Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63.63% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63.63% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
The Euro Short-Term Rate (€STR) is the interest rate benchmark for overnight borrowing costs throughout the euro area. It’s calculated and published by the European Central Bank (ECB) as a replacement for the Euro Overnight Index Average (EONIA) and the Euro Interbank Offered Rate (EURIBOR).
The simultaneous purchase or sale of a financial product in order to take advantage of small price differentials between markets. Arbitrage is the result of price inefficiencies and is extremely difficult for individual traders to exploit. Thus, the capitalization of these price inefficiencies is usually achieved by large financial institutions that employ advanced algorithmic trading programs.
ASIAN CENTRAL BANKS
Refers to the central banks or monetary authorities of Asian countries. These institutions have been increasingly active in major currencies as they manage growing pools of foreign currency reserves arising from trade surpluses. Their market interest can be substantial and influence currency direction in the short-term
ASK (OFFER) PRICE
The price at which the market is prepared to sell a product. Prices are quoted two-way as Bid/Ask. The Ask price is also known as the Offer. In FX trading, the Ask represents the price at which a trader can buy the base currency, shown to the left in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the Ask price is 1.4532, meaning you can buy one US dollar for 1.4532 Swiss francs. In CFD trading, the Ask also represents the price at which a trader can buy the product. For example, in the quote for UK OIL 111.13/111.16, the product quoted is UK OIL and the Ask price is £111.16 for one unit of the underlying market. *
In the context of foreign exchange is the right to receive from a counterparty an amount of currency either in respect of a balance sheet asset (e.g. a loan) or at a specified future date in respect of an unmatched forward Forward or spot deal
An instruction given to a dealer to buy or sell at the best rate that can be obtained at a specific time
AT OR BETTER
An instruction given to a dealer to buy or sell at a specific price or better.
Refers to the AUD/USD (Australian Dollar/U.S. Dollar) pair. Also “Oz” or “Ozzie”.
Settlement and related processes
BALANCE OF TRADE
The value of a country’s exports minus its imports.
BALANCE OF TRADE
The value of exports less imports. Invisibles are normally excluded, and is otherwise referred to as mercantile or physical trade. Figures can be quoted on FoB/ FaS , customs cleared, or Fob export, FoB export
The rate at which a central bank is prepared to lend money to its domestic banking system
A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar; the opening price, which is marked with a horizontal line to the left of the bar; and the closing price, which is marked with a horizontal line to the right of the bar
A certain price of great importance included in the structure of a Barrier Option. If a Barrier Level price is reached, the terms of a specific Barrier Option call for a series of events to occur
The first currency in a currency pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF (U.S. Dollar/Swiss Franc) rate equals 1.6215, then one USD is worth CHF 1.6215. In the forex market, the US dollar is normally considered the base currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British pound, the euro and the Australian dollar
The lending rate of the central bank of a given country.
A chart pattern used in technical analysis that shows when demand and supply of a product are almost equal. It results in a narrow trading range and the merging of support and resistance levels
A unit of measurement used to describe the minimum change in the price of a product
The price expressed in terns of yield maturity or annual rate of return
Negative for price direction; favouring a declining market. For example, “We are bearish EUR/USD” means that we think the euro will weaken against the dollar
Traders who expect prices to decline and may be holding short positions.
The price at which the market is prepared to buy a product. Prices are quoted two-way as Bid/Ask. In FX trading, the Bid represents the price at which a trader can sell the base currency, shown to the left in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the Bid price is 1.4527, meaning you can sell one US Dollar for 1.4527 Swiss francs. In CFD trading, the Bid also represents the price at which a trader can sell the product. For example, in the quote for UK OIL 111.13/111.16, the Bid price is £111.13 for one unit of the underlying market. *
The difference between the bid and the ask (offer) price.
Refers to the first three digits of a currency quote, such as 117 USD/JPY or 1.26 in EUR/USD. If the price moves by 1.5 big figures, it has moved 150 pips
In finance, a binary option is a type of option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The cash-or-nothing binary option pays some fixed amount of cash if the option expires in-the-money while the asset-or-nothing pays the value of the underlying security. Thus, the options are binary in nature because there are only two possible outcomes. They are also called all-or-nothing options, digital options (more common in forex/interest rate markets), and Fixed Return Options (FROs) (on the American Stock Exchange).
The upside equivalent of capitulation. When shorts throw in the towel and cover any remaining short positions
A tool used by technical analysts. A band plotted two standard deviations on either side of a simple moving average, which often indicates support and resistance levels
A name for debt which is issued for a specified period of time
In a professional trading environment, a book is the summary of a trader’s or desk’s total positions
BRAKE EVEN POINT
The break even point is when the gain equals the loss. The price of a financial instrument at which the option buyer recovers the premium, meaning that he makes neither a loss or gain. In the case of a call option, the break even point is the exercise price plus the premium. This is important for sellers and business owners because they will be able to determine when they will start making a profit, as well as being able to determine the proper price for their products
An individual or firm that acts as an intermediary, bringing buyers and sellers together for a fee or commission. In contrast, a dealer commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party
Market slang for one million units of a dollar-based currency pair, or for the US dollar in general
Favouring a strengthening market and rising prices. For example, “We are bullish EUR/USD” means that we think the euro will strengthen against the dollar
Traders who expect prices to rise and who may be holding long positions
Taking a long position on a product
Looking to buy 20-30-pip/point pullbacks in the course of an intra-day trend
BUY LIMIT ORDER
An order to execute a transaction at a specified price (the limit) or lower
The GBP/USD (Great British Pound/U.S. Dollar) pair. Cable earned its nickname because the rate was originally transmitted to the US via a transatlantic cable beginning in the mid 1800s when the GBP was the currency of international trade
The Canadian dollar, also known as Loonie or Funds
A currency trade which exploits the interest rate difference between two countries. By selling a currency with a low rate of interest and buying a currency with a high rate of interest, the trader will receive the interest difference between the two countries while this trade is open
A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded
A point at the end of an extreme trend when traders who are holding losing positions exit those positions. This usually signals that the expected reversal is just around the corner
A trading strategy that captures the difference in the interest rates earned from being long a currency that pays a relatively high interest rate and short another currency that pays a lower interest rate. For example: NZD/JPY (New Zealand Dollar/Japanese Yen) has been a famous carry trade for some time. NZD is the high yielder and JPY is the low yielder. Traders looking to take advantage of this interest rate differential would buy NZD and sell JPY, or be long NZD/JPY. When NZD/JPY begins to downtrend for an extended period of time, most likely due to a change in interest rates, the carry trade is said to be unwinding
The market in the actual underlying markets on which a derivatives contract is based
The price of a product for instant delivery, i.e., the price of a product at that moment in time
Abbreviation referring to central banks
A government or quasi-governmental organization that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank
Exchange rates against the ECU adopted for each currency within the EMS.Currencies have limited movement from the central rate according to the relevant band
A Contract for Difference (or CFD) is a type of derivative that gives exposure to the change in value of an underlying asset (such as an index or equity). It allows traders to leverage their capital (by trading notional amounts far higher than the money in their account) and provides all the benefits of trading securities, without owning the product. In practical terms, if you buy a CFD at $10 then sell it at $11, you will receive the $1 difference. Conversely, if you went short on the trade and sold at $10 before buying back at $11, you would pay the $1 difference
An individual, also known as a technical trader, who uses charts and graphs and interprets historical data to find trends and predict future movements
The New York clearing house clearing system. (Clearing House Interbank Payment System). Most Euro transactions are cleared and settled through this system
Short-lived price moves with limited follow-through that are not conducive to aggressive trading
Copenhagen Interbank Rate, the rate at which the banks lend the Danish Krone on an unsecured basis. The rate is calculated daily by the Danmarks Nationalbank (the Danish Central Bank), based on rules set out by the Danish Banker’s Association
Funds that are freely available, sent in to settle a trade
The process of settling a trade
Exposure to a financial contract, such as currency, that no longer exists. A position is closed by placing an equal and opposite deal to offset the open position. Once closed, a position is considered squared
The process of stopping (closing) a live trade by executing a trade that is the exact opposite of the open trade
CLOSING MARKET RATE
The rate at which a position can be closed based on the market price at end of the day
The price at which a product was traded to close a position. It can also refer to the price of the last transaction in a day trading session
An asset given to secure a loan or as a guarantee of performance
A fee that is charged for buying or selling a product.
Currencies from economies whose exports are heavily based in natural resources, often specifically referring to Canada, New Zealand, Australia, and Russia
The dollar pairs that make up the crosses (i.e., EUR/USD + USD/JPY are the components of EUR/JPY). Selling the cross through the components refers to selling the dollar pairs in alternating fashion to create a cross position.
Symbol for NASDAQ Composite Index
A document exchanged by counterparts to a transaction that states the terms of said transaction
A period of range-bound activity after an extended price move
Measures the amount of spending towards new construction, released monthly by the U.S. Department of Commerce’s Census Bureau
The tendency of an economic crisis to spread from one market to another
The standard unit of forex trading
The month in which a futures contract matures or becomes deliverable if not liquidated or traded out before the date specified
A confirmation sent that outlines the exact details of the trade
The notional number of shares one CFD represents
A position which has a limited risk because of a Guaranteed Stop
An event that changes the equity structure (and usually share price) of a stock. For example, acquisitions, dividends, mergers, splits and spinoffs are all corporate actions
Refers to corporations in the market for hedging or financial management purposes. Corporates are not always as price sensitive as speculative funds and their interest can be very long term in nature, making corporate interest less valuable to short-term trading
COST OF LIVING INDEX
Broadly equivalent to Retail Price Index or Consumer price
The second listed currency in a currency pair
One of the participants in a financial transaction
Foreign Currency Inter-bank Exchange (FOREX) instruments are Positions (Buys and/or Sell) between the Client and its Counterparty and, unlike exchange-traded foreign exchange instruments which are, in effect, guaranteed by a clearing organization affiliated with the exchange on which the instruments are traded, are not guaranteed by a clearing organization. Thus, when the Customer purchases an OTC foreign exchange instrument, it relies on the Counterparty from which it has purchased the instrument to fulfill the contract. Failure of a Counterparty to fulfill a Position could result in losses of any prior payment made pursuant to the Positions as well as the loss of the expected benefit of the transaction
Risk associated with a cross-border transaction, including but not limited to legal and political conditions
Acronym for Consumer Price Index, a measure of inflation
A pair of currencies that does not include the U.S. dollar
Also known as Cross Currency, this is a Forex transaction where two different currencies are traded. These currencies are traded without any involvement with the U.S. Dollar
A technique using financial futures to hedge different but related cash instruments based on the view that the price movements between the instruments move in concert
A cross-trade transaction is a transaction where either the buy broker and the sell broker are the same, or the buy broker and the sell broker belong to the same firm
Refers to CAD (Canadian Dollar), Aussie (Australian Dollar), Sterling (British Pound) and Kiwi (New Zealand Dollar) – countries off the Commonwealth
Refers to commodity trading advisors, speculative traders whose activity can resemble that of short-term hedge funds; frequently refers to the Chicago-based or futures-oriented traders
Any form of money issued by a government or central bank and used as legal tender and a basis for trade
The two currencies that make up a foreign exchange rate. For example, EUR/USD (Euro/U.S. Dollar)
The probability of an adverse change in exchange rates
A three-letter symbol that represents a specific currency. For example, USD (U.S. Dollar)
The sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). The balance of trade is typically the key component to the current account
Speculators who take positions in commodities and then liquidate those positions prior to the close of the same trading day
Making an open and close trade in the same product in one day
A term that denotes a trade done at the current market price. It is a live trade as opposed to an order
The primary method of recording the basic information relating to a transaction
An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission
DEFEND A LEVEL
Action taken by a trader, or group of traders, to prevent a product from trading at a certain price or price zone, usually because they hold a vested interest in doing so, such as a barrier option
A negative balance of trade or payments
Removing a stock’s listing on an exchange
A trade where both sides make and take actual delivery of the product traded
A term to describe when a counterparty will not be able to complete his side of the deal, for example not being able to pay the price of the contract. This risk is very high in case of over the counter transactions where there is no exchange which can stand as a guarantee to the trade between the two parties to the contract.The risk is higher when there are economic and financial problems, as well as higher when dealing with bonds and the currency markets
The ratio between the change in price of a product and the change in price of its underlying market
A method used by option writers to hedge risk exposure of written options by purchase or sale of the underlying instrument in proportion to the delta
A ratio spread of options established as a neutral position by using the deltas of the options concerned to determine the hedge ratio
A composite of tradable rates for lending and borrowing a currency over a specific time period (tenor), quoted as a yearly rate. The best bid and offer are taken to present a competitive picture of the cost of borrowing. When a deposit rate is used for financing, the 1-month rate will typically be used for consistency
The decrease in value of an asset over time
A financial contract whose value is based on the value of an underlying asset. Some of the most common underlying assets for derivative contracts are indices, equities, commodities, and currencies
When a pegged currency is allowed to weaken or depreciate based on official actions, the opposite of a revaluation
Quoting in fixed units of foreign currency against variable amounts of the domestic currency
Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank
In technical analysis, a situation where price and momentum move in opposite directions, such as prices rising while momentum is falling. Divergence is considered either positive (bullish) or negative (bearish); both kinds of divergence signal major shifts in price direction. Positive/bullish divergence occurs when the price of a security makes a new low while the momentum indicator starts to climb upward. Negative/bearish divergence happens when the price of the security makes a new high, but the indicator fails to do the same and instead moves lower. Divergences frequently occur in extended price moves and frequently resolve with the price reversing direction to follow the momentum indicator
The amount of a company’s earning distributed to its shareholders – usually described as a value per share
DJIA OR DOW
Abbreviation for the Dow Jones Industrial Average or US30
Dovish refers to data or a policy view that suggests easier monetary policy or lower interest rates. The opposite of hawkish
Price action consisting of lower lows and lower highs
European Central Bank, the central bank for the countries using the euro
Reflects the impact of foreign exchange changes on the future competitive position of a company in the sense of the impact it can have on the future cash flows of the company
A government-issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc
EFFECTIVE EXCHANGE RATE
An attempt to summarize the effects on a country’s trade balance of its currency’s changes against other currencies
European Monetary System
END OF DAY ORDER (EOD)
An order to buy or sell at a specified price that remains open until the end of the trading day, typically at 5pm/17:00 New York time
The time zone of New York City, which stands for United States Eastern Standard Time/Eastern Daylight time
An exchange-traded fund (or ETF) is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE. ETFs may be attractive as investments because of their low costs, tax efficiency, and stock-like features
EUROPEAN MONETARY UNION (EMU)
An umbrella name for the group of policies that aims to coordinate economic and fiscal policies across EU Member States
EUROZONE LABOR COST INDEX
Measures the annualized rate of inflation in the compensation and benefits paid to civilian workers and is seen as a primary driver of overall inflation
A share bought in which the buyer forgoes the right to receive the next dividend and instead it is given to the seller
The Process of completing an order or deal
A less broadly traded currency
(1) Options – the last date after which the option can no longer be exercised. (2) Bonds-the date on which a bond matures
The month in which an option expires
The precise date and time when an option will expire. The two most common option expiries are 10:00am ET (also referred to as 10:00 NY time or NY cut) and 3:00pm Tokyo time (also referred to as 15:00 Tokyo time or Tokyo cut). These time periods frequently see an increase in activity as option hedges unwind in the spot market
Corporations who sell goods internationally, which in turn makes them sellers of foreign currency and buyers of their domestic currency. Frequently refers to major Japanese corporations such as Sony and Toyota, who will be natural sellers of USD/JPY, exchanging dollars received from commercial sales abroad
The total amount of money loaned to a borrower or country. Banks set rules to prevent overexposure to any single borrower. In trading operations, it is the potential for running a profit or loss from fluctuations in market prices
A market that is thought to have travelled too far, too fast
Exchange Rate Risk
The potential loss that could be incurred from an adverse movement in exchange rates
The dollar level of new orders for both durable and nondurable goods. This report is more in depth than the durable goods report which is released earlier in the month
Rapid movement in a market caused by strong interest by buyers and/or sellers. In such circumstances price levels may be omitted and bid and offer quotations may occur too rapidly to be fully reported
The Federal Reserve Bank, the central bank of the United States, or the FOMC (Federal Open Market Committee), the policy-setting committee of the Federal Reserve
Refers to members of the Board of Governors of the Federal Reserve or regional Federal Reserve Bank Presidents
FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC)
The regulatory agency responsible for administering bank depository insurance in the United States
FEDERAL NATIONAL MORTAGE ASSOCIATION
A privately owned but US government sponsored corporation that trades in residential mortgages. Its activities are funded by the sale of instruments commonly known as Fannie Maes
FEDERAL RESERVE BOARD
The board of the Federal Reserve System, appointed by the US President for 14 year terms, one of whom is appointed for four years as chairman
