We come face to face with our 
local money every day. The 
time will come when some of 
us will need to make or receive 
a payment in a foreign currency.

To jump this hurdle, we go to 
the bank to handle the currency
exchange, or to a number of 
foreign currency exchange 
companies we can find on the 
internet, who will invariably 
quote far better rates of 
exchange. Believe me they 
will, they could not exist if they 
did not offer a better deal. 

You do not have to be a mechanic to know some essential words
about a car like the steering wheel, the hand brake, clutch
pedal, the engine etc. But you do need to know these fundamental
words to be able to understand what they refer to when becoming
a car driver otherwise life would be hard.

Similarly, it is important to know a little about the foreign
exchange market so that when the day comes and you will be need
to buy foreign currency to get that house of your dreams or
anything else abroad, you are not at a disadvantage.

The foreign exchange market also called Forex or Fx , has no
trading centre Unlike the London Stock Exchange or the New York
Stock Exchange centres, it has no fixed abode, but manages very
well and is extremely active.

There are hundreds of brokerage companies and banks, who deal
between themselves including big corporations. Put these on one
level. On another level, there are smaller agents who handle the
buying and selling of the foreign currencies, going by the rates
as signalled by Reuters or other agencies. These rates are
aligned to the actual events taking place non stop in the
market. . The difference between these two levels is a wholesale
and retail classification as existing in other trades. When the
media talk about the foreign exchange market, it is the
wholesale level they refer to.

Foreign exchange currency institutions have better access to
obtaining a more advantageous rate of exchange than the ordinary
small company or the man in the street.

The foreign exchange market operates 24 hours per day.

Bid is the rate at which a dealer is ready to purchase the base
currency.

Offer is the rate at which the dealer is ready to sell the basic
currency.

The difference between the bid and ask price is called the
spread.

The market makers make the profit from the spread. They make no
commission.

Basic currency is the currency against which the other
currencies are quoted

Bull Market refers to a price rising market Bear Market refers
to a declining price market

Bottom: a description of a price decline meeting heavy support
against further price decline.

Cable: When the steel cable was connected under the Atlantic in
1850 thus linking USA with UK enabling telegraph transmission
between the London and New York Exchanges, it was called
Atlantic Cable. Satellite and optic cables are now used, and the
word Cable refers to GBP/USD currency pair rate.

Cross Rates: This refers to currency pairs where the USD is not
included like GBP/EUR or GBP/JPY

Margin refers to a deposit in cash required to cover the
possibility of loss the client may encounter trading the foreign
exchange

Margin call refers to a requirement for additional money, to
make up the minimum cash deposit needed to cover any losses the
client may encounter trading in the foreign exchange market.

Volatility refers to the extent of price fluctuation 

There are of course, many more terms used in the foreign
currency business, but you have here a selection which will help
you to know some of the basics.

Good luck.