There are currently 221 names in this directory
Absolute Breadth Index (ABI)
The absolute breadth index is a momentum indicator discovered by Norman Fosback. It is an indicator that measures market activity by taking into consideration issues that affect price advances and price declines, and the value of the ABI is actually the absolute difference between these two sets of issues. ABI is therefore calculated as follows: ABI = advancing issues – declining issues For graphical representation, a 10week moving average is derived by dividing the ABI by the total number of values traded. Values of >40% are adjudged to be bullish while values less than 15% are adjudged to be bearish.
Absolute rate is a combination of a percentage of an interest rate swap that is fixed, as well as the percentage that is flexible or floating. Interest rate swaps are used by companies to hedge against sudden and undesirable fluctuations in interest rates. So if the swap deal is given at a premium of 5% and a flexible rate of 2% from a flexible rate such as LIBOR or EURIBOR is added to the mix, this gives an absolute rate of 7%.
Absolute Return Index
Absolute return index is an index that measures the absolute return of a market of hedge funds versus the returns of individual hedge funds. An absolute return index is a stock market index. In essence, the absolute return index is used as a tracker for the performance of hedge funds over a period of time. In order to qualify to be listed, hedge funds must meet certain criteria. Once listed, all hedge funds are weighed equally, and are tracked regardless of past performance records. At the end of the year, the index’s performance is compared with that of the individual hedge fund, and that way, investors can know which hedge funds outperformed the market and use that as a guide to know where to put their money.
The accumulation area is the range of prices within which a trader purchases or ‘accumulates’ a stock. The area of accumulation is usually determined by looking at the volume within an area where price of the asset seems not to be able to go below. By looking at the on-balance volumes at particular areas where price seems to have hit a support level, traders can use the information derived from these accumulation areas as signals to purchase a stock.
Accumulative Swing Index (ASI)
The ASI is a technical indicator that is used to measure the long-term trend of a security or asset in the market. A positive ASI is an indication of a market that will be higher in the long term, and a negative ASI indicates that the security’s value will fall in the long-term. This calculation is done using the high, low, open and close prices over time. The ASI’s results are enhanced when combined with other technical indicators that can detect breakout movements.
This is the use of a manual or human resource to manage an account or a trading portfolio as opposed to the use of passive systems of account management such as indexing. Indexing involves adjusting the components of an investment portfolio to match the performance of an index. By employing the human element where research, creative reasoning and analysis as well as judgement is tied to experience, it is thought that this approach can produce better returns than indexed portfolios.
Adaptive Price Zone (APZ)
This is a technical indicator that is used to detect points of market reversal, especially in a choppy range-bound market situation. Introduced by Lee Leibfarth in 2006, the APZ indicator appears as a set of bands which are non-symmetrical. These bands are based on double-smoothed exponential moving averages and are short term in nature. The distance between the bands are a function of the price swings, with wider bands indicating greater volatility and narrower bands indicating lesser volatility. The APZ indicator has a statistical average and price extremes produce an attempt by the band to correct the imbalance, thus producing the trading opportunity that this indicator shows.
ADF (Andorran Franc)
The Andorran Franc was the national currency of the territory of Andorra before the introduction of the Euro in 1999. Prior to 1999, Andorra never printed any bank notes nor minted any coins, so Andorra has never had any independent currency. Andorra used the currencies of France and Spain as legal tender, being located in a range of mountains between both countries. Therefore the Andorran Franc is in reality, the French Franc which was the currency of France.
An adjustable peg is a type of fixed exchange rate policy adopted by certain countries where the national government pegs the rate of its currency to that of another major currency such as the US Dollar. Under this arrangement, the peg can be adjusted within a narrow range of movement. It is important to note that adjustability of the peg does not mean that the currency is floating. China’s Yuan (RNB) is the most famous example. Others haven been the Argentinian Peso (under Pres. Carlos Menem’s regime, and to some extent, the Singaporean Dollar).
This is a tool of technical analysis that measures the difference between the total number of securities that have gained in value and those that have depreciated in value. This index is used as an indication of the strength of market movements. If there are more stocks gaining that losing value in the market at a time that the market has started to advance, this shows that the advance is likely to continue for some time and is not a transient event. Conversely, if there are more securities losing value at a time that the market is down, this is a sign of bearishness in the market.
Advance-Decline Line (AD)
The A/D Line is an indicator used in technical analysis. It is a tool used mostly in the stock markets to measure the number of assets that rise or fall during a market advance or decline respectively. The movement of the share price of a single large and well capitalized company can affect the index as a whole. The A/D line is therefore used to know if the movement of a majority of smaller stocks in that index was responsible for the market movement, or if the market movement was caused essentially by the performance of one or two large company stocks. If there is disproportion between the market and the stock prices of smaller companies listed in that market, the A/D line will show it as a trading opportunity. The trade opportunity would be that the gap would correct, and so this information can be exploited by speculators in the market.
AED (United Arab Emirates Dirham)
The legal tender/currency of the United Arab Emirates is the Dirham, which is subdivided into 100 fils. The Dirham was introduced in 1973 to replace the Bahrain Dinar and the Qatar and Dubai Riyal, (used in all emirates in the UAE except Abu Dhabi where the Bahraini Dinar was used). Presently, the range of notes for the Dirham is from 5 AED to 1000 AED. The Dirham is issued by the Central Bank of the United Arab Emirates.
AFA (Afghanistan Afghani)
The AFA is the ISO 4217 code for the original Afghani, which was the currency of Afghanistan from 1925 to 2003. It was issued by the Da Afghanistan Bank (Afghanistan’s central bank) and was available via a dual exchange rate mechanism (fixed by the Central bank and floating at the Saraye Shahzada money exchanges). Subdivided into 100 Pul, it was eventually replaced in 2003 by the new Afghani (ISO 4217 Code AFN) due to the years of uncontrolled and unregulated printing of the currency by entities other than the Da Afghanistan Bank during the wartime years and under the Taliban administration. The new Afghani is now a fully floated currency.
An affirmative obligation is a rule imposed by the management of a stock exchange mandating market specialists and market maker brokers to take positions in certain assets when there is not enough demand for those assets, so as to close a liquidity gap. The affirmative obligation will also include presenting two-sided quotes to traders on such positions, and reporting any such executed trades to the relevant authorities within a specified time. This is also called positive obligation. It is this obligation that is responsible for the after-hours trade activities on the markets.
This is a measure of an investor’s total market exposure to spot and futures market contracts. Such investors would include banks, major corporations, hedge funds and other financial institutions. The definition for the Forex market is the exposure of a trading entity to fluctuations in the exchange rates of two currencies. Aggregate risk is a key indicator that a trading entity must employ in order to gauge the maximum allowable exposure to a a trade before engaging in that trade. Once this has been derived, limits on the position can be set. Larger corporations such as the ‘too big to fail’ banks have larger aggregate risk limits than smaller firms with lower credit ratings.
The aggressor is usually the party that initiates the deal in a transaction. In the financial markets, the aggressors are usually the ones responsible for order flows in a particular direction. This role is taken on by the institutional investors in the Forex market, and that is why in times of increased volatility (especially during news trades), it is not unusual to see large spikes following the release of a news item. In this instance, the institutional investors aggressive push prices by their large demand and hope to gain on this price change by offloading the positions on the non-aggressive section of the market.
ALL (Albanian Lek)
The Albanian Lek is the currency/legal tender of Albania. 1 Albanian Lek is made up of 100 qindarka. Introduced for the first time in 1926, there have been four series of the ALL introduced in its history. Known locally as the Leke, the latest series of the ALL were introduced in 1997 with denominations ranging from 100 Leke to 5000 Leke. The 100 Leke is no longer used as legal tender and the qindarka subdivisions are no longer issued.
American Stock Exchange (AMEX)
American Stock Exchange was a stock exchange located in New York that first started in the early 19th century to trade at least 100 stocks of companies in the construction and railroad business. With the discovery of oil and the emergence of other industries that produced equipment used in the American civil war, more companies became listed on this exchange and this metamorphosed into AMEX. AMEX was later acquired by NYSE Euronext in 2008 to become the NYSE AMEX Equities Exchange. It is the 3rd largest stock exchange in the US by trade volume. Small-cap stocks and ETFs are the securities mostly traded on AMEX.
Prices of securities always form peaks and troughs in the market. The peaks are the areas where prices are highest, and troughs are the areas where prices are lowest. The amplitude measures the distance between the midpoint of the highest point of the price (peak) and the midpoint of the lowest price point (trough). A bullish retracement is signified by a positive amplitude, and a bearish retracement is signified by a negative amplitude.