FEDERAL RESERVE SYSTEM
The central banking system of the US comprising 12 Federal Reserve Banks controlling 12 districts under the Federal Reserve Board. Membership of the Fed is compulsory for banks chartered by the Comptroller of Currency and optional for state chartered banks
FIBONACCI RETRACEMENT FAN
The Fibonacci retracement sequence is one of the most widely used tools in technical analysis. There are different visualization tools, the Fibonacci Retracement Fan being one of them. Technical analysts use the Fibonacci retracement sequence in order to identify support, resistance and reversal zones. In conjunction with other elements of technical analysis, they can offer analysts entry as well as exit levels into trades. Each time price action approaches one of the key levels, a closer analysis is warranted. The most important levels to monitor is the start and end point of the sequence (0 and 100) as well as the 38.2, 50.0 and 61.8 levels. The Fibonacci retracement sequence can be found all through nature and the Italian mathematician Leonardo Pisano Bogollo (1170 – 1250) is credited with making the sequence a mainstream mathematical formula
Refers to the price quotation of ’00’ in a price such as 00-03 (1.2600-03) and would be read as ‘figure-three.’ If someone sells at 1.2600, traders would say ‘the figure was given’ or ‘the figure was hit
When an order has been fully executed
FILL OR KILL
An order that, if it cannot be filled in its entirety, will be cancelled
FIRST IN FIRST OUT (FIFO)
All positions opened within a particular currency pair are liquidated in the order in which they were originally opened
FLAT OR FLAT READING
Economic data readings matching the previous period’s levels that are unchanged
Dealer jargon used to describe a position that has been completely reversed, e.g., you bought $500,000 and then sold $500,000, thereby creating a neutral (flat) position
(1) see Floating exchange rate. (2) Cash in hand or in the course of being transferred between banks (3) Federal Reserve Float arises from the system where cheques sent to the Federal Reserve Banks are credited sometimes in advance of the depositing bank loosing the reserve
FLOATING EXCHANGE RATE
When the value of a currency is decided by the market forces dictating the demand and supply of that particular currency
Fresh buying or selling interest after a directional break of a particular price level. The lack of follow-through usually indicates a directional move will not be sustained and may reverse
Federal Open Market Committee, the policy-setting committee of the US Federal Reserve
Written record of FOMC policy-setting meetings are released three weeks following a meeting. The minutes provide more insight into the FOMC’s deliberations and can generate significant market reactions
The Force Index was developed by Alexander Elder and is often considered a next generation technical indicator. Technical analysts use this indicator in order to measure the strength or force, behind a move in price action. The Force Index gives technical analysts information on the directional change of the price, the degree of the change and the trading volume. The inclusion of volume as part of the oscillator creates a powerful tool as volume confirms moves in price action. The center line is set at 0 and a reading above 0 suggests that bulls are in control of price action while a reading below 0 places bears in control. The volume confirmation behind moves doesn’t only confirm breakout/breakouts, but also allows technical analysts to filter out false, short-term moves within a bigger trend. This creates more accurate trading signals when the Force Index is used together with other aspects of technical analysis
The simultaneous buying of one currency and selling of another. The global market for such transactions is referred to as the forex or FX market
The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based on the interest rate differential between the two currencies involved
A deal with a value date greater than the spot value date
The pips added to or subtracted from the current exchange rate in order to calculate a forward price
The rate at which a foreign exchange contract is struck today for settlement at a specified future date which is decided at the time of entering into the contract. The decision to subtract or add points is determined by the differential between the deposit rates for both currencies concerned in the transaction. The base currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefore the forward points are subtracted from the spot rate. Similarly, the lower interest rate base currency is said to be at a premium, and the forward points are added to the spot rate to obtain the forward rate
A name for the index of the top 40 companies (by market capitalization) listed on the French stock exchange. FRA40 is also known as CAC40
Total reserves held by a bank less the reserves required by the authority
The name of the UK 100 index
The assessment of all information available on a tradable product to determine its future outlook and therefore predict where the price is heading. Often non-measurable and subjective assessments, as well as quantifiable measurements, are made in fundamental analysis
The macro economic factors that are accepted as forming the foundation for the relative value of a currency. These include inflation, growth, trade balance, government deficit, and interest rates
Refers to hedge fund types active in the market. Also used as another term for the USD/CAD (U.S. Dollar/Canadian Dollar) pair
Use of taxation as a tool in implementing monetary policy
An agreement between two parties to execute a transaction at a specified time in the future when the price is agreed in the present
An obligation to exchange a good or instrument at a set price and specified quantity grade at a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange- Traded Contacts – ETC), versus Forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange
G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved
Group of 7 Nations – United States, Japan, Germany, United Kingdom, France, Italy and Canada
G7 plus Russia
The rate at which a delta changes over time or for one unit change in the price of the underlying asset
A quick market move in which prices skip several levels without any trades occurring. Gaps usually follow economic data or news announcements
GEARING (ALSO KNOWN AS LEVERAGE)
Gearing refers to trading a notional value that is greater than the amount of capital a trader is required to hold in his or her trading account. It is expressed as a percentage or a fraction
An index of the top 30 companies (by market capitalization) listed on the German stock exchange – another name for the DAX
Refers to a bid being hit or selling interest
GIVING IT UP
A technical level succumbs to a hard-fought battle
GMT (GREENWICH MEAN TIME)
Greenwich Mean Time – The most commonly referred time zone in the forex market. GMT does not change during the year, as opposed to daylight savings/summertime
Removes inflation from the GNP figure. Usually expressed as a percentage and based on an index figure
The difference between the actual real GNP and the potential real GNP. If the gap is negative an economy is overheated
The purchase of a stock, commodity or currency for investment or speculation – with the expectation of the price increasing
The selling of a currency or product not owned by the seller – with the expectation of the price decreasing
GOLD (GOLD’S RELATIONSHIP)
It is commonly accepted that gold moves in the opposite direction of the US dollar. The long-term correlation coefficient is largely negative, but shorter-term correlations are less reliable
A certificate of ownership that gold investors use to purchase and sell the commodity instead of dealing with transfer and storage of the physical gold itself
The standard unit of trading gold is one contract which is equal to 10 troy ounces
GOOD ‘TIL CANCELLED ORDER (GTC)
An order to buy or sell at a specified price that remains open until filled or until the client cancels
GOOD ‘TIL DATE
An order type that will expire on the date you choose, should it not be filled beforehand
GOOD FOR DAY
An order that will expire at the end of the day if it is not filled
Nickname for the US dollar
GROSS DOMESTIC PRODUCT (GDP)
Total value of a country’s output, income or expenditure produced within its physical borders.
