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Pip (Tick)

Foreign exchange term representing the minimum fluctuation or smallest increment of price movement. It is a 100th part of a %, normally 10,000 of any spot rate. E.g. if the GBPUSD exchange rate is $1.5500, one pip is 0.0001.

Point

Foreign exchange term representing 100 Pips (see Pip (Tick) above). E.g. if the GBPUSD exchange rate is $1.5500, one point is 0.01.

Position

The netted total commitments in a given currency. A position can be either flat or square (no exposure), long, (more currency bought than sold), or short (more currency sold than bought).

Premium

In the currency market, it is the amount of pips added added/subtracted from the spot price to determine a forward exchange rate.

Producer Price Index (PPI)

An economic indicator which gauges the average changes on prices received by domestic producers for their output at all stages of processing.

Profit Taking

The unwinding of a position to realise profits.

Rally

A recovery in an exchange rate price after a period of decline.

Range

The difference between the highest and lowest price of a currency recorded during a given trading period.

Rate

The price of one currency in terms of another.

Real

A price, interest rate or statistic that has been adjusted to eliminate the effect of inflation.

Reserve Currency

A currency held by a central bank on a permanent basis as a store of international liquidity, these are normally US Dollar, Euro and Pounds sterling.

Resistance Level

A price level at which you would expect selling to take place and recognised by technical analysts as a price that a currency will struggle to move above, which could result in a rebound of the exchange rate. Market participants routinely use resistance levels as a guide to place automated orders such as limit orders.

Retail Price Index (RPI)

Measurement of the monthly change in the average level of prices at retail, normally of a defined group of goods. RPIX excludes mortgage interest payments.

Revaluation

Increase in the exchange rate of a currency as a result of official action.

Revaluation Rate

The rate for any period or currency that is used to revalue a position or book.

Right-hand Side

Taking the right hand side of a two way quote i.e. buying the quoted currency.

Risk

The degree of uncertainty associated with an investment.

Risk Management

The identification and acceptance or offsetting of the risks threatening the profitability or existence of an organisation. With respect to commercial foreign exchange, correct risk management involves thorough financial analysis of the market and client's position and use of appropriate currency strategies.

Risk/Return

The relationship between the risk and return on a currency. Usually, the more risk you are prepared to take, the higher the profit or loss you can expect.

Rollover

Where the settlement of a deal is rolled forward to another value date based on the interest rate differential of the two currencies. E.g. next day (also called Tomorrow Next, abbreviated to Tom-Next).

Running a Position

Keeping open positions in the hope of a speculative gain.

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