Glossary of foreign exchange terms

Bankers’ Automated Clearing Services - the process for making Sterling payments via domestic banks. Mostly used for direct credits and direct debits. BACS payments tend to take three business days to clear.

The movement of funds from one entity to another. When related to moving cash from one location (country) to another, this is often interchanged with terms including; currency transfer, foreign exchange, currency converting and more.

Clearing House Automated Payment System - a faster way of making payments. Usually cleared on the same working day.

This is the process of moving funds from one location, and therefore currency, to another.

The amount of money at risk due to foreign exchange movements. Essentially another word for financial risk.

A UK system for faster payment of amounts up to £10,000 (lower for some banks). Funds are usually credit within minutes.

A global market which exists for the effective movement of capital (cash/money) from one destination to another. Also referred to as Forex, FX and currency market, the foreign exchange market facilitates the trading of currencies. Some of the items that make the FX market unique compared to any other trading entity include; the global natural of the industry, the volume of transactions taking place, myriad factors impacting exchange rates and the use of leverage to enhance profit and loss margins.

A contract to exchange a specific amount of one currency for another on a future date, at a predetermined rate. A deposit is normally required for forward contracts.

The difference between the spot rate and the forward rate. The forward points are a calculation of the interest rate differential between the buy and sell currency.

The rate at which two currencies can be exchanged on a pre-set future date.

FX is the abbreviated version frequently used for foreign exchange. FX is the global trading market for the movement of currencies.

A GTC foreign exchange order will be left in the market at a set rate until executed or cancelled by you.

Protection against future currency movements. The financial products used to provide this protection are often called Currency Options.

This term has many different meanings depending on context, but when we use it it's to describe the profit we make from the transference of funds. See ‘Spread’ below for more details.

Currency is bought by the customer at the offer rate and sold at the bid rate. The mid-market rate is the mid-point between the bid and offer rates.

Money can be transferred in a number of ways from country to country, and spanning a variety of volumes and currency types. Some of the most common types of money transfers include; electronic funds transfers, wire transfers, Giro and money orders.

A combination of a stop loss order and a take profit order, which are both described in detail below. When one of these two orders is executed, the other order is automatically cancelled.

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

The foreign exchange rate at which two currencies can be exchanged in two days' time.

The exchange of one currency for another at a specified rate for settlement in two working days.

A stop loss order is a means of limiting your risk in case exchange rates get worse. A currency stop loss level is set. If that currency level is reached, the trade is automatically executed in the market to stop any further loss. The currency level used for a stop loss order is always worse than the current market price. This is a way to protect yourself from adverse changes in exchange rates without needing to constantly monitor the rate.

The spread is the profit taken by a bank or a broker between the rate they receive and the rate they pass on to clients. We take a smaller spread than most banks and other currency companies, and pass this benefit on to our clients.

Like a stop loss order, a take profit order first involves setting a currency level. Once that currency level is reached, the trade is executed in the market. The currency level used for a take profit order is always better than the current market price. This allows you to capitalise or take profit on improvements in exchange rates without having to keep an eye on the rate.

The date the transference of your funds will take place.

An online currency transfer tool that allows you to see how much your money is worth in a different currency at the current exchange rate. Check out the WorldFirst currency converter.