The Andrew’s Pitchfork is a trend channel indicator developed by Alan Andrews for use in trading the financial markets. The indicator is made up of three lines: a median line which is key to the use of this indicator, as well as two parallel lines located on each side of the median line. These parallel lines are at the same distance from the median line on each side. The outer trend lines mark areas of support and resistance, while the median line is used to get the diagonal orientation of the indicator, thereby showing the strength of the trend. A steeply sloped Pitchfork shows a strong trend. Range traders can therefore trade within the trend lines. A break of the lower trend line while the pitchfork is pointing diagonally upwards is a bearish reversal while a break of the upper trend line while the pitchfork is pointing diagonally downwards is a bullish reversal.
ANG (Netherlands Antilles Guilder)
The Guilder was originally the currency used by the Netherlands and all its territories prior to 1999 when the Euro was adopted by the Netherlands. In Curacao and St Maarten, 2 of the 5 island territories that constituted the Netherlands Antilles islands prior to the dissolution of that union in 2010, the Guilder is used as the ANG or Netherlands Antilles Guilder. The ANG will be replaced by the Carribean Guilder sometime in 2013. The Guilder has been in use in the Netherlands Antilles since the 18th century. The link to the traditional Dutch Guilder was broken by the German occupation of the Netherlands during the Second World War, and the ANG became pegged to the US Dollar in 1940. The dissolution of the Netherlands Antilles Union in 2010, with the emergence of the constituent islands now forming independent countries means that 2012 is the last year that this currency will be used as legal tender.
Annual Equivalent Rate
This is an interest rate that is paid based on calculations of principal + interest for every fresh interest rate payment. Annual equivalent rate is therefore calculated based on the new compounded figure derived from the sum of the original principal and any interest that has been paid on that principal. This allows the amount to be compounded several times.
The anti-Martingale system is a system of Forex trading where the trader halves the size of his position after a losing trade, and doubles his position after a string of winning trades. This is in contrast to the Martingale strategy where the trader doubles his size after a losing trade in an attempt to recover capital in one fell swoop. The anti-Martingale strategy is assumed to be less risky because it only builds on periods of trading success and not during periods of loss when the trader is less emotionally prepared to assume more risk.
AON (Angolan Novo Kwanza)
The Novo Kwanza is the second in the series of Kwanza notes issued by the Angolan Central Bank. The Kwanza is the currency and legal tender of Angola. Four Kwanza series of notes have been issued and used in Angola since 1977. The Novo Kwanza was issued for the first time in 1990 to replace the First Kwanza and was used until 1995. The ownership of the Kwanza was placed under restrictions, as Angolans could only replace the 5% of the First Kwanza for the new Kwanza, and the remaining 95% for government owned traded instruments. This Kwanza existed only in the form of bank notes because the currency was so devalued that it made no sense to mint coins. The currency note range of the Novo Kwanza was from 50 to 5,000 Novo Kwanza.
The increase in the value of an asset. Appreciation of an asset usually occurs when there is positive market news or trader optimism. In the Forex market, a currency will experience an appreciation or rise in value when there is increased demand for that currency for the use of international transactions, or whenever there is an increase in the interest rate (which means traders holding that currency can get an increased rate of return on investments with that asset in the Forex market), or when there is an increase in the demand for goods and services from that country as a result of increase in the income of the citizens in that country.
Profiting from differences in the price of a single asset (such as a currency pair) that is traded on more than one market. For arbitrage opportunities to exist, the currency pair must be traded simultaneously on two different markets, and at different prices. One very common form of arbitrage is hedging, which is a practice of buying a security on one market (e.g. the spot Forex market) and selling the options on that currency pair in another market (e.g. currency options market). Arbitrage is also used in sports, in trading exchange traded funds and also in trading credit default swaps.
Arms Index (TRIN)
The Arms Index is named after its inventor, Richard Arms. It is used to measure the relation in volumes of advancing securities and the volume in declining securities. Volumes a integral part in the analysis of possible future price movements of a security. The normal situation would be increased volume in advancing securities, showing that the advance is as a result of more demand. Where the security is rising and the volume is not, this creates a negative divergence and vice verse. The TRIN will therefore indicate areas where these divergences occur, which trader can then use as divergence trading signals.
Developed by Tushar Chande, the Aroon Indicator is basically a trend indicator, helping traders determine existing trend in the market. The Aroon indicator is made up of two lines (Aroon Up and Aroon Down), each made up of 25 standard periods. The maximum range of values for the Aroon Indicator is from 0 to 100. A cross of the Aroon lines at values closer to 100 indicates that the market is overbought and that a bearish reversal is likely. A downtrend is seen when the Aroon Down is >70. A cross of the Aroon lines at values closer to 0 indicates oversold conditions and a market ripe for bullishness. An uptrend is seen when the Aroon Up is >70. When the Aroon lines run parallel to each other, it shows a market in consolidation.
Unlike the Aroon indicator, the Aroon oscillator is a momentum indicator. Also developed by Tushar Chande, the Aroon oscillator is used to signal uptrends, downtrends and market reversals. When the Aroon oscillator is above 0, it is an indication that the market is in an uptrend. When the Aroon oscillator is below 0, it is an indication that the market is in a downtrend. The strength of the trend is determined by how far away the Aroon oscillator is from the zero line.
ARS (Argentinian Peso)
The Argentinian Peso is the legal tender of the country of Argentina. Its ISO 4217 Code is the ARS. One Argentine Peso is made up of 100 centavos. The Peso has been in use in Argentina since the 19th century. It has gone by several names, still qualified as Pesos from that time until the present day. It has however undergone several name changes and re-denominations to derive the present Peso, which is known as the Peso convertible. The Peso convertible has been in use since 1992, and since January 2002, has been allowed to float in the currency exchange market following the Argentine financial crisis of 2001. The value of the ARS in international transactions is commonly expressed against the US dollar.
The price at which a currency pair or security is offered for sale. The Ask is the quoted price at which an investor or trader can buy a currency pair, or the price at which a dealer will sell a currency pair to a trader. This is also known as the "offer", "ask price", and "ask rate". In a price quote, there are two prices that are listed, and it is the price listed on the right hand side of a price quote that constitutes the Ask. The Ask Price is always higher than the bid price. E.g. in a quote that is listed as 1.2346/1.2349, 1.2349 is the Ask Price.
An item having commercial or exchange value. The commercial value of a resource is not fixed, but changes from time to time as a result of several factors influencing the supply and demand of the resource. It is this change in the perceived value of the resource that confers on it economic and commercial importance. Financial markets provide a standardized template on which assets can be exchanged for a value bestowed on it by the concurrence of traders and the intermediaries (brokers) in such transactions.
An order by a trader or broker to fill a trade using the best prices possible in the shortest time possible. An ‘at best’ order is invariably an instant order that will be filled at market price, and may be subject to slippage.
An order by a trader to a broker to fill a long trade at a price that is below the current market price, or to fill a short trade at a price that is above market price. The expectation is that prices will move against the trader’s expectation for the asset before turning in the direction of the trader’s expectation, and so an ‘at limit’ order reduces the level of draw down the account would have experienced if the order is filled at market price. An ‘at limit’ order is a pending order.
This term is used in reference to order placement, indicating that the broker should fill the trader’s order at the trader’s ordered price, or at a price that will be cheaper for the trader in terms of spread costs. Usually pending orders are used for such requests by traders to brokers.
This is a tool used to evaluate the performance of fund managers. It seeks to determine if superior stock selection or superior timing is the determinant factor of the performance of a fund manager that outperforms an index.
AUD (Australian Dollar)
This is the legal tender of Australia. The Australian Dollar is classified as a commodity currency, as its price is correlated to the price of gold. The Australian Dollar was used as a currency of choice for the carry trade because Australia had the highest interest rate out of the 7 major global currencies, peaking at 8.25% just before the global financial crisis of 2008. It is subdivided into 100 cents.
Australian Bureau of Statistics (ABS)
This is the agency in Australia that is saddled with the responsibility of maintaining and managing the country’s statistical data. It was formed in 1905, and its functions include census of population and housing, undertaking surveys to determine the level of expenditure on research and development in Australia since 1978 and conducting several household and business surveys. Some of these household/business surveys include GDP, CPI, consumption and investment and incomes.
Authorized Forex Dealer
This is an entity that has been registered and licensed by the appropriate regulatory authority to conduct the business of selling assets to traders and buying assets from traders as a broker/market maker.
Automated Forex Trading
This refers to the practice of using software (indicators and expert advisors) to generate signals and execute trades automatically in the Forex market without human intervention. Another way of carrying out automated Forex trading is by signing up to auto-trading services and signing up to a trade strategy, which is now replicated on the trading account automatically in an attempt to reproduce the results of the successful strategy developer.
A method of executing trades without manual input or without the help of a broker’s dealing desk. In the old days, order placement was done using telephone calls put to the broker to get their dealing desk to execute the trade, meaning that a human element was involved in the trade. The provision of online trading platforms now enables traders to get their orders executed with a click of the mouse button, providing automatic execution of their orders.
