Option is the most common derivative instrument.

Devaluation ― deliberate downward adjustment of a currency’s price, normally by official announcement.


Economic Indicator ― a government-issued statistic on the state of an economy, which might affect market prices. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.

End Of Day Order (EOD) ― an order to buy or sell at a specified price. This order remains open until the end of the trading day.

Equity ― in a margin account, it's an accounting equation, which defines the amount currently held in a customer’s account calculated as if all the opened positions will be closed at the current market quotes. It's usually calculated as the account balance plus unrealized gains and minus unrealized losses.

European Monetary Union (EMU) ― EMU created the single European currency called the Euro, which replaced the national currencies of the member EU countries in 2002. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

Euro ― the currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).

European Central Bank (ECB) ― the Central Bank for the new European Monetary Union.


Federal Deposit Insurance Corporation (FDIC) ― the regulatory agency responsible for administering bank depository insurance in the US.

Federal Reserve (Fed) ― the Central Bank for the United States.

Flat/Square ― dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position. 

Foreign Exchange (Forex, FX) ― simultaneous buying of one currency and selling of another.

Forward ― the pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.

Forward Points ― the pips added to or subtracted from the current exchange rate to calculate a forward price.

Fundamental Analysis ― analysis of economic and political information with the objective of determining future movements in a financial market.

Futures Contract ― an obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange Traded Contacts – ETC), versus forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.


Good Till Cancelled Order (GTC) ― an order to buy or sell at a specified price. This order remains open until filled or until the client cancels.


Inflation ― an economic condition whereby prices for consumer goods rise, eroding purchasing power.

Initial Margin ― the initial deposit of collateral required to enter into a position as a guarantee on future performance.

Interbank Rates ― the Foreign Exchange rates at which large international banks quote other large international banks.


Leading Indicators ― statistics that are considered to predict future economic activity.

LIBOR ― London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

Limit Order ― an order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/JPY is 102.00/05, then a limit order to buy USD would be at a price below 102. (i.e. 101.50)

Liquidity ― the ability of a market to accept large transaction with minimal to no impact on price stability.

Liquidation ― the closing of an existing position through the execution of an offsetting transaction.

Long Position ― a position that appreciates in value if market prices increase.


Margin ― the required equity that an investor must deposit to collateralize a position.

Margin Call ― a request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.

Market Maker ― a dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

Market Risk ― exposure to changes in market prices.

Mark-to-Market ― process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.

Maturity ― the date for settlement or expiry of a financial instrument.


Offer ― the rate at which a dealer is willing to sell a currency.

Offsetting Transaction ― a trade with which serves to cancel or offset some or all of the market risk of an open position.

One Cancels the Other Order (OCO) ― a designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.

Open Order – an order that will be executed when a market moves to its designated price. Normally associated with Good Till Cancelled Orders.

Open Position ― a deal not yet reversed or settled with a physical payment.

Over the Counter (OTC) ― asked to describe any transaction that is not conducted over an exchange.

Overnight ― a trade that remains open until the next business day.


Pips ― digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.

Political Risk ― exposure to changes in governmental policy which will have an adverse effect on an investor’s position.

Position ― the netted total holdings of a given currency.

Premium ― in the currency markets, describes the amount by which the forward or futures price exceed the spot price.

Price Transparency ― describes quotes to which every market participant has equal access.


Quote ― an indicative market price, normally used for information purposes only.


Rate ― the price of one currency in terms of another, typically used for dealing purposes. 

Resistance ― a term used in technical analysis indicating a specific price level at which analysis concludes people will sell. 

Revaluation ― an increase in the exchange rate for a currency as a result of central bank intervention. Opposite ofDevaluation.

Risk ― exposure to uncertain change, most often used with a negative connotation of adverse change.

Risk Management ― the employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.

Rollover ― process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies.


Settlement ― the process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.

Short Position ― an investment position that benefits from a decline in market price.

Spot Price ― the current market price. Settlement of spot transactions usually occurs within two business days.

Spread ― the difference between the bid and offer prices.

Sterling ― slang for British Pound.

Stop Loss Order ― type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor’s position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.

Support Levels ― a technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of Resistance.

Swap - the forex swap is an investment strategy that is a combination purchase and sale of the same amount of one currency, while purchasing a different currency that carries two different value dates. This essentially creates a situation in which the investor offsets the sale with the purchase, and also positions the investor to earn a return in both a short and a long position. A forex swap is not the same as a currency trade, which is a simple exchange of currencies based on the current performance of one currency against the other.


Technical Analysis ― an effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.

Tomorrow Next (Tom/Next) ― simultaneous buying and selling of a currency for delivery the following day.

Transaction Cost ― the cost of buying or selling a financial instrument.

Transaction Date ― the date on which a trade occurs.

Turnover ― the total money value of all executed transactions in a given time period; volume.

Two-Way Price ― when both a bid and offer rate is quoted for a Forex transaction.


Uptick ― new price quote at a price higher than the preceding quote.

Uptick Rule ― in the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.

US Prime Rate ― the interest rate at which US banks will lend to their prime corporate customers.


Value Date ― the date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date.

Variation Margin ― funds a broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements.

Volatility (Vol) ― a statistical measure of a market’s price movements over time.


Whipsaw ― slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.


Yard ― slang for a billion.

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