TERM: Spread

Spread is difference between bid and ask price. Different brokers offer varying spread.

TERM: Ask

Ask is price at which broker will sell base currenc in exchange of quote currency. It is price at which trader buy from market.

TERM: Bid

The bid is that priceat which your broker is willing to buy base currency. It is selling price for trader.

TERM: Long position

Long position means buying base currency. If you are long GBP/USD, it means you want GBP to go north against USD. 

TERM: Quote currency

Second currency in a currency pair, or currency on right side is called quote currency. eg GBP/USD in this pair USD is quote currenc

TERM: Base currency

The first currency listed on left of the currency pair is know as base currency. eg in GBP/USD,GBP is base currency.

FX market structure

Fx market is decentralised market, it has no no fixed physical exchange. but forex market participants can be grouped in following way

• Major banks
• Electronic brokerage services(EBS)/Reuters dealing 3000-spot matching
• Medium sized and small banks
• Retail market makers/Retail ECN's/  Hedge funds and commercial companies
• Retail traders

Currency pairs traded in forex market.

There are three types of currency pairs

• Major currency pairs
• Minor or cross currency pairs
• Exotic pairs

Major currenc pairs

These pairs all contain USD on one side and are the most liquid and frequently traded pairs.

Following are major currency pairs

• EUR/USD
• USD/JPY
• GBP/USD
• USD/CHF
• USD/CAD
• AUD/USD
• NZD/USD

Cross/Minor currency pairs

They are currency pairs which donot contain USD in it. Most actively traded crosses are derived from three major non-USD currencies. EUR, JPY, USD.

EUR crosses

• EUR/CHF
• EUR/GBP
• EURCAD
• EUR/AUD
• EUR/NZD

JPY crosses

• EUR/JPY
• GBP/JPY
• CHF/JPY
• CADJPY
• AUD/JPY
• NZD/JPY

GBP crosses

• GBP/CHF
• GBP/AUD
• GBP/CAD
• GBP/NZD

Other crosses

• AUD/CHF
• AUD/CAD
• AUD/NZD
• CAD/CHF
• NZD/CHF
• NZD/CAD

Exotic pairs

Exotic pairs are made up of one major currency paired with the currency of an emerging economy.

• USD/HKD
• USD/SGD
• USD/ZAR
• USD/THB
• USD/MXN
• USD/DKK
• USD/SEK
• USD/NOK

What is forex market?

Forex market is a market in which currencies are traded in pairs. eg: GBPUSD. It is largest financial market in the world, with daily trading volume of $5 trillion. Forex market is considered an OTC, over the counter or inter bank market, the entire market is run electronically within a network of banks, 24hours a day.
Forex market can be traded in different ways. eg: spot, futures, options and ETF(exchange traded fund).

Forex market has many advantages.

• No comissions
• No fixed lot size
• Low transaction cost
• 24hour market
• Leverage
• High liquidity

TERM:Petrodollers

All oil purchases from OPEC must be paid in U.S. dollars. If Mexico wants to buy oil, it has to sell its local currency and buy U.S. dollars, then use those dollars to buy oil from OPEC.

Any country that buys oil from OPEC must do so using petrodollars.

Petrodollars are also known as petrocurrency.

UK current account deficit (26/6/2013)

UK current account deficit.
Current account is difference between exports and imports of a country.
UK avergae quarterly deficit for last 10 years is -9.1 billion
Average quarterly deficit for last 3 years is -10.9 billion
Average quarterly deficit for last 1 year is -14.7 billion
Last quarter deficit is -14.0 billion.

It means UK is importing more and exporting less.

expected defficit for quarter april-june 2013 is -11.9 billion