Autoregression is a statistical model which believes that past values are predictive of current and future values, and thus seeks to use trends, moving averages and other previous statistical data of an asset to attempt to predict future price of that asset. Autoregression is a system of analysis which tries to predict the current behavior of an asset by looking at the past behaviors/values of that asset. There are several autoregressive models used in the market.
Average Daily Trading Volume (ADTV)
Average amount of an individual security that is traded within a time frame of one day. It is calculated by dividing the number of shares traded in a time frame by the number of days that stock has been traded. Many analysts use 30 days as a benchmark. So if a stock has 6,000,000 shares traded in 30 days, the ADTV is 6,000,000 / 30 = 200,000.
Average Directional Movement Index (ADX)
This is an indicator developed by Welles Wilder in 1978 to measure the strength of a trend in an asset based on a series of prices. It is a momentum indicator in Forex, It combines a positive strength indicator (+D1) and a negative strength indicator (-D1), and the results are smoothed out by an exponential moving average. It is a lagging indicator and is graded from 0 to 100, with crosses of +D1 and –D1 close above 50 indicating that the trend has a strong momentum.
Avgerage Execution Speed
Average speed is calculated on actual data of all trades execution time on particular type of account and is updated on weekly basis. It does not include the internet connection latency from client terminal to our trading server, which can vary depending on trader's internet connection quality and speed.
AWG (Aruban Florin)
This the currency of the former Dutch territory of Aruba. It is subdivided into 100 cents, and is the successor of the Netherlands Antillean Guilder, being used for the first time in 1986. The Aruban Florin is pegged to the US Dollar at the rate of 1.78 Florins to US$1. The currency is issued by the Central Bank of Aruba.
This is the interest that a trader shows in transacting on a bond. The buyers and sellers of a bond are matched by matching their axes.
The office location, or department, where the processing of financial transactions takes place. Usually when a trade has been performed by a trader, that order must be processed and executed, and a record of that trade and its outcome kept for settlement purposes. When the trade is over, the amount won or lost in the trade is credited or debited from the trader’s account respectively. For cases of rollover, the swap is either added to or deducted from the trader’s account depending on what currency in the pair the trader is holding. When traders request for withdrawals, these are processed accordingly. All these functions are performed by departments that constitute the broker’s back office. So the back office is basically any department within a broker’s organization that handles record-keeping, processing, clearing and settlement of all transactions from the broker’s clients.
The financial result of all completed transactions of a trading account. In the Forex market, there is an unused balance and the used balance (which is the margin put up as the trader’s equity in the leveraged trade). The true balance of the trading account can only be known when all unrealized profits or losses, as well as the initial margin (used balance) are included into the unused balance after all positions have been closed.
The rate at which a central bank is prepared to lend money to its domestic banking system. It is also known as the discount rate, or interest rate on the economic news calendar. Central banks function as a lender of last resort. Commercial banks invest funds deposited with them by customers either in the form of loans given out to individuals and businesses, or in other investment vehicles, but are required to keep reserve funds to handle settlement of transactions. Occasionally, commercial banks may run out of such reserve funds. They can therefore obtain stop-gap loans from the central bank, repayable at a certain interest rate. This is what is known as the bank rate.
A bar is used on a financial chart to represent the time frame in which transactions and prices of the asset being traded are recorded. If an hourly time chart is being used, one bar shows price data and trading activity for one hour.
Barra Risk Factor Analysis
This is a statistical model developed by Barra Inc to measure the risk inherent in a security relative to the market risk. Debt ratings, earnings growth, share turnover, are some of the metrics measured by this model, and the results now compared with risks inherent in the sector where the company operates in, risks inherent in the company itself and risks associated with multi-sectorial exposure. A Value at Risk (VaR) number is assigned to the company undergoing risk assessment using the Barra Risk Factor Analysis, and this number is graded from a percentile rank of 0 to 100 with numbers approaching 100 being associated with greater risk/volatility.
In terms of foreign exchange trading, currencies are quoted in pairs. This is because you cannot trade one currency on its own. A currency is always traded in exchange for another. The first currency in the pair is the base currency. The base currency is the currency against which exchange rates are generally quoted in a currency pair. In expressing the exchange rate, the rate is quoted as the value of the other currency in relation to 1 unit of the basic currency. For instance, when a quote of EUR/USD is said to be 1.3109, it means that 1.3109 US Dollars can be used to purchase 1 unit of the base currency. Examples: USD/JPY, the US Dollar is the base currency; EUR/USD, the EURO is the base currency.
Base Interest Rate (Benchmark Interest Rate)
A minimal interest rate set and published by commercial banks for accumulating interest on different credit types.
A basis point is one-hundredth of a percentage point, or 1/100 (0.01%). This term has its origins in the practice of trading the ‘basis’, or the percentage difference between spreads. It is commonly used in describing the rate of change of interest rates. So if a central bank increases interest rate from 4.5% to 5%, this is an increase in 0.5% or 50 basis points.
BBD (Barbados Dollar)
This is the currency of Barbados, and has been in use since 1935. It is subdivided into 100 cents, and replaced the previous bank notes and coins (dollars and pounds sterling) which had been issued by several colonial banks such as the Royal Bank of Canada and Barclay's Bank.
BDT (Bangladesh Taka)
This is the legal tender of Bangladesh, and the Taka is subdivided into 100 poisha. The Taka is issued and produced by the Bangladesh Bank ( the central bank of Bangladesh) with the exception of the 1 and 2 Taka notes which are produced by the Ministry of Finance. The Taka became the currency of Bangladesh in 1972. Several issues of the Taka have been produced, with the 10 Taka note now being issued as a polymer note.
A market participant counting on the market price decrease; a market operator, a trader or an investor who speculates on the fall in value of an asset. The bears will therefore sell an asset based on their sentiment of market expectations. When there are more bears in the market place than there are buyers (bulls), then the market price of the asset will depreciate.
An extended period of general price decline in an individual security, an asset, or a market. A bear market is also defined as a loss of more than 20% of the value of an asset or a market over a 2-month period. A bear market can be a sign of systemic collapse of the financial system, as occurred after the collapse of Lehman Brothers and the subsequent global financial crisis. A bear market is usually triggered by fear, panic or prolonged and extreme investor pessimism.
A bear position is a trading position which is based on the expectation that the prices of an asset will fall by at least 20%. The bear position is executed by borrowing an asset from dealer, selling the asset at a price, and buying back the asset to return to the dealer (on maturity of the trade) at a cheaper, bargain price, thus profiting from the price difference.
Bearish Abandoned Baby
This is a bearish reversal pattern which is formed by a long bullish candle, followed by a Doji which has gapped upwards, and then a bearish candle which has gapped downwards from the Doji. It is a bearish reversal candlestick pattern with strong reliability.
Bearish Belt Hold
This is a candlestick pattern of low reliability which forms in an uptrend. The pattern is made up of a bearish or black candlestick occurs with an opening price (that becomes the high for the day) being higher than the close of the previous day. This bearish candle has a short lower shadow and no upper shadow.
Beginning Market Value (BMV)
The valuation at which an asset is expected to exchange for at the beginning of each period. It assumes that the beginning market value at the start of every period is equal to the ending market value of the previous period, based on an agreement between market participants on what the value of the asset should be, and given that the market remains efficient.
Also known as a Gaussian distribution curve, is a graph whose line forms the shape of a bell. The characteristic shape is formed when key points of the graph are plotted, which shows that the normal distribution in a market will show fewer market participants at both extremes of performance, and more concentration towards the centre.
Berlin Stock Exchange (BER)
This is a stock exchange founded in 1685 and located in Berlin, Germany. The main offering of the Berlin Stock Exchange is foreign stocks, and up until recently, this stock exchange catered solely to retail investors.
BGN (Bulgarian Lev)
The Bulgarian Lev is the currency of Bulgaria. It has undergone four issues, with the first issue being released in 1881 at a par value with the French Franc. It is subdivided into 100 stotinka and is issued by the Bulgarian National Bank (BNB).
BHD (Bahraini Dinar)
The Dinar is the currency of Bahrain and is subdivided into 100 fils. It was first introduced in 1965 to replace the Gulf Rupee at an exchange value of one-tenth the value of the Rupee.The exchange rate of the Dinar is fixed to the US Dollar and a special foreign currency reserve asset valuation system known as the IMF Special Drawing Rights (SDR).
The price at which a dealer is prepared to purchase a currency from an investor or trader, or the price at which an investor or trader can sell a currency pair to a dealer. This is also known as the "bid price" and "bid rate". In a price quote, there are two prices that are listed, and it is the price listed on the left hand side of a price quote that constitutes the Bid. The Bid Price is always lower than the ask price. E.g. in a quote that is listed as 1.2346/1.2349, 1.2346 is the Bid Price.
BIF (Burundi Franc)
The Burundi Franc is the currency of the country of Burundi and is subdivided into 100 centimes. The Burundi Franc replaced the Rwanda and Burundi Franc as the official currency of the country in 1964. The Burundi Franc is unique as the centimes has never been issued as a coin, with the 1 BIF note being issued as a coin.
