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The process by which financial institutions settle payments between each other. Cleared funds refer to money that has been processed and confirmed by the banking system, ensuring it’s available for use. In trading, this concept is crucial for ensuring transaction …
A government or quasi-government organization that manages a nation’s monetary policy. Central banks oversee monetary policy, manage currency issuance, and regulate the banking system within a country. Their actions, such as setting interest rates, directly impact currency values, making them …
A market where financial instruments can be traded for immediate delivery. The cash market involves trading financial instruments for immediate delivery, offering liquidity and immediacy for transactions. This market contrasts with futures markets, where contracts are settled at a later …
A strategy where one sells the currency of a country with a low interest rate and simultaneously buys the currency of a country with a higher interest rate. For example, yen crosses like GBP/JPY and NsD/JPY. Carry trade leverages interest …
A chart that represents the range of trading prices for the day, including opening and closing prices. Candlestick charts provide a visual representation of price movements, showing the open, close, high, and low prices within a specific timeframe. Traders use …
A policy where a government or central bank fixes its currency’s exchange rate to another currency or basket of currencies. A currency peg is when a country’s currency is fixed to the value of another currency or a basket of …
Financial derivatives giving the right, but not the obligation, to buy or sell currency at a set price before a certain date. Currency options give the right, but not the obligation, to exchange one currency for another at a predetermined …
Contracts to buy or sell a specific amount of currency at a predetermined price on a set date in the future. Currency futures are standardized contracts agreeing to buy or sell a specific amount of currency at a future date …
When a currency loses value compared to another currency. Currency depreciation happens when one currency loses value against another, often due to economic factors like inflation or trade balances. This can make exports cheaper but imports more expensive, influencing trade …
The act of realizing a gain or loss by closing a position. Crystallization in finance means realizing gains or losses by closing a position, turning unrealized into realized profits or losses. This step is crucial for tax planning and portfolio …
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