GROSS NATIONAL PRODUCT
Gross domestic product plus income earned from investment or work abroad.
An order type that protects a trader against the market gapping. It guarantees to fill your order at the price asked
A stop-loss order guaranteed to close your position at a level you dictate, should the market move to or beyond that point. It is guaranteed even if there’s gapping in the market
Refers to traders pushing to trigger known stops or technical levels in the market
Every 100 pips in the FX market starting with 000
Materials such as metals, chemicals, and oil that are traded in the commodities markets
A currency whose value is expected to remain stable or increase in terms of other currencies
A country’s monetary policymakers are referred to as hawkish when they believe that higher interest rates are needed, usually to combat inflation or restrain rapid economic growth or both
HEAD & SHOULDERS
A pattern in price trends which chartist consider indicates a price trend reversal. The price has risen for some time, at the peak of the left shoulder, profit taking has caused the price to drop or level. The price then rises steeply again to the head before more profit taking causes the price to drop to around the same level as the shoulder. A further modest rise or level will indicate that a further major fall is imminent. The breach of the neckline is the indication to sell
A position or combination of positions that reduces the risk of your primary position
HIT THE BID
To sell at the current market bid
Names for the Hong Kong Hang Seng index
Very high and self sustaining inflation levels. One definition being the period while inflation exceeds 50% until it has drops below that level for 12 months
Little volume being traded in the market; a lack of liquidity often creates choppy market conditions
International Monetary Market, the Chicago-based currency futures market, that is part of the Chicago Mercantile Exchange
A traditional futures contract based on major currencies against the US dollar. IMM futures are traded on the floor of the Chicago Mercantile Exchange
Measures the total value of output produced by manufacturers, mines and utilities. This data tends to react quickly to the expansions and contractions of the business cycle and can act as a leading indicator of employment and personal income data
An economic condition whereby prices for consumer goods rise, eroding purchasing power
INITIAL MARGIN REQUIREMENT
The initial deposit of collateral required to enter into a position
The foreign exchange rates which large international banks quote to each other
Adjustments in cash to reflect the effect of owing or receiving the notional amount of equity of a CFD position
Action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates
A person or corporate entity which introduces accounts to a broker in return for a fee
A private company’s initial offer of stock to the public. Short for initial public offering
ISM MANUFACTURING INDEX
An index that assesses the state of the US manufacturing sector by surveying executives on expectations for future production, new orders, inventories, employment and deliveries. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
An index that surveys service sector firms for their outlook, representing the other 80% of the US economy not covered by the ISM Manufacturing Report. Values over 50 generally indicate an expansion, while values below 50 indicate contraction
A term describing the expected effect of a devaluation on a country’s trade balance. It is anticipated that import bills rise before export orders and receipts increase
A trader who trades for small, short-term profits during the course of a trading session, rarely carrying a position overnight
KEEP THE POWDER DRY
To limit your trades due to inclement trading conditions. In either choppy or extremely narrow markets, it may be better to stay on the side-lines until a clear opportunity arises
Nickname for NZD/USD (New Zealand Dollar/U.S. Dollar).
Option strategy that requires the underlying product to trade at a certain price before a previously bought option becomes active. Knock-ins are used to reduce premium costs of the underlying option and can trigger hedging activities once an option is activated
Option that nullifies a previously bought option if the underlying product trades a certain level. When a knock-out level is traded, the underlying option ceases to exist and any hedging may have to be unwound
LAST DEALING DAY
The last day you may trade a particular product
LAST DEALING TIME
The last time you may trade a particular product
To carry out a transaction in the market to offset a previous transaction and return to a square position
Less developed countries, often used with respect to secondary debt market
Statistics that are considered to predict future economic activity
LEADS & LAGS
The effect on foreign trade payments of an anticipated move in the exchange rate, normally a devaluation. The importers speeden up the payment for the imports and exporters delay recieving payment for the exports
A price zone or particular price that is significant from a technical standpoint or based on reported orders/option interest
Also known as margin, this is the percentage or fractional increase you can trade from the amount of capital you have available. It allows traders to trade notional values far higher than the capital they have. For example, leverage of 100:1 means you can trade a notional value 100 times greater than the capital in your trading account.*
Short-term traders, referring largely to the hedge fund community
Potential loss, debt or financial obligation
The London Inter-Bank Offered Rate. Banks use LIBOR as a base rate for international lending. Is being replaced by SONIA
An order that seeks to buy at lower levels than the current market or sell at higher levels than the current market. A limit order sets restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/JPY is 117.00/05, then a limit order to buy USD would be at a price below the current market, e.g. 116.50. A Limit Order that is attached to a currently existing open position (or a pending entry order) with the purpose of closing that position may also be referred to as a “Take Profit” order
A market which has sufficient numbers of buyers and sellers for the price to move in a smooth manner
The closing of an existing position through the execution of an offsetting transaction
A position that appreciates in value if market price increases. When the base currency in the pair is bought, the position is said to be long. This position is taken with the expectation that the market will rise
Traders who have bought a product
Nickname for the Canadian dollar or the USD/CAD (U.S. Dollar/Canadian Dollar) currency pair
A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots
The longest-term trader who bases their trade decisions on fundamental analysis. A macro trade’s holding period can last anywhere from around six months to multiple years
When the monetary authorities intervene regularly in the market to stabilise the rates or to push the exchange rate in a required direction. It is also called the dirty float which we have in India
Measures the total output of the manufacturing aspect of the Industrial Production figures. This data only measures the 13 sub-sectors that relate directly to manufacturing. Manufacturing makes up approximately 80% of total Industrial Production
Collateral that the holder of a position in securities, options, Forex or futures contracts, has to deposit to cover the credit risk of his counterparty. Other definitions to MARGIN, used in other areas are: (1) Difference between the buying and selling rates, also used to indicate the discount or premium between spot or forward. (2) For options, the sum required as collateral from the writer of an option. (3) For futures, a deposit made to the clearing house on establishing a futures position account. (4) The percentage reserve required by the US Federal Reserve to make an initial credit transaction
A request from a broker or dealer for additional funds or other collateral on a position that has moved against the customer
This refers to the time of day that a market closes. In the 24 hour-a-day foreign exchange market, there is no official market close. 5:00 PM EST is often referred to and understood as the market close because value dates for spot transactions change to the next new value date at that time.