The first two or three digits of a foreign exchange price or rate. Examples: USD/JPY rate of 108.05/10 the big figure is 108. EUR/USD price of .8325/28 the big figure is .83
Big Mac PPP
This is a method of quoting the exchange rate of two countries by comparing the price of a Big Mac (McDonald’s flagship hamburger) in one country with the price of the Big Mac in another country. It is published by the Economist as an informal way of measuring the Purchasing Power Parity (PPP) between two currencies. It was introduced in 1986 by Pam Woodall.
Blue Collar Trader
A trader who trades assets as a second stream of income and not as the primary means of making a living. Such traders are less experienced than professional traders, trade lower volumes and take lesser risks than the professional traders.
BMD (Bermudian Dollar)
The Bermuda Dollar is the currency of the island country of Bermuda and is subdivided into 100 cents. The Bermuda Dollar was introduced in 1970 and initially maintained a peg with the British Pound, but this peg was abandoned in 1972 as a retaliatory move by the Bermuda government after the UK excluded Bermuda from its sterling area privileges. The Bermuda Dollar is currently pegged to the US Dollar at parity and this has been in existence since 1972.
BND (Brunei Dollar)
The Brunei Dollar or Ringgit Brunei is the official currency of the sultanate of Brunei and is subdivided into 100 sen (cents in English). The currency is issued by the Monetary Authority of Singapore and is maintained at exchange rate parity with the Singaporean Dollar. It was first introduced in 1967 and since then six issues of the currency have been issued.
BOB (Bolivian Boliviano)
This is the currency of Bolivia and is subdivided into 100 cents (centavos). Since 1864, two Boliviano issues have been used in Bolivia. The coins and notes are issued by the Banco Central de Bolivia. Rampant inflation caused the old Boliviano to be redenominated at a rate of 1,000,000 Old Boliviano to 1 new Boliviano in 1987.
This is the minimum change that must occur in the price of an asset for the next mark to be added to a point. Unlike a bar chart which plots price changes at specific time intervals, point charting only adds a new mark after the asset price has moved by a specified amount known as the box size.
A market order that is executed at the best possible market price. If all the units of asset that the trader wants to purchase cannot be filled at that price, the trader uses a limit order to acquire the assets still at a best possible price.
Bracketed Buy Order
This is a buy order that also incorporates a limit order placed above the entry price and a stop order placed below the entry price. The essence of this order is for the trade to either lock in profits by triggering the limit order when the price rises above entry, or to control losses by triggering the stop order if the price goes below entry price.
Bracketed Sell Order
This is a sell order that also incorporates a limit order placed below the entry price and a stop order placed above the entry price. The essence of this order is for the trade to either lock in profits by triggering the limit order when the price falls below entry, or to control losses by triggering the stop order if the price goes above entry price.
This is a gap between the closing price in one candle and the opening price in the next candle, usually as a result of an increase in trade volume. Breakaway gaps can occur upwards or downwards.
This is a decline in the price of an asset which is both sharp and rapid in nature. Such steep declines are usually as a result of a systemic negative impact on the markets.
A breakout is a situation when the momentum of the price action is so strong that it moves beyond key levels of support (downside breakout) and resistance (upside breakout). Breakouts usually occur as a result of high impact news releases or some other factors that cause traders in the market to generally place orders in one direction.
A breakout trader is one who uses a system of pending orders to trade price breakouts in the market. The breakout trader’s strategy is based on a system where pending orders are used above a resistance (Buy Stop) and below a support (Sell Stop) in order to trigger the trade automatically if prices advance beyond the key levels.
The town of Bretton-Woods is located in the state of New Hampshire in the United States. It is the site of the United Nations Monetary and Financial Conference, which in 1944 led to the establishment of the post-World War 2 foreign exchange and global economic system that remained intact until the early 1970s. The conference resulted in the formation of the IMF and the International Bank of Reconstruction and Development (World Bank). The system fixed major global currencies to the US Dollar in a fixed exchange rate system with 1% fluctuations, and fixed the price of US Dollar to gold at the rate of $35 an ounce.
Bretton Woods Agreement
The treaty signed by the first members of the UN in 1944 during the United Nations Monetary and Financial Conference in Bretton-Woods, New Hampshire in USA, which set fixed exchange rates for major currencies of the world, and gave central banks the right to intervene in foreign exchange markets to ensure that the fixed exchange rate of the global currencies to the US Dollar, and he US Dollar to the price of gold at the level of 35 USD per ounce was maintained. The agreement was in force until 1971 when it was unilaterally abandoned by the US government under President Richard Nixon.
BRL (Brazilian Real)
This is the official currency of Brazil and is subdivided into 100 centavos.The modern version of this currency was first issued in 1994, with the second issue being released in 1998 and still in use. It was introduced with a fixed exchange peg to the US Dollar at the rate of parity. The currency is issued by the central bank of Brazil, and consists of a 10 real polymer bank note. The new currency notes released in 2010 were specially created to help visually-impaired users identify the notes with less problems.
An agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. Brokers are agents working on commission and not principals or agents acting on their own account. In the foreign exchange market brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties. There are four or five major global brokers operating through subsidiaries affiliates and partners in many countries.
BSD (Bahamian Dollar)
This is the official currency of the Bahamas and is subdivided into 100 cents. The currency is issued by the Central Bank of The Bahamas and maintains a fixed exchange rate at parity with the US Dollar. The Bahamian Dollar replaced the Pound in 1966 as the official country, marking the country’s transition from colonial rule to self-determination.
BTN (Bhutanese Ngultrum)
This is the official currency of Bhutan, and it is subdivided into 100 chhertum. The currency is issued by the Royal Monetary Authority of Bhutan and came into existence in 1974 to replace the Indian Rupee at exchange rate parity.
A situation where the expenditures by the government on its capital and recurrent programs exceed the revenues the government earns for that budgetary year. In order to cover up for the budget deficits, governments usually resort to borrowing from financial institutions like the World Bank, International Monetary Fund (IMF) or African Development Bank (and similar organizations all over the world), or they resort to borrowing in the form of issuing government bonds to investors.
A market participant counting on an increase in the value of the market in general or an asset specifically. A bull is also a market operator, a trader or an investor who speculates for a rise in prices of tradable instruments. The bulls will therefore buy an asset based on their sentiment or on their market expectations. When there are more bulls in the market place than there are sellers (bears), then the market price of the asset will appreciate.
A market which is on a consistent upward trend. A bull market is created by increased market optimism and buoyed investor confidence, which leads to widespread buying far above any selling. The widespread buying produces increased demand for the asset, leading to further appreciation.
Bullish Abandoned Baby
This is a bullish reversal candlestick pattern with high reliability, formed by a long bearish candlestick, followed by a Doji which has gapped downward, and then a long bullish candlestick that has gapped upwards from the Doji.
Bullish Belt Hold
This is a candlestick pattern of low reliability which forms in a downtrend. The pattern is made up of a bullish candlestick which occurs with an opening price (that becomes the low for the day) being lower than the close of the previous day. This bullish candle has a short upper shadow and no lower shadow.
The Deutsch Bundesbank is German for German Federal Bank is the Central Bank of Germany. Established in 1957 as the Central Bank of the Old West Germany, the Bundesbank replaced the Bank Deutsche Lander and eventually became the central bank of the unified Germany in 1990. The Bundesbank was the largest and most powerful of the central banks in Europe based on the size and strength of the German economy and its currency, the Deutschmark. The Bundesbank was responsible for control of inflation and monetary policy in Germany, as well as issuing the bank notes (Deutschmark) and coins (Pfennig). The bank also functions as the banker of the German republic. However, the Bundesbank is NOT a lender of last resort, unlike other banks in its category such as the Federal Reserve and Bank of England. It is currently part of the European System of Central Banks (ESCB).
An opening of a long and a closure of a short positions. Traders generally buy when there is the expectation that the price of the asset or that the exchange rate of the currency pair will increase. A Buy order in Forex is an instant market order to purchase the asset at the market (current) price.
Buy A Bounce
This is a range trading technique where the trader enters a long position on the currency pair when it reaches a support, formed by the lower end of the price range.
An order to buy an asset once a confirmation of a break of a strong resistance is obtained. Usually if an asset price closes the candle above the resistance point, a break is achieved and the trader can then use the buy break order to trade this situation.
Buy Limit Order
An order to execute a transaction at a specified price (the limit) or lower. A Buy Limit order is a pending order used by the trader when he expects the price of the asset or currency pair to increase in value after prices have fallen from their present position. On the MetaTrader4 platform, the Buy Limit is purely a pending order, but on other platforms, the Buy Limit has a variety known as Entry Limit Buy.
An order to buy a security at a price that must not be higher than the security's last price if the last price was a down-tick or a zero-minus tick, or must not be higher than the difference between the last price and its change If the previous trade was an uptick or a zero-plus tick.
