Closing out a position and taking profits when the security in question moves up to a target level but fails to break through it. This can be seen as a method of extracting what profit a trade has been able to produce so far because the trader believes that further movement past the target level is unlikely. |||For example, suppose that a trader is in a long position on a given currency pair and the exchange rate moves upward in her favor by a moderate amount, but fails to move past a key resistance level she was expecting to act as a catalyst for further movement. In this case, the trader would probably deem the trade flat on a failure and close the position, taking whatever profit has been earned.
1. A price that is neither rising nor declining.2. In forex, the condition of being neither long nor short in a particular currency. Also referred to as 'being square'.3. A bond that is trading without accrued interest. |||1. If a stock over the last month has been trading around $30, it can be thought of as trading flat.2. If you had no positions in the U.S. dollar or your long and short positions canceled each other out, you would be flat or have a flat book.3. A bond is trading flat if the buyer of the bond is not responsible for paying the interest that has accrued since the last payment (accrued interest is usually part of the bond purchase price). Bonds that are in default trade flat.
A term coined by economist Ed Yardeni relating international liquidity to the effect of foreign central banks on U.S. monetary policy. It is measured as the sum of U.S. Treasury and U.S. agency securities held by foreign banks. |||FRODOR is an extremely procyclical economic indicator. As the growth of FRODOR rises, so do the prices of stocks, commodities and real estate, while the U.S. dollar declines. The opposite is seen when the growth of FRODOR decelerates.
The exchange of one currency for another, or the conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around-the-clock. The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX." |||Foreign exchange transactions encompass everything from the conversion of currencies by a traveler at an airport kiosk to billion-dollar payments made by corporate giants and governments for goods and services purchased overseas. Increasing globalization has led to a massive increase in the number of foreign exchange transactions in recent decades. The global foreign exchange market is by far the largest financial market, with average daily volumes in the trillions of dollars.
The market in which participants are able to buy, sell, exchange and speculate on currencies. Foreign exchange markets are made up of banks, commercial companies, central banks, investment management firms, hedge funds, and retail forex brokers and investors. The forex market is considered to be the largest financial market in the world. Watch: Forex Market Basics |||Because the currency markets are large and liquid, they are believed to be the most efficient financial markets. It is important to realize that the foreign exchange market is not a single exchange, but is constructed of a global network of computers that connects participants from all parts of the world.
A monetary policy tool in which a central bank takes an active participatory role in influencing the monetary funds transfer rate of the national currency. Central banks, especially those in developing countries, intervene in the foreign exchange market in order to build reserves, stabilize the exchange rate and to correct misalignments. The success of foreign exchange intervention depends on how the central bank sterilizes the impact of its interventions, as well as general macroeconomic policies set by the government. |||Two difficulties that central banks face is determining the timing and amount of intervention, as this is often a judgment call rather than a cold, hard fact. The amount of reserves, the type of economic trouble facing the country and the ever changing market conditions makes taking the best course of action difficult. Foreign exchange interventions can be risky in that they can undermine a central bank's credibility if it fails to maintain stability. Defending the national currency from speculation was a precipitating cause of the 1994 currency crisis in Mexico, and was a leading factor in the Asian financial crisis of 1997.
An association of banks specializing in the foreign exchange activities in India. The Foreign Exchange Dealers Association of India, which was created in 1958, regulates the governing rules and determines the commissions and charges associated with the interbank foreign exchange business. |||FEDAI determines many of the rules that overlook the day-to-day forex transactions in India. In addition to rule setting, FEDAI assists member banks by acting as an advisor and assists with the training of personnel. The association is responsible for accrediting India's foreign exchange brokers and announcing the exchange rates to its member banks.
An agreement to make a currency exchange between two foreign parties. The agreement consists of swapping principal and interest payments on a loan made in one currency for principal and interest payments of a loan of equal value in another currency. The Federal Reserve System offered this type of swap to several developing countries in 2008. |||The World Bank first introduced currency swaps in 1981 in an effort to obtain German marks and Swiss francs. This type of swap can be done on loans with maturities as long as 10 years. They differ from interest rate swaps because they also involve principal.
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