A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial product
An order to buy or sell at the current price
Market value of a forex position at any time is the amount of the domestic currency that could be purchased at the then market rate in exchange for the amount of foreign currency to be delivered under the Forex contract
Process of re-evaluating all open positions in light of current market prices. These new values then determine margin requirements
The date of settlement or expiry of a financial product
Refers to Medley Global Advisors, a market consultancy that maintains close contacts with central bank and government officials around the world. Their reports can frequently move the currency market as they purport to have inside information from policy makers. The accuracy of the reports has fluctuated over time, but the market still pays attention to them in the short-run
Japanese ministry of International Trade & Industry
Abbreviation for month-over-month, which is the change in a data series relative to the prior month’s level.
A series of technical studies (e.g. RSI, MACD, Stochastics, Momentum) that assesses the rate of change in prices.
Traders who align themselves with an intra-day trend that attempts to grab 50-100 pips.
The amount of currency bought or sold which has not yet been offset by opposite transactions.
US term for five basis points
An option that pays a fixed amount to the holder if the market never touches the predetermined Barrier Level.
A foreign currency current account maintained with another bank. The account is used to receive and pay currency assets and liabilities denominated in the currency of the country in which the bank is resident
NOT HELD BASIS ORDER
An order whereby the price may trade through or better than the client’s desired level, but the principal is not held responsible if the order is not executed
A financial instrument consisting of a promise to pay rather than an order to pay or a certificate of indebtedness
The operations of a financial institution which although physically located in a country, has little connection with that country’s financial systems. In certain countries a bank is not permitted to do business in the domestic market but only with other foreign banks. This is known as an off shore banking unit
The price at which the market is prepared to sell a product. Prices are quoted two-way as Bid/Offer. The Offer price is also known as the Ask. The Ask represents the price at which a trader can buy the base currency, which is shown to the right in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the ask price is 1.4532, meaning you can buy one US dollar for 1.4532 Swiss francs. In CFD trading, the Ask represents the price a trader can buy the product. For example, in the quote for UK OIL 111.13/111.16, the product quoted is UK OIL and the ask price is £111.16 for one unit of the underlying market.*
If a market is said to be trading offered, it means a pair is attracting heavy selling interest, or offers.
A trade that cancels or offsets some or all of the market risk of an open position.
Old lady of Threadneedle Street, a term for the Bank of England
Attempting to sell at the current market order price.
ONE CANCELS THE OTHER ORDER (OCO)
A designation for two orders whereby if one part of the two orders is executed, then the other is automatically cancelled.
An option that pays a fixed amount to the holder if the market touches the predetermined Barrier Level.
An order that will be executed when a market moves to its designated price. Normally associated with good ’til cancelled orders.
An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.
A derivative which gives the right, but not the obligation, to buy or sell a product at a specific price before a specified date.
An instruction to execute a trade.
A system used to show market depth of traders willing to buy and sell at prices beyond the best available.
A forward deal that is not part of a swap operation
OVER THE COUNTER (OTC)
Used to describe any transaction that is not conducted via an exchange.
Is an economy on a high growth rate trajectory placing pressure on the production capacity resulting in increased inflationary pressures and higher interest rates
Net long or short position in one or more currencies that a dealer can carry over into the next dealing day. Passing the book to other bank dealing rooms in the next trading time zone reduces the need for dealers to maintain these unmonitored exposures
A trade that remains open until the next business day
When a number of exchange and /or deposit orders have to be fulfilled simultaneously
Refers to the offer side of the market dealing.
The forex quoting convention of matching one currency against the other.
A very heavy round of selling.
(1) The nominal value of a security or instrument. (2) The official value of a currency
A market that moves a great distance in a very short period of time, frequently moving in an accelerating fashion that resembles one half of a parabola. Parabolic moves can be either up or down.
When only part of an order has been executed.
Waiting for certain levels or news events to hit the market before entering a position.
Measures an individual’s total annual gross earnings from wages, business enterprises and various investments. Personal income is the key to personal spending, which accounts for 2/3 of GDP in the major economies.
The smallest unit of price for any foreign currency, pips refer to digits added to or subtracted from the fourth decimal place, i.e. 0.0001.
Exposure to changes in governmental policy which may have an adverse effect on an investor’s position.
A collection of investments owned by an entity.
The net total holdings of a given product.
A positive divergence, in technical analysis, occurs when the price of an asset continues to move lower while the underlying technical indicator starts to advance. This is considered a bullish trading signal, especially if one is formed while price action is close to a support zone; it often preceded a breakout. A negative divergence emerges when price action advances while the underlying technical indicator starts to contract. This creates a bearish trading signal and if it occurs as the asset is closing in on a resistance zone it often precedes a breakdown
The amount by which the forward or futures price exceeds the spot price.