Buy on Margin
The process of buying a currency pair where a client pays cash for part of the overall value of the position. The word margin refers to the portion the investor puts up rather than the portion that is borrowed. The financial markets require heavy capital involvement. For this reason, they are heavily leveraged, which means that a trader is not expected to bring all the capital required for a trade. Rather he can borrow the capital for the trade from the broker, who will now require the trader to put up a portion of his account balance as collateral for the trade. This practice is known as buying on margin.
Buy Stops Above
A ‘buy stop above’ is a pending order that is used in trading an upside breakout. When prices of the asset are advancing and the momentum of the advance is very strong as to close above a resistance level, a breakout occurs. In order to benefit maximally from such an upside breakout without missing the entry, a buy stop is placed above the resistance so that the upside breakout can trigger a trade entry and the trade position can follow the price movement to its logical conclusion.
A trading strategy in which a trader takes profits by closing a short position or buying into a long position, at a time when the price of the asset being traded is dropping but may reverse and move against the trader.
BWP (Botswana Pula)
This is the official currency of Botswana and is subdivided into 100 thebe. The currency is issued by the Bank of Botswana and maintains a fixed exchange rate at parity with the South African Rand. The Botswana Pula came into existence in 1976 and three series of the currency have been issued since then.
BZD (Belize Dollar)
This is the official currency of the country of Belize and is subdivided into 100 cents. The currency is issued by the Central Bank of Belize and maintains a fixed exchange rate with the US Dollar at a ratio of 2:1. The Bahamian Dollar jettisoned its peg with the Pound in 1978 in favour of the US Dollar peg.
The British pound/US Dollar exchange rate GBP/USD. The name ‘cable’ was derived from the transatlantic cable that ran from the US to Europe in the 19th century, and this was the only means of transmitting information between both continents, including the exchange rate information. Since this was the method of creating a synchrony between the exchange rates in both the US and London markets, this pair is still colloquially known as the cable.
CAD (Canadian Dollar)
The Canadian Dollar is the official currency of Canada, and it is listed as one of the major currencies in the Forex market. It is closely correlated to the price of oil, and it is issued by the Bank of Canada. It is subdivided into 100 cents.
Cancel Former Order (CFO)
This is an instruction from a trader to a broker to cancel an order that was made previously but which has not been filled. This is usually done if a trader changes his mind about a transaction, especially if it concerns the outlook on the same security.
A chart that displays the daily trading price range (open, high, low and close). A form of Japanese charting that has become popular in the West. A narrow line (shadow) shows the day's price range. A wider body marks the area between the open and the close. If the close is above the open, the body is white (not filled); if the close is below the open, the body is black (filled).
A trading strategy in which the trader attempts to profits from a basket of carry trade positions, placing long positions on currencies with the higher- yielding interest rate while simultaneously selling those with lower-yielding interest rates.
This is a settlement of a futures trade that is made with the cash value of the asset and not by delivery of the physical asset itself. Most online trades done on the options and futures market are settled with cash deliveries.
A cent lot is equivalent to 1/1000 micro lots, where the value of one tick movement of price is equivalent to 1 cent.
A bank, administered by a national government, which regulates the behavior of financial institutions within its borders and carries out monetary policy. A central bank is responsible for issuing a nation’s currency, controlling its supply and in some cases, acting as a lender of last resort to provide emergency financing to the nation’s banking system.
A centralized exchange where all orders in the market are routed to, with no other competing exchanges receiving any orders/quotes. As such, all price quotes obtained from that exchange are the same that are given to all participants in that market.
CFD (Contract For Differences)
This is an agreement between a buyer and a seller to exchange the difference between the initial value of an asset at the time of the agreement and the final value of an asset at the end of the trade maturity, without actual ownership of the asset and settlement of the cash value of the asset (and not physical delivery), in which both parties must put up some margin for the trade.
A chart formation is a series of patterns that are formed by peculiar arrangement of candlesticks and these can be used as determinants of future price action of an asset.
A person who attempts to predict prices by analyzing past price movements as recorded on a chart. Using chart information is one of the methods of technical analysis. Information that can be derived from the charts include candlestick patterns, chart patterns, and information from technical indicators. Chart information derived from the worm of chartists is the bedrock of technical analysis.
CHF (Swiss Franc)
This is the currency of Switzerland and Lechtenstein. It is issued by the Swiss National Bank and it is subdivided into 100 centimes. It is listed as one of the major currencies in the Forex market, and currently has a minimum peg set by the Swiss government against the Euro.
Closing a Position
The process of selling or buying a foreign exchange position resulting in the liquidation (squaring up) of the position. A position can be liquidated manually by the trader using the appropriate button on the Forex platform, or can be liquidated automatically by setting a profit target, using a trailing stop or using an expert advisor. In all cases, the instruction is sent to the broker to close the position, which broker does by looking for a trader willing to be a counterparty to the transaction by acquiring the trade position at that price or by the market maker acquiring the position from the trader as a counterparty.
Closing Market Rate
The rate at which a position can be closed based on the market price at end of the day. Another way to describe the closing market rate is the market price of a currency pair when the market closes at the end of the trading day, or the most updated valuation of an asset at the time the market closes for the day.
Broker’s bonus for facilitating transactions. A commission is different from the spread, which is usually the difference between the price that a broker is ready to pay for an asset and the price that the broker is ready to buy back the asset from a trader. A commission is a fee charged for enabling a transaction to occur. In the Forex market, commissions are only charged in an ECN environment to cover the cost of maintaining the FIX protocol on which the electronic communication network works.
These are trad-able financial instruments whose contracts are based on materials of value that are either extracted from the ground (hard commodities such as gold, natural gas, oil), or are based on agricultural products (corn, coffee, cocoa, wheat).
Commodity Block Currency
This is a currency of a country whose economy is directly affected and correlated with the price movements of a single economy. This usually occurs in countries whose main export earner comes from a single commodity, or which depends on imports of a single commodity for its economical well-being. An example is Canada, whose oil sands give it the second largest oil reserves after Saudi Arabia.
Commodity Channel Index (CCI)
This is a technical indicator that was invented by David Lambert as an oscillator to detect periods at which prices may undergo reversal. It does this by identifying overbought and oversold conditions in the market. It can also show periods of price divergence in the market, and can also be used as a coincident indicator to show the start of an uptrend (CCI close to +100) or a downtrend (CCI close to -100).
Commodity pairs refers to the pairing of currencies that are correlated with the prices of certain commodities. The currencies correlated with commodities are Australian Dollar ( gold), Canadian Dollar (oil), US Dollar (oil), Japanese Yen (oil). The commodity pairs are therefore the USDCAD, CADJPY, AUDJPY and AUDUSD.
Commodity Selection Index (CSI)
Developed by Willes Wilder, the CSI is a momentum indicator that aids the trader to select assets that can be traded on the short term. It works by assigning a value number to a commodity so that an asset with a high CSI value indicates that the asset has high volatility which can be exploited by short term traders to enter and exit positions on the asset fairly quickly.
A spread which involves related commodities which are different. It can also be defined as the difference in price between the crude form of a commodity and its refined form. An example of a commodity-product spread is the crack spread, which is the spread between the price of crude oil and its refined derivatives e.g. heating oil. Traders can profit from this spread by taking a position on the crude product and then a contrarily position on the refined product.
Common gaps simply refer to a gap or space on the charts between the closing price of one candle and the opening price of the next candle. The word ‘common’ is given to them because they occur all the time in the market and their occurrence is not rare.
An order which may be submitted or cancelled only if specific criteria are met. The criteria or conditions for such an order will be defined by the trader or investor, and are used so that it is only when the conditions for the market are favorable for making money or preserving capital for the trader, that they will be executed or cancelled.
Confirmation On A Chart
This is a term in technical analysis used to describe a situation where a trading signal for an asset is confirmed either by technical indicators that show a setup favoring the trade on the time frame charts, or the appearance of candlesticks/chart patterns that concur with the trading signal.
A period in the markets when there is excessive demand of exit orders that outstrips the corresponding orders required to buy off these positions. This leads to price tightening or ‘congestion’ on the charts.
This refers to a period of time in the market when prices are restricted to a tight trading range. Consolidation occurs when the majority of traders sit on the sidelines, leading to very low trading volumes.
A calculation of international transactions that is designed to eliminate exchange rate fluctuations. It is mostly used by companies that do a lot of international business.
Consumer Price Index (CPI)
The CPI is calculated once a month, and is used to measure the change of prices of goods and services that are purchased by domestic households. It can also be described as an index that measures the rate of change of goods and services as purchased by a consumer. One of the most important inflation indicators in a nation, and is one of the pieces of data used by the central bank to determine interest rates.
A continuation pattern is a period of consolidation after a strong trend, and which is usually a sign that the previous trend will continue once the period of consolidation is over. Examples of continuation patterns are triangles, flags and pennants.
