Forex Basics

Foreign Exchange
The simultaneous transaction of one currency for another.

Foreign Exchange Market
An informal network of trading relationships between the world's major banks and other market participants, sometimes referred to as the interbank market. The foreign exchange market has no central clearinghouse or exchange, and is considered an over-the-counter (OTC) market.

Spot Markete
The market for buying and selling currencies at the current market rate.

Rollovere
A spot transaction is generally due for settlement within two business days (the value date). If you open a position on Monday, the value date is Wednesday, but if you hold it past rollover on Monday, the new value date is Thursday. Every margin transaction involves borrowing one currency to purchase another, so you pay interest on the currency borrowed, and earn it on the one purchased. For example, if you buy the NZD (7.5% interest rate) and sell the JPY (0.5% interest rate), you would earn interest on the NZD and pay it on the JPY. The amount you pay or receive is based on the interest rate differential between the two currencies. Most brokers automatically roll over your open positions (usually 5PM New York time/10PM GMT) allowing you to hold your position for an indefinite period of time.

Current central bank interest rates
How to calculate rollover interest
Rollovers in Forex

Exchange Ratee
The value of one currency expressed in terms of another. For example, if EUR/USD is 1.3200, 1 Euro is worth US$1.3200.

Currency Paire
The two currencies that make up an exchange rate. When one is bought, the other is sold, and vice versa.
Base Currencye

The first currency in the pair. Also the currency your account is denominated in.
Counter Currencye

The second currency in the pair. Also known as the terms currency.
ISO Currency Codese
USD = US Dollar
EUR = Euro
JPY = Japanese Yen
GBP = British Pound
CHF = Swiss Franc
CAD = Canadian Dollar
AUD = Australian Dollar
NZD = New Zealand Dollar

For a full list, see ISO Currency Codes
Currency Pair Terminologye
EUR/USD = "Euro"
USD/JPY = "Dollar Yen"
GBP/USD = "Cable" or "Sterling"
USD/CHF = "Swissy"
USD/CAD = "Dollar Canada" (CAD referred to as the "Loonie")
AUD/USD = "Aussie Dollar"
NZD/USD = "Kiwi"

Market Makere
A market maker provides liquidity for a particular financial instrument and stands ready to buy or sell that instrument by displaying a two-way price quote. In most cases, a market maker's commission is built into the spread.
# Another Market Maker Definition

Forex ECN Broker
Electronic Communications Network. A Forex ECN brings together multiple market makers and traders to trade together between themselves, matching buyer and seller together for a small fee. It allows traders to act like market makers by being able to enter in their own bids and offers into the platform. A forex ECN displays all the available bids and offers from all market makers and traders on the platform, and matches your order to the best available price.