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Currency Exchange Options - Terms used by Currency Brokers

Send Money terms Used by Currency Providers, See a Glossary of Foreign Exchange Terminology used by banks and foreign exchange brokers

  • Appreciation >> A currency appreciates when it strengthens in price.

  • Ask Rate >> Also known as the offer, this is the rate at which non-market makers can buy a particular currency.

  • Asset Allocation >> Investment practice that divides funds among different markets to achieve diversification for risk management purposes.

  • Bacs >> (Bankers Automated Clearing Services). The process for Sterling clearing for domestic banks. Usually takes 3 business days.

  • A balance of Trade >> The value of a country's exports minus its imports.

  • Base Currency >> The currency which is the base for quotes. For example, the euro is the base currency for EURUSD quotes, while the US dollar is the base currency for USDJPY.

  • Bear Market >> A market that is characterized by declining prices.

  • Bid Rate >> The rate at which traders can currently sell a particular currency.

  • Bid Offer >> (Ask) Spread: The difference between the bid and the ask (offer) price.

  • Broker >> An individual or a company that acts as an intermediary, handling investors' orders to buy and sell currencies. Some brokers charge a commission for this service.

Send Money Terminology

  • Chaps >> CHAPS: (Clearing House Automated Payment System). A faster means of making payments. Usually occurs on the same day.

  • Cable >> is the slang for the GBPUSD dollars exchange rate.

  • Central Bank >> A government or quasi-governmental organization that manages a country's monetary policy. An example is the Federal Reserve, which is the US Central Bank.

  • Commission >> A transaction fee charged by a broker.

  • Cross Rate >> An exchange rate between two currencies that does not involve the US dollar, such as EURJPY.

  • Currency >> Any form of money issued by a government or central bank and used as legal tender.

  • Currency Risk >> The probability of an adverse change in exchange rates.

  • Day Trading >> Refers to positions that have been opened and closed on the same day.

  • Deficit >> is a negative balance of trade or payments

  • Exposure >> is the amount of money at risk due to Foreign Exchange movements.

  • Economic Indicator >> A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), CPI (inflation) and retail sales.

Currency Exchange Terminology

  • European Central Bank >> (ECB): The Central Bank of the European Monetary Union.

  • Federal Reserve >> (Fed): The Central Bank of the United States.

  • Foreign Exchange >> Foreign Exchange/ Forex or FX market: A market where currencies are bought and sold against each other.

  • Forward Contract >> is a contract to exchange a specific amount of one currency for another on a future date at a predetermined rate. Deposit required for forwarding contracts.

  • Forward Rate >> is the rate at which two currencies can be exchanged on a preset future date, e.g. sterling-dollar exchange rate today for transfer in 3 months time.

  • Forward Points >> is the difference between the spot rate and the forward rate.

  • Fundamental analysis >> is an 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 an instrument at a set price on a future date. Difference between a future to forward?. Futures typically traded on an exchange or fixed settlement date. Forwards are over-the-counter (OTC) contracts. The maturity date can be a bespoke basis.

  • GTC >> Good till cancelled. The GTC meaning "Good Till Cancelled". GTC order continues until executed or cancelled.

  • Hedge >> is protection against future currency movements.

  • Inflation >> is an economic condition whereby prices for consumer goods rise, eroding purchasing power.

  • Limit Order >> is an order to buy at or below a specific price or to sell at or above a specific price.

Foreign Exchange Terms Used

  • Liquidity >> is the ability of a market to accept large transaction with minimal or no impact on price stability.

  • Long position >> is a market position where the client has bought a currency he did not previously have. Normally expressed in base currency terms, e.g. long Dollars (short Swiss Franc)...

  • Margin >> is the required equity that an investor must deposit to collateralize a position.

  • Margin Call >> is a request from a broker or a dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer. Alternatively, the client can choose to close one or more positions.

  • Market Maker >> is a dealer who supplies prices and is prepared to buy or sell at that stated bid and ask prices.

  • OCO >> "One Cancels Other" A combination of a 'Stop Loss' order and a 'Take Profit' order. When one order executed the other order automatically cancelled.

  • Order >> You can leave an "order" with us to transact on your behalf if a particular exchange rate is reached.

  • Offer >> is the price or rate that a trader is prepared to sell it.

  • Open Position >> is a deal that has not been settled by physical payment or reversed by an equal and opposite deal for the same value.

  • Over the Counter >> (OTC): Used to describe any transaction that is not conducted over a regulated exchange.

  • Pips >> Are the term used in the currency market to characterize the smallest incremental move an exchange rate can make. The value of a pip depends on the currency pair. Also, One pip/basis point equals for instance 0.0001 for EUR/USD, GBP/USD and USD/CHF, and 0.01 for USD/JPY.
FX Terms
  • Resistance Level >> is a price level at which you would expect selling to take place.

  • Settlement Date >> is the date for the exchange of payments.

  • Short Position >> is an investment position that benefits from a decline in market price.

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

  • Spot Rate >> is the foreign exchange rate at which two currencies can be exchanged in 2 days time.

  • Spot Transaction >> is the exchange of one currency for another at a specified rate for settlement in 2 working days.

Spread >> is the difference between the bid and the offer (ask) price.

  • Stop Loss Order >> A stop loss order is a means of limiting your risk from adverse exchange rates. A currency level set. Once reached automatically executed. The currency level used for a stop loss order is always worse than the current market price. This is a way to protect you from adverse changes in exchange rates without needing to constantly monitor the rate.

  • Support Level >> is a price level at which you would expect buying to take place.

  • Take Profit Order >> Is a stop loss order, a take profit order first involves setting a currency level. When currency level reached. Trade executed in the market. The currency level used for a take profit order is always better than the current market price. This is a way to capitalize on improvements in exchange rates without needing to constantly monitor the rate.

  • Technical Analysis >> is an effort to forecast future market activity by analyzing market data through the use of charts, price trends, and volume.

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