The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (interest arbitrage) deals, over the period of each deal.
Official action normally occasioned by a change either in the internal economic policies to correct a payment imbalance or in the official currency rate.
Traders and/or price action are acting with conviction.
An Option that can be exercised any time prior to and including its maturity date. American Options are the majority of the traded options. European Options can only be exercised at maturity.
A person who is expert in studying financial data and recommends actions for the clients.
Used to describe a currency which increases its value in response to market demand as opposed to official adjustment.
The practice of taking advantage the price difference on purchase or sale of a financial product with goal of profiting from pricing inconsistencies.
The Asian session covers the hours 23:00-8:00 and is centered in Tokyo.
Ask (offer) price
The lowest price for a specific currency offered by a seller. The Ask price is also known as the Offer and prices are quoted in Bid/Ask. For example in the quote USD/EUR 1.7190/95, the Ask price is 1.7195 which means that you can buy 1 USD for 1.7195 EURO. USD is the base currency.
Any tradable item such as stocks,currencies,indixes and commodities.
Instructions to buy or sell at the best rate available in the market.
At or better
Instructions to make an order to deal for a specific given price or above.
Automated Forex Trading
A method of trading foreign currencies buy or sell orders automatically based on a set of criteria and analyses.Criteria in Autotrading can differ greatly.
A method of trades executed without input them manually. Automatic trades are done quickly, in real time and traders are able to trade anytime during the day or night.
Involved in administrative functions that supports the company such as payments.
Back to Back
(1) Transaction where all the obligations and liabilities in one transaction are mirrored in a second transaction. (2) Transaction where a loan is made in one currency in one country against a loan in another country in another currency.
Balance of Payments
An accounting record of all the transactions between a country’s imports and exports and the rest of the world for a specific period of time.
Balance of trade
The difference in value between the exports and the imports of a country over a certain period of time. Positive Balance of trade is known as Surplus while negative Balance of trade is known as Deficit.
The rate of interest which a central bank charges on lendings to its domestic commercial banks.
A popular chart used to display the opening and closing price as well as to indicate the highest and lowest price of a security traded during the day.
A certain price of great importance included in the structure of a Barrier Option. If a Barrier Level price is reached, the terms of a specific Barrier Option call for a series of events to occur.
Any number of different option structures (such as knock-in, knock-out, no touch, double-no-touch-DNT) that is important to a specific price trading. In a no-touch barrier, a large defined payout is awarded to the buyer of the option by the seller if the strike price is not ‘touched’ before expiry. This creates an incentive for the option seller to drive prices through the strike level and creates an incentive for the option buyer to defend the strike level.
The first currency of a currency pair is called the Base. When you buy the currency pair it shows how much of the quoted currency is needed to buy one unit of the base currency. When you sell it shows how much of the quoted currency you will get for selling 1 unit of the Base currency.
The rate at which the Central Bank of a country is lending.
A method used in technical analysis – a chart pattern that shows when demand and supply of a product are almost equal. It results in a narrow trading range and the merging of support and resistance levels.
The difference between the cash price and futures price.
A unit of measurement used to describe the minimum change in the price of a product.
A group of currencies normally used to manage the exchange rate of a currency. Sometimes referred to as a unit of account.
Bearish / Bear market
A currency market in which prices are declining. For example, “We are bearish EUR/USD” means that we think the Euro will weaken against the dollar.
Traders who believe prices will move lower and may be holding short positions.
The price at which a buyer has offered to purchase the currency. Prices are quoted two-way as Bid/Ask. In FX trading, the Bid represents the price at which a trader can sell the base currency, shown to the left in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the Bid price is 1.4527, meaning you can sell one US Dollar for 1.4527 Swiss francs.
The difference between the Bid and the Ask (Offer) price.
Refers to the first 3 digits of a currency quote, such as 122 USD/JPY or 1.37 in EUR/USD. If the price moves by 1.7 big figures, it has moved 170 pips.
A trading option in which the trader chooses Call or put (up or down) on a specific asset which expires at an exact time and the payout is standard.
The Bank for International Settlements located in Basel, Switzerland, is the central bank for central banks. The BIS frequently acts as the market intermediary between national central banks and the market. The BIS has become increasingly active as central banks have increased their currency reserve management. When the BIS is reported to be buying or selling at a level, it is usually for a central bank and thus the amounts can be large. The BIS is used to avoid markