There are some terms which are often used in relation to stock market and foreign exchange. In this article, some of these terms will be discussed for easy comprehension of news and information about our economy.

OFFICIAL EXCHANGE RATE

In foreign exchange, the exchange rate set by the government. This especially applies to pegged currencies, but countries with floating currencies may also set an official exchange rate for a given day.

The rate of inflation as set by the government. Official rates of inflation may be accurate or not, depending on how they are calculated and whether political consideration influences the calculations.

PARALLEL MARKET

Parallel market (also known as gray market) is a market which trades foreign currencies, stocks, shares etc, and which runs at the same time as a country's own market. Parallel markets mean that a country has less control over its economy.

The gray market (sometimes spelled as "grey market" is the collective system of unauthorized sales channels for products.

Gray market products may be less expensive than those bought through official distribution channels but are sometimes inferior. The products may be counterfeit or have counterfeit parts, for example; they may be second-hand products or contain second-hand components that are represented as new. In some cases, gray market products are authentic but distributed illegally, perhaps to exploit variations in costs and prices in different parts of the world. Warranties, updates or other support are usually not available for gray market products.

The term gray market reflects the somewhat ambiguous middle-ground between the completely legal products sold on the white market and the clearly illegal products sold on the black market.

In the stock market, the gray market involves the trading of new issues of shares before they're officially available. In this context, the gray market is also sometimes referred to as the parallel market.

BLACK MARKET

A black market or underground economy is a market in which goods or services are traded illegally. The key distinction of a black market trade is that the transaction itself is illegal. The goods or services themselves may or may not be illegal to own, or to trade through other legal channels. Because the transactions are illegal, the market itself is forced to operate outside the formal economy that is supported by the established state power.

The black market is distinct from the grey market, in which commodities are distributed through channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer, and the white market.

In forex parlance, black market are those forex vendors, business oriented individuals and companies who buy foreign currencies and sell higher to buyers. Since they are not strictly monitored and regulated, buying from them is easier than the official market.

STOCK MARKET

Organized and regulated financial market where securities (bonds, notes, shares) are bought and sold at prices governed by the forces of demand and supply. Stock exchanges basically serve as primary markets where corporations, governments, municipalities, and other incorporated bodies can raise capital by channeling savings of the investors into productive ventures; and secondary markets where investors can sell their securities to other investors for cash, thus reducing the risk of investment and maintaining liquidity in the system.

INTERBANK MARKET

The financial system and trading of currencies among banks and financial institutions, excluding retail investors and smaller trading parties. While some interbank trading is performed by banks on behalf of large customers, most interbank trading takes place from the banks' own accounts.

The interbank market for forex serves commercial turnover of currency investments as well as a large amount of speculative, short-term currency trading. According to data compiled in 2004 by the Bank for International Settlements, approximately 50% of all forex transactions are strictly interbank trades.

FOREIGN EXCHANGE

The exchange of one currency for another, or the conversion of one currency into another currency. Foreign exchange also refers to the global market where currencies are traded virtually around-the-clock. The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX."

Foreign exchange transactions encompass everything from the conversion of currencies by a traveler at an airport kiosk to billion-dollar payments made by corporate giants and governments for goods and services purchased overseas. Increasing globalization has led to a massive increase in the number of foreign exchange transactions in recent decades. The global foreign exchange market is by far the largest financial market, with average daily volumes in the trillions of dollars.

EXCHANGE RATE

The price of a nation’s currency in terms of another currency. An exchange rate thus has two components, the domestic currency and a foreign currency, and can be quoted either directly or indirectly. In a direct quotation, the price of a unit of foreign currency is expressed in terms of the domestic currency. In an indirect quotation, the price of a unit of domestic currency is expressed in terms of the foreign currency. An exchange rate that does not have the domestic currency as one of the two currency components is known as a cross currency, or cross rate. Also known as a currency quotation, the foreign exchange rate or forex rate.

An exchange rate has a base currency and a counter currency. In a direct quotation, the foreign currency is the base currency and the domestic currency is the counter currency. In an indirect quotation, the domestic currency is the base currency and the foreign currency is the counter currency.

Most exchange rates use the US dollar as the base currency and other currencies as the counter currency. However, there are a few exceptions to this rule, such as the euro and Commonwealth currencies like the British pound, Australian dollar and New Zealand dollar.

Exchange rates for most major currencies are generally expressed to four places after the decimal, except for currency quotations involving the Japanese yen, which are quoted to two places after the decimal.

BEAR MARKET

A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20\% or more in multiple broad market indexes over at least a two-month period, is considered an entry into a bear market.

A bear market should not be confused with a correction, which is a short-term trend that has a duration of less than two months. While corrections are often a great place for a value investor to find an entry point, bear markets rarely provide great entry points, as timing the bottom is very difficult to do. Fighting back can be extremely dangerous because it is quite difficult for an investor to make stellar gains during a bear market unless he or she is a short seller.

http://www.financialwatchngr.com/2016/01/16/some-stock-market-and-forex-terms-explained/

The foreign exchange market (Forex, FX, or currency market) is a global decentralized market for the trading of currencies. The main participants in this market are the larger international banks. Financial centres around the world function as the anchors of trading between a wide range of multiple types of buyers and sellers around the clock, with the exception of weekends. The foreign exchange market determines the relative values of different currencies.

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