Continuous Net Settlement (CNS)
This is an automated clearing and settlement system that uses a clearing house unit in a brokerage firm to settle all financial transactions that have occurred between traders. The in-house handling of clearing and settlement of orders makes for a more efficient and continuous system of ensuring that those who have bought assets have their assets delivered and those who have sold assets get their money, thus eliminating the need for taking settlement of orders outside the brokerage which could lead to settlement delays.
Contrarian means taking a position, a standpoint or bias that is against the general sentiment in the financial markets or for an asset. Traders like who bet against the housing market in 2005/2006 were contrarian traders, betting against the market sentiment at the time about the continued surge in prices of real estate.
A currency that can be bought or sold very readily on the foreign exchange market (i.e. internationally) without any government restrictions.
This is an arbitrage strategy that involves holding a short position on a company’s common stock while maintaining a long position on the convertible bond instrument of that company. This is a hedging strategy that ensures that the trader makes money on the asset whether the price goes up or down.
The foreign banks representative who regularly performs services for a bank which has no branch in the relevant center, e.g. to facilitate the transfer of funds. In the US this often occurs domestically due to inter state banking restrictions. A correspondent bank is usually a large financial institution that sets up special accounts called correspondent accounts, in order to receive money from and make payments on behalf of smaller financial institutions.
A participant in a financial transaction. A counterparty is a market participant that takes the opposing side of a transaction to that of a trader in the market. In the Forex market, market makers usually function as a counterparty in a Forex transaction.
Also known as retracement trading, this is the practice of trading against the trend. The strategy is to go long on an upward retracement from a downtrend, and to go short on a downward retracement on an uptrend. Countertrend trading is also known as contrarian trading, and is of a short-term nature becuase the retracement that is traded on a countertrend trade does not last long.
Covered Interest Rate Parity
This is a situation where the forward and spot rates of the currencies of two countries are at par with the interest rates of the two countries. This is used to determine what a foreign investment should yield in terms of the domestic currency.
A currency which can be freely exchanged with another currency without having to be first exchanged with the US Dollar.
Currency exchange rate quotes which do not involve the US Dollar. In other words, the cross rate is the exchange rate between two cross currencies. Another definition has it as the quoted exchange rate of two currencies in a country in which neither currency is the official currency.
Two currency exchange rate set in relations of each of them towards the third currency. For instance, for EUR/CHF pair, EUR/USD and USD/ CHF quotes are used. The concept of using cross rates to trade Forex arose because some Forex platforms do not offer certain currency pairs. In order to benefit from a gain in the exchange rate of one currency over another in any currency pair not listed in a Forex platform, a trader may decide to employ the concept of currency crosses to facilitate these trades. So using our example of the EUR/CHF, assuming that the trader does not have this pair listed on his platform and he believes the Euro would gain against the Swiss Franc, he can go long on the EUR/USD and go short on the USD/CHF, with the corresponding USD short position in the first trade and the long position on the second trade neutralizing themselves.
A situation where price crosses a key threshold such as a resistance level or a support level. The resistance and support levels are said to be crossover thresholds because they indicate points at which the price of the asset will continue to rise or continue to fall.
Money issued by a government. Currency has evolved over centuries from grains to other times that were considered stores of value, to gold and silver, and then graduated to the use of minted coins and paper money. It is a form of money used as a unit of exchange within a country. Money is known as currency because once the issuing agency (the central bank) has decided on the amount of money that is in circulation at any given time, the existing amount of money in a system flows from one person to another based on the exchange of goods or services for it, and this is likened to a river current that flows from one point to the other.
This is a Forex strategy in which a trader can take advantage of the difference in exchange rates of a currency pair across several markets by taking a long position on a currency in one market and instantly going short on that currency in another market. The opportunity for such trades are very brief and transient, so they require specialised software which can execute the trades in record speeds before the differential closes up in such a liquid market as the Forex market.
A selection of foreign currencies, which is used as a guiding line by regulative institutions when shaping a national currency rate against other currencies. In other words, a currency basket is a collection of foreign currencies which are weighted according to their relative importance to that country’s trade, and then used as a benchmark in setting an exchange rate for a local currency. In other words, if three currencies A, B and C are used as the composite currencies in a basket, and the imports and exports of a currency are made up of 40% from currency B, and 30% from currency A and C, the constitution of the currency basket would be made up of 40% weight from B, and 30% weight each from A and C.
Central bank intervention in the operations on the currency market in order to raise or lower the exchange rate of the national currency by selling/ buying foreign currency. A reduced rate of the national currency can be achieved through the purchase of foreign currency; increased rate is achieved through foreign currency sales. Some countries have an export oriented economy and export sales are hurt if there is undue strengthening of the local currency. An example of an export oriented economy is Japan, and we have seen the Bank of Japan intervene in the markets twice in the last three years. The last BoJ intervention saw the bank using more than 600 billion Japanese Yen to buy foreign currencies. A currency intervention can also be achieved by setting maximum or minimum exchange rate pegs. An example of this was seen on September 6, 2011 when the Swiss National Bank (SNB) set the minimum exchange rate peg between the Euro and the Swiss Franc to 1.2000, and pledged to defend the peg by selling ‘unlimited amounts’ of the local currency in order to drop its value. This was done to protect the export oriented Swis economy that was being hurt by a stronger Swiss Franc.
A conversion operation object based on the change of one currency rate against another. The example of the currency pair is USD/JPY. Currency pairings are done because it is the rate of exchange of one currency to another currency that is measured in the Forex market. A currency cannot be traded against itself, and that is why currencies are paired so that they reflect the rate of exchange of one currency against another. In a currency pair, the first listed currency is the base currency while the currency listed on the right is known as the counter currency.
The risk that shifts in foreign exchange rates may undermine the dollar or any other foreign currency value of overseas investments. In other words, this is the business risk that can lead to an increase in cost of goods of services borne by individuals or corporations with cross-border interests as a result of increase in the exchange rate of the local currency against a foreign currency. If for instance a company A wants to buy goods in US dollars from a US company on Friday and a few hours to the transaction, the value of the local currency decreases so that it now takes more if it to buy the agreed sum of US dollars that the company would have paid for the goods, this situation constitutes a currency risk.
This is the time that is used by brokers to mark the end of one trading day and the beginning of another trading day. It is usually used in the Forex market purely for administrative purposes and for rollover calculation since Forex is technically speaking, a 24 hour market. The daily cut off time is 2100hrs GMT (Daylight Savings Time On) or 2200hrs GMT (Daylight Savings Time Off).
Daily Trading Limit
This is the maximum price movement on an asset or security in a positive or negative direction. Some stock exchanges have daily trading limits imposed by the regulatory authorities in order to control the level of volatility which can sometimes get out of control if there is a major systemic shock that impacts the markets.
Dark Cloud Cover
This is a double-candlestick bearish pattern where the first candle is a bullish candlestick, followed by a bearish candlestick whose high is higher than that of the first candlestick, and which closes below the midpoint of the body of the first candlestick. This candlestick pattern shows that sellers immediately came into the market to shut down the activity of the buyers. It is a highly reliable pattern.
A buy or sell order that will expire automatically at the end of the trading day on which it is entered. On some Forex trading platforms, the day order is also known as a Good for Day (GFD) order. A trader uses a day order when he wants a particular trade he is interested in taking to be executed within the same trading day if the conditions set for the execution of that trade are met. In setting a day order, the trader does not expect the trade order to be viable after that trading day, and so instead of having to manually close the order himself, he can use a day order to get that trade automatically cancelled once the day is over.
A trade opened and closed on the same trading day. A day trade may be done in a matter of minutes (e.g. following a news trade spike), or can be done within a matter of hours. Trades opened and closed in a matter of minutes are also referred to as scalps. Since a day trade is usually done within the same trading day, it would require that the price of the currency pair changes appreciably, and the trade volumes used in executing such trades would be higher than would ordinarily be expected for traders who open trades for the long haul, in order to benefit maximally from these movements. Day trades typical feature movements of between 10 pips to 100 pips.
A trader who buys and sells on the basis of small short-term price movements. Typically, the Forex market is a highly volatile market and this allows the currency pairs to experience reasonable price movements within the same trading day. These periods of price volatility allows traders to open and close trades within a few minutes or hours of each other, and traders who conduct this kind of trading activity are known as day traders. Day traders are also found in the stock markets, but on a much lesser scale.
Refers to a style or type of trading where trade positions are opened and closed during the same day. Day trading requires that the trader analyze the market using short term charts (e.g. the 1 minute, 5 minute, 15 minute and 1 hour charts), identify currency pairs that have the potential for moving between 10 and 100 pips, and then executing the trade using this pip range as the target and stop prices. A popular day trading technique is trading the price spike that follows high market impact news releases, in which the trader aims to capture market movement resulting from the price spike following the news release.
