Forex Markets

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10 Terms

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Forex

A global market where currencies are exchanged.

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Spot Market

A market for immediate exchange of currencies.

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Forward Market

A market where contracts are created to exchange currencies on a future date at a set rate.

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Exchange Rate Risk

The risk that fluctuations in exchange rates will affect business profits.

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Liquidity Risk

The risk arising from the difficulty of trading certain currency pairs.

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Hedging

A strategy used by companies to lock in exchange rates and avoid potential losses.

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Foreign Direct Investment (FDI)

Investment made by a company into assets in another country, influenced by currency values.

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Counterparty Risk

The risk that the other party in a Forex transaction will default.

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Economic Indicators

Data points that can influence currency strength, such as interest rates.

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Market Sentiment

The prevailing attitude of traders that can affect currency prices.