Exchange rate system where a country's central bank pegs (fixes) its currency's exchange rate to a more popular reserve currency, such as the USD or Euro, yet has the ability to change the rate when it so desires. Reason? The country might want a fixed rate to make its currency more valuable, in order to make imports cheaper; conversely, it might want a fixed rate to make its currency seem less valuable, to encourage foreigners to buy their exports.

The sum of government spending, personal consumption expenditures, and business expenditures. In Keynsian theory, if the level of debt stops rising and instead slows or falls with the bursting of a credit bubble, then aggregate demand will suffer a sudden and sustained drop when the private sector stops spending and instead turns to debt reduction. The prescription was more government deficit spending to compensate for the shortfall in private debt spending. Hazlitt (Austrian school) thought that Keynes focus on Macroeconomic "aggregates" such as aggregate demand were statistical fictions that concealed the microeconomic relationships among a multitude of individual prices and wages, and that the deficit spending solution for bursting bubbles did more harm than good.

Generated from a variety of sources (fiscal, monetary, regulatory policy, or shocks from natural disasters), aggregate risk poses large implications for economic growth. For instance, when a credit bubble has reached a peak and starts to decline, some banks go bankrupt, others tighten up on credit, raising the standards of quality and reducing the quantity of credit, which can prevent economic growth.

Trading based on pre-defined formulas as opposed to a person manually executing a trade.

An increase in the value of the currency in response to increased demand. A decrease in the value in the currency is called depreciation.

Trading that works through an Application Programming Interface (API), or "go-between" that enables software to interact with other software. In Forex, an API refers to the interface that enables the platform to connect to the market, facilitating real-time forex price quotations, trade execution and order and trade confirmations.

Trades that take advantage of price differences that are not expected to persist, such as price differences between banks or brokerages or regions. Although the price difference may be very small, arbs typically trade regularly and in huge volume, often with fast computer systems, so they can make sizable profits. Markets are seldom efficient, and arbitrage opportunities do sometimes exist between banks or brokerages, but transaction costs (spread and/or commission) make this strategy more risky than it seems.

Also known as the 'offer' price, it is the quoted price at which an investor can buy a currency pair (seen as the higher quoted price than the bid). The difference between the ask and the bid is called the Bid-Ask Spread

An item that has value in an exchange. Assets can be physical, such as real estate or stocks, or a right, such as a patent; they can be as liquid (easily converted to money) as cash in the bank or as illiquid (not as easily converted to money) as real estate.

Not putting all your eggs in one basket and instead dividing your funds into different markets in an attempt to reduce your risk.

The classification of an asset, such as stocks, options, fixed income, commodities, or forex.

Abbreviation for the Australian dollar and U.S. dollar (AUD/USD) currency pair. The currency pair tells the reader how many U.S. dollars (the quote currency) are needed to purchase one Australian dollar (the base currency). Trading the AUD/USD is also known as trading the "Aussie".

A financial institution granted authorization from a relevant regulatory body to act as a dealer of forex. In the US, the National Futures Association (NFA) ensures that forex dealers are subject to stringent screening and enforcement of regulations.

Means your orders are sent via software robot to your broker automatically and instantly without human intervention, even when away from your computer. It is more disciplined than manual trading, because there no more missed opportunities or poor execution because trader is not in front of computer, second guessing his system, or making typing mistakes. See manual trader.