Dead Cat Bounce
This is a period of transient upside recovery after a period of a sustained downtrend, followed by a continuation of the downtrend. The dead cat bounce is completed when the resumption of the downtrend makes new lows. The dead cat bounce is more of a profit-taking recovery and not a full entry of buyers into the market, hence the short-lived nature of the bounce.
This is a detailed, documented record of all the transactions that a trader has performed on a given trading day. The deal blotter provides information about the open and closed positions for the day as well as the profits and losses for the day. It contains the information for all trades made on that day.
A document that contains all the essential details of each trade that a trader has made on a given day. It includes the details about the broker, the counterparty to the trade, transaction date and time. The data are usually serially numbered and it is from the deal slip that data of each and every trade is transferred to the deal blotter, which now carries the information about all the trades for the day in one place.
A company or individual, playing in the market at their own expense and on their behalf, that is, investing their own money, selling/buying a currency or other assets on their own. In the Forex market, the dealers are also known as market makers. Many brokers in the Forex market are dealers/market makers, taking buy and sell positions from the liquidity providers in order to ramp up liquidity and then offering these positions at set prices to retail traders. Dealers typically operate a dealing desk and do not provide an ECN environment for their clients. Dealers serve to close the liquidity gap in the Forex market when there are many smaller players who can only afford a few hundreds to thousands in the Forex market.
This is the department in a market maker brokerage firm that is responsible for the execution of trade orders in the Forex market. Dealing desks act as intermediaries between the trader and the liquidity providers, matching buyers with sellers and fulfilling sell orders with buy orders. Dealing desks can also be found in banks and finance houses.
The death cross is a technical pattern in which a short term moving average (such as the 50-day moving average) breaks below the support hitherto formed by the long term moving average (e.g. 200-day moving average), signifying a change in trend to a downtrend. The long term moving average now serves as a resistance.
A fall in the value of a currency due to market forces. This is not the same as devaluation, which is deliberate move by a central bank to lower the value of the local currency. Depreciation occurs strictly by a lower demand and larger supply of a currency. Depreciation can be caused by inflation, increased in money supply or if a country is under economic sanctions, preventing them from being able to import goods or sell their products.
The ability of a security to withstand demand for it without significant price changes. In the Forex market, depth is seen in highly liquid securities, making it possible for the spreads to be low and fairly constant.
Depth of Market
This is a measure of the size and number of the open positions on the buy and sell side for an asset at various prices. This information is a measure of market liquidity and is also the basis of the data shown in the order book, accessible to traders using Level II trading platforms. Another definition describes depth of market as the number of units of the asset that can be purchased without significantly affecting the price of the asset. In other words, a very large order has to be made before the price of the asset shifts significantly.
Deutsche Akzien Index (DAX 100)
Major German stock index. It is a blue cheap index that tracks the performance of the 30 top German companies, using pricing obtained from the Xetra electronic pricing system. This is why it is sometimes known as the Xetra DAX. The DAX’s base date is set to January 1987, and since then the movement of the index has been set to be measured once every second.
The depreciation of the national currency, or in other words, the rate decline in relation to foreign currencies and gold. For example, in Britain in September 1992 raising interest rates in the situation of stagnation in the economy were the reason for the devaluation of the pound. On September 16 the pound lost 2.7% against the Mark and by the evening was traded in New York at 2.703.
Quoting in fixed units of foreign currency against variable amounts of the domestic currency. In other words, the quote is done by stating the price of the local currency against the foreign currency. For instance, if using a direct quotation system based in the Us for the British Pound, a direct quote would be US$1 = GBP 0.6273, even though in the conventional price quoting system, the GBP is the base currency in a GBP/USD pair.
This is a quote that expresses the exchange rate in terms of how much of the domestic currency or the currency under reference can purchase one unit of another currency. So instead of the conventional quote for Euro vs US Dollar being expressed in terms of the base currency (EURUSD = 0.9860), the direct quote is expressed in terms of the counter currency to the base currency.
This is a trade order from a client to a broker with specific instruction to route the order to a particular exchange. This order is used when the trader wants to buy a stock from a particular exchange, or if for the purpose of faster reaction to the news, the trader decides to execute the order from a server located closer to the exchange serving the news.
This is a trading strategy in which the trader opens a position which is dedicated either to the upside (long) or to the downside (short). Directional traders usually form a bias for an asset at the beginning of the trading period and only trade in the direction of that asset for the time period in view.
A dirty float is a currency exchange regime setup by a government in which the national currency is allowed to float, but where the central bank can intervene at any point to send the currency in the opposite direction whenever the current direction is perceived to be injurious to the economy of that country. Another name for dirty float is a ‘managed float’.
An account in which the customer permits a trading institution to act on the customer's behalf in buying and selling currency pairs. The institution has discretion as to the choice of currency pairs, prices, and timing-subject to any limitations specified in the agreement.
This is a technical analytical indicator that expresses the difference between the most recent closing price of an asset and its current price, and expresses the value obtained as a percentage. The disparity index is used to measure momentum of the price of the asset, and detect points at which price corrections may occur, with a positive value indicating a ‘buy’ point and a negative value indicating a ‘sell’ point.
A situation where the price of the asset and the technical indicators are moving in opposite directions. It is also a situation where two indicators are moving in opposite directions. The principle behind the use of divergence in trading is that eventually, the price of the asset will correct in the direction of the indicator, giving the trader an indication of where to trade when the divergence appears.
The acquisition of a wide range of securities in order to reduce risks: the drop of rate of certain securities is covered by the growth of price of others. The history of the Kimberly Clark company is one of successful diversification. The company worked in a pulp and paper industry sector. At one point, company managers realized that it became difficult for the company to develop in this sector on the world scale. The major incentive was to find a new market, a new industry, and a new strategy. And Kimberly Clark developed Procter & Gamble company in the sector of paper consumer goods. They began to produce "Haggies" diapers, cosmetics and by now they have successfully realized their goal.
The national currency in a number of countries: the United States, Canada, Australia, New Zealand etc. One US Dollar = 100 cents. The name originated from the word "Thaler" which was the name for a black metal coin in Europe. The US Dollar is also used in countries like Zimbabwe that operate a dual legal tender system where goods and services are priced and can be paid for in the local currency as well as the US dollar.
Double Exponential Moving Average (DEMA)
This is a trend indicator developed by Patrick Mulloy that is used as a substitute to other moving average indicators because it is more sensitive and responds more quickly.
Dow Jones Averages (DJA)
The average indicator of transportation, utilities and industrial companies’ shares. It was created by Charles Dow, the founder of the Dow Jones& Company. It is calculated as the average of quotes of the day at the exchange closing time. The Dow Jones is a measure of the performance of the 30 most capitalized firms trading in the New York Stock Exchange. As an index, it is used as an indicator of stock market activity in the US and to measure the temperature of investors with regards to their sentiments regarding the performance of the US economy.
A stock volume where there are more bearish than bullish trade volumes, causing the price of the asset to close the day lower than it opened. A down volume is therefore a situation where bearish price movements are caused by low buying volumes and larger selling volumes.
Downside Tasuki Gap
This is a bearish continuation candlestick pattern which is used to signal the continuation of a per-existing downtrend. It is a triple candlestick pattern in which the first two are bearish candlesticks with a gap between them, followed by a third candlestick whose open is at the upper half of the second candlestick and whose body partially closes the gap between the Day 1 and Day 2 candles.
This is a period marked by sustained fall in prices for a trading asset or for a market. In a downtrend, each successive peak and trough that depict the price movement of the asset is lower than the previous one, and a downtrend occurs when the market for that asset is dominated by sellers.
EA (Expert Advisor)
An expert advisor or Forex robot is a software whose algorithm is based on a trading strategy, and which is programmed to open and close trades in the market automatically based on the trading strategy it has been programmed to work on.
An ECN broker is a broker that provides straight through processing for pricing and order executions to its clients without the intervention of a dealing desk. ECN brokers obtain pricing straight from the liquidity providers and offer the pricing to traders without interference or mark-up. ECN brokers therefore offer the most transparent pricing model in the market.
The risk that a company’’s finances is exposed to as a result of fluctuations in interest rates and exchange rates, especially when a component of the company’s operations has to deal with foreign exchange transactions or cross-border transactions. Usually, such a company that has economic exposure is one that has to regularly exchange the local currency for a foreign one, or borrow money from external financing institutions. In each case, there is a risk of economic exposure because of the floating nature of interest rates and exchange rates, so the entity stands to lose money by simple exchanges of money if the local currency weakens against the foreign one.
The balance of funds on the trade account. It is calculated using the following formula: balance + floating profit – floating loss.In other words, the equity in an account is calculated by adding the unused balance in the account to the difference between any floating profits made and floating losses in active trades.
The national currency of EU countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Slovenia, the Netherlands, Portugal and Spain. It was first introduced on January 1st 1999, and effectively replaced the old national currencies of these countries in 2002. It also replaced the ECU in 1998 in a parity exchange regime. The Euro is one of the most actively traded currencies in the Forex market, and its pairing with the US Dollar is the most actively traded in the market.