A price gap, either to the upside or the downside, occurs when the opening price of the new trading sessions is severely above the closing price of the previous sessions. On the chart, a gap is visible which will be closed by price action eventually. A price gap is usually the result of an unexpected fundamental development during low trading volume or when markets are closed. A price gap can either be closed quickly which will mark a reversal or price action will accelerate further to the upside/downside in which case the trend will extend and the gap will be closed at some point in the future. The circumstances of the price gap as well as other aspects of technical analysis will indicate what should be expected next
Describes quotes to which every market participant has equal access.
A dealer who buys or sells stock for his/her own account
The difference between the cost price and the sale price, when the sale price is higher than the cost price.
The tendency of a trending market to retrace a portion of the gains before continuing in the same direction.
PURCHASING MANAGERS INDEX (PMI)
An economic indicator which indicates the performance of manufacturing companies within a country.
PURCHASING MANAGERS INDEX SERVICES (FRANCE, GERMANY, EUROZONE, UK)
Measures the outlook of purchasing managers in the service sector. Such managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries and inventories. Readings above 50 generally indicate expansion, while readings below 50 suggest economic contraction.
A product which gives the owner the right, but not the obligation, to sell it at a specified price.
When a central bank injects money into an economy with the aim of stimulating growth.
A type of future with expiry dates every three months (once per quarter).*
An indicative market price, normally used for information purposes only
A recovery in price after a period of decline.
When a price is trading between a defined high and low, moving within these two boundaries without breaking out from them.
The price of one currency in terms of another, typically used for dealing purposes.
Reserve Bank of Australia, the central bank of Australia.
Reserve Bank of New Zealand, the central bank of New Zealand.
Traders of significant size including pension funds, asset managers, insurance companies, etc. They are viewed as indicators of major long-term market interest, as opposed to shorter-term, intra-day speculators.
The amount of money you have made or lost when a position has been closed.
A decline in business activity. Often defined as two consecutive quarters with a real fall in GNP
Funds held against future contingencies, normally a combination of convertible foreign currency, gold, and SDRs. Official reserves are to ensure that a government can meet near term obligations. They are an asset in the balance of payments
A price that may act as a ceiling. The opposite of support.
An individual investor who trades with money from personal wealth, rather than on behalf of an institution.
Measures the monthly retail sales of all goods and services sold by retailers based on a sampling of different types and sizes. This data provides a look into consumer spending behaviour, which is a key determinant of growth in all major economies.
When a pegged currency is allowed to strengthen or rise as a result of official actions; the opposite of a devaluation.
A form of corporate action where shareholders are given rights to purchase more stock. Normally issued by companies in an attempt to raise capital.
Exposure to uncertain change, most often used with a negative connotation of adverse change.
The employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.
A rollover is the simultaneous closing of an open position for today’s value date and the opening of the same position for the next day’s value date at a price reflecting the interest rate differential between the two currencies. In the spot forex market, trades must be settled in two business days. For example, if a trader sells 100,000 Euros on Tuesday, then the trader must deliver 100,000 Euros on Thursday, unless the position is rolled over. As a service to customers, all open forex positions at the end of the day (5:00 PM New York time) are automatically rolled over to the next settlement date. The rollover adjustment is simply the accounting of the cost-of-carry on a day-to-day basis.
A trade that has been opened and subsequently closed by an equal and opposite deal.
An indicator of the status of your open positions; that is, unrealized money that you would gain or lose should you close all your open positions at that point in time.
The Securities and Exchange Commission.
A group of securities that operate in a similar industry.
Taking a short position in expectation that the market is going to go down.
The process by which a trade is entered into the books, recording the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.
An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.
A situation in which traders are heavily positioned on the short side and a market catalyst causes them to cover (buy) in a hurry, causing a sharp price increase.
After a decline, traders who earlier went short begin buying back.
Traders who have sold, or shorted, a product, or those who are bearish on the market.
SIDELINES, SIT ON HANDS
Traders staying out of the markets due to directionless, choppy or unclear market conditions are said to be on the side-lines or sitting on their hands.
SIMPLE MOVING AVERAGE SMA
A simple average of a pre-defined number of price bars. For example, a 50 period daily chart SMA is the average closing price of the previous 50 daily closing bars. Any time interval can be applied.
The difference between the price that was requested and the price obtained typically due to changing market conditions.
A term used when the market feels like it is ready for a quick move in any direction.
Choppy trading conditions that lack any meaningful trend and/or follow-through.
Swiss National Bank, the central bank of Switzerland.
The Secured Overnight Financing Rate (SOFR) is the overnight interest rate used for US dollar-denominated loans and derivatives in the overnight market.
The Sterling Overnight Index Average (SONIA) is the effective overnight interest rate that banks pay to borrow sterling overnight from other financial institutions. It’s used for overnight funding of trades that occur in off-hours, replacing LIBOR.
Refers to central banks active in the spot market.
A market whereby products are traded at their market price for immediate exchange.
The current market price. Settlement of spot transactions usually occurs within two business days.
The purchase or sale of a product for immediate delivery (as opposed to a date in the future). Spot contracts are typically settled electronically.
The difference between the buying and selling price of a contract
Purchase and sales are in balance and thus the dealer has no open position.
A nickname for the British pound or the GBP/USD (Great British Pound/U.S. Dollar) currency pair.
A market on which securities are traded.
The combined price of a group of stocks – expressed against a base number – to allow assessment of how the group of companies is performing relative to the past.
STOP ENTRY ORDER
This is an order placed to buy above the current price, or to sell below the current price. These orders are useful if you believe the market is heading in one direction and you have a target entry price.
STOP LOSS ORDER
This is an order placed to sell below the current price (to close a long position), or to buy above the current price (to close a short position). Stop loss orders are an important risk management tool. By setting stop loss orders against open positions you can limit your potential downside should the market move against you. Remember that stop orders do not guarantee your execution price – a stop order is triggered once the stop level is reached, and will be executed at the next available price.
A stop order is an order to buy or sell once a pre-defined price is reached. When the price is reached, the stop order becomes a market order and is executed at the best available price. It is important to remember that stop orders can be affected by market gaps and slippage, and will not necessarily be executed at the stop level if the market does not trade at this price. A stop order will be filled at the next available price once the stop level has been reached. Placing contingent orders may not necessarily limit your losses.
When a market seems to be reaching for a certain level that is believed to be heavy with stops. If stops are triggered, then the price will often jump through the level as a flood of stop-loss orders are triggered.
Refers to stop-loss orders building up; the accumulation of stop-loss orders to buy above the market in an up move, or to sell below the market in a down move.
The defined price at which the holder of an option can buy or sell the product.
A price that acts as a floor for past or future price movements.
A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.
A temporary halt in the trading of a product.
A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate
Stands for “take profit.” Refers to limit orders that look to sell above the level that was bought, or buy back below the level that was sold.
See definition of Limit Order.
Assuming control of a company by buying its stock.
The process by which charts of past price patterns are studied for clues as to the direction of future price movements.
Traders who base their trading decisions on technical or charts analysis.
TEN (10) YR
US government-issued debt which is repayable in ten years. For example, a US 10-year note.
A illiquid, slippery or choppy market environment. A light-volume market that produces erratic trading conditions.
A minimum change in price, up or down.
TIME TO MATURITY
The time remaining until a contract expires.
TOMORROW NEXT (TOM/NEXT)
Simultaneous buying and selling of a currency for delivery the following day.
Measures the difference in value between imported and exported goods and services. Nations with trade surpluses (exports greater than imports), such as Japan, tend to see their currencies appreciate, while countries with trade deficits (imports greater than exports), such as the US, tend to see their currencies weaken.
The number of units of product in a contract or lot.
A pair is acting strong and/or moving higher; bids keep entering the market and pushing prices up.
A postponement to trading that is not a suspension from trading.
A market that feels like it wants to move lower, usually associated with an offered market that will not rally despite buying attempts.
A pair is acting weak and/or moving lower, and offers to sell keep coming into the market.
The range between the highest and lowest price of a stock usually expressed with reference to a period of time. For example: 52-week trading range.
A trailing stop allows a trade to continue to gain in value when the market price moves in a favourable direction, but automatically closes the trade if the market price suddenly moves in an unfavourable direction by a specified distance. Placing contingent orders may not necessarily limit your losses.
The cost of buying or selling a financial product.
The date on which a trade occurs.
Price movement that produces a net change in value. An uptrend is identified by higher highs and higher lows. A downtrend is identified by lower highs and lower lows.
The total money value or volume of all executed transactions in a given time period.
When both a bid and offer rate is quoted for a forex transaction.
The actual traded market from where the price of a product is derived
Measures the total workforce that is unemployed and actively seeking employment, measured as a percentage of the labour force
The theoretical gain or loss on open positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized gains/losses become profits/losses when the position is closed
A new price quote at a price higher than the preceding quote
In the US, a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed
A name for WTI Crude Oil
US PRIME RATE
The interest rate at which US banks will lend to their prime corporate customers
Also known as the maturity date, it is the date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward
A simple option whose terms and conditions do not include any provisions other than exercise style, expiry and strike. To compare with exotic options which have additional terms
Funds traders must hold in their accounts to have the required margin necessary to cope with market fluctuations
Expresses the price change of an option for a one per cent change in the implied volatility
VELOCITY OF MONEY
The speed with which money circulates or turnover in the economy. It is calculated as the annual national income: average money stock in the period
VIX OR VOLATILITY INDEX
Shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge.”
Referring to active markets that often present trade opportunities
Volume weighted average price (VWAP) is the weighted average execution price for a given trade based upon multi-tiered levels of liquidity, with each tier having a corresponding price and volume. TierSizeBid PriceOffer Price 1500,0001.323351.32350 21,000,0001.323401.32370 32,000,0001.323451.32375 43,000,0001.323501.32380 55,000,0001.323551.32385 Given the above ladder a buy trade of 3.5 million would execute through the top 3 price levels (starting at Tier 1) as follows: 500,000 at 1.3235 1,000,000 at 1.3237 2,000,000 at 1.32375 The average price for the total amount is calculated at an average price of 1.3237. Calculation: ((500,000/3,500,000) * 1.3235) + ((1,000,000/3,500,000)1.3237) + ((2,000,000/3,500,000)1.32375) = 1.3237
WEDGE CHART PATTERN
Chart formation that shows a narrowing price range over time, where price highs in an ascending wedge decrease incrementally, or in a descending wedge, price declines are incrementally smaller. Ascending wedges typically conclude with a downside breakout and descending wedges typically terminate with upside breakouts
Slang for a highly volatile market where a sharp price movement is quickly followed by a sharp reversal
Money borrowed in large amounts from banks and institutions rather than from small investors
Measures the changes in prices paid by retailers for finished goods. Inflationary pressures typically show earlier than the headline retail
A day on which the banks in a currency’s principal financial centre are open for business. For FX transactions, a working day only occurs if the bank in both (all relevant currency centers in the case of a cross are open)
Where a limit order has been requested but not yet filled.
A billion units
The percentage return from an investment
Abbreviation for year over year
The yuan is the base unit of currency in China. The renminbi is the name of the currency in China, where the Yuan is the base unit
Certificate issued by the Bank of England to “discount houses” in lieu of stock certificates to facilitate their dealing in the short dated gilt edge securities.
ZERO COUPON BOND
A bond that pays no interest. The bond is initially offered at a discount to its redemption value.
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