European Currency Unit (ECU)
A currency unit that has been in use by European Monetary System from 1979 till 1998. The ECU was the precursor of the Euro. The ECU was actually a basket of currencies from the European Union member states, and was replaced by the Euro at a value equivalent to parity. The constituent currencies in the basket were the Belgian Franc, Deutschmark, Danish Krone, Greek Drachma, Irish Pound, Spanish Peso, French Franc, British Pound, Portuguese Escudo, Dutch Guilder, Italian Lira and Luxembourgian Franc.
European Monetary System (EMS)
EU countries relation in currency sphere, which has a goal to provide a stable national currencies rates ratio. Another goal is the facilitation of stabilization of foreign economic relations in general.
This is the broker that is responsible for the assessment of validity of a trader’s order and the final processing and execution of that order. Sometimes trades have to be routed through major brokerages in order to get matching orders that will fulfill execution for clients. At this stage, the trades must be vetted to ensure compliance with the rules before matching counter-orders are used to provide execution.
This is the difference in price between the close of a candlestick and the open of another candlestick, where the open of the second candlestick gaps downwards after prices have been rising for some time. An exhaustion gap usually results from buyers’ fatigue and a drop off in the volume of demand for the asset, leading to a sharp retreat of prices that manifests as a gap following the weekend.
An exotic currency is one that is thinly traded and as such, has little liquidity and very wide spreads. Examples are the Swedish Krona (SEK), Norwegian Krone (NOK), Turkish Lira. On the forex platforms, the pairings of these currencies usually have very wide spreads. E.g. the EURSEK has spreads of up to 50 pips on some platforms. As a consequence, they also have wide intraday ranges. Examples of exotic currency pairings include EURSEK, EURNOK, USDZAR etc.
A fakeout is a situation where a trader takes a position in the market on the basis of analysis done with technical indicators, but the outcome of the trade is different because the asset so analyzed takes a different course from the technical analysis done on it. Fakeouts occur commonly when a trader uses a single indicator for conducting technical analysis.
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. It is also possible for slippages to occur in such markets as it is difficult to effectively find buyers and sellers at key stop and limit levels due to prices moving too rapidly.
Federal Deposit Insurance Corporation (FDIC)
The regulatory agency responsible for administering bank depository insurance in the United States. The job of the FDIC is to provide insurance for customers’ deposits in commercial banks so that in the event of liquidation or bankruptcy of an affected bank, customers’ deposits will be safe. This function is carried out along with the central banks or any such agencies that are classified as lenders of last resort.
Federal Reserve System (FED)
Also known as the Federal Reserve, the Fed is an independent financial institution, which serves as the US central bank. It was founded on December 23, 1913. The Fed structure is made up of a Governor with a Board of Governors (Fed Reserve Board), 12 Federal Reserve Banks and a Federal Open Market Committee (FOMC) which handles the monetary policy function. In addition to monetary policy, the Fed controls money supply in the US and functions as a lender of last resort to the US banking system.
The process of completing a customer's order to buy or sell a currency pair. In an ECN environment, the trader’s fill is usually at the price that he has ordered at from a liquidity provider. In a dealing desk environment, the trader’s fill may not necessarily be at the price at which he ordered, especially in a situation of market volatility.
The price at which a buy or sell order was executed. A fill price may not necessarily be the trader’s order price, and where the fill price differs from the order price so that the trader incurs more spread cost, this is known as slippage. In an ECN environment, the trader’s order prices are equivalent to the fill prices.
The risk that a firm will be unable to meet its financial obligations. This has many applications in business. Financial risk can describe a situation where a company is unable to pay dividends to shareholders as a result of debt or inadequate cash flow. It can also mean a situation where a bond issuer defaults on its bond obligations, or the inability of an illiquid Forex broker to settle withdrawal claims of its clients.
Five Digit Pricing
A system where currency pairs are priced with 5 decimal places instead of the conventional four. E.g. quote for EURUSD with five digit pricing would be expressed as 1.31092. This is a more exact pricing model for the forex market and is commonly used by ECN brokers.
This is a situation where the difference between the bid and ask prices is always the same, irrespective of market demand or volatility. Fixed spreads are a feature of dealing desk trading in the forex market.
The Flat is a term that has three meanings. In Forex, it indicates a state of being neither in a long position or short position, or in other words, describing a trading book with no market exposure. It can also mean a bond that has no interest accruing to it, or a state where the price is neither rising nor falling (flat market).
Floating Profit and Loss
Unrecorded gains/losses on the open positions of a certain tool at current rates values. Another name for floating profit or loss is unrealized profit or loss. When a position is open, whatever profit or loss is shown on the active trade is known as the floating profit or loss. In so far as the positions are open, whatever profit or loss shown on the platform represents the floating profit/loss.
Federal Open Market Committee, the committee that sets money supply targets in the US which tend to be implemented through Fed Fund interest rates etc. The FOMC handles the monetary policy function of the Fed and is made up of the Governor, the Chairmen of the 12 Reserve banks and the seven members of the Board of Governors. Only 5 of the 12 Reserve Bank Presidents have voting rights when deciding on issues like setting the interest rates in the US.
The purchase or sale of a currency against sale or purchase of another. This is also used to describe the market in which currencies re bought and sold against each other with the aim of profiting from the change in the exchange rates between one currency and another. In everyday street parlance, it's used to connote foreign currency.
Foreign Exchange Risk
The risk that the exchange rate on a foreign currency will move against the position held by an investor such that the value of the investment is reduced. It can also be used to describe a situation which arises when a change in exchange rates causes an entity to incur more cost on a transaction.
Forex Broker (Brokerage Firms)
The brokerage firm, such as Forex4you, provides the link in the seller-customer chain. It is the ‘sauce’ which holds together a ‘hamburger’ if you like. A broker takes an order from a customer and gives it to a salesperson. A broker is always between those two people, like a sauce. Because of brokers, buyers and sellers need never meet face-to-face. In simple words, brokers are mediators or agents. Their job is not just to meet seller and buyer but to take care of all the documents and the time and space limitations of a deal. Usually brokerage firms receive a fee for their services. This usually consists of their own exchange rate that they provide to their customers, which can be higher or lower than the wholesale rate at which they are able to get in the market.
A transaction that settles at a future date. It is described as a non-standard transaction between a buyer and seller to settle a financial transaction at a future date, at a price that is agreed on at the present time. Forward contracts are especially used in the physical commodities markets to guarantee a price for commodities exchanged as a way of hedging against risks to both parties. For the commodity owner (seller), a forward contract helps to hedge against fall in prices as a result of a glut in the market, and for a commodity buyer, a forward contract helps to hedge against rise in price as a result of famine, war or other situations that will produce a shortfall in supply.
The number of basis points that are added to or subtracted from the spot rate to calculate the forward rates for a forward foreign exchange transaction. In other words, this is the spot rate difference between the spot price and the forward price for a currency transaction. These points are based on the differential between the interest rates of the two currency pairs. For example, if the 3-year forward rate of the GBP/USD is 1.6109 and the spot price of the GBP/USD is 1.5950, the forward points is 1.6109 – 1.5950 which is 0.0059 or 59 basis points.
Forward Rates or Forward Price
The net price resulting from calculating the forward points and subtracting them from the existing spot rate. This is the rate at which a currency can be purchased or sold for delivery in the future. When a buyer and seller enter into a forward contract, they agree on a price that will be paid in future on delivery of the product/asset. The price at which both parties agree to conduct the settlement, even though decided at a present time for a future date, is called a forward price.
Four Digit Pricing
A system of setting prices of currency pairs with 4 decimal places. E.g. quote for EURUSD with four digit pricing would be expressed as 1.3109. This pricing system is mostly used by market makers.
A price range where quotes haven’t occurred. A gap usually occurs as a result of after-hours trading, which pushes the price of an asset to some distance away from the original market close, thereby creating an area where no price quotes occur. Gaps occur when there is plenty of volatility, and when some market moving news such as an earnings report has been released to the market after trading hours.
Good Till Cancelled Order (GTC)
A buy or sell order which remains open until it is filled or cancelled. A good till cancelled order is used by a trader when he/she feels that the conditions under which the asset is trading is one where an order which is filled will bring favorable returns for the trader, irrespective of how long it takes.
Gross domestic product (GDP)
The combined value of all finished goods and services produced in a country by its residents as well as non-residents. The GDP per capita is an internationally recognized tool of measuring the living standards of its inhabitants.
Gross National Product (GNP)
The combined value of all goods and services produced by the factors of production provided by the residents of a country inside or outside of it during a period of 1 year. GNP emphasizes production based on ownership, and does not include any money made by non-residents of a country throughout the duration of their stay in that country. The GNP is another indicator used in measuring the living standards of inhabitants of a country, since the definition also includes the income earned by the citizens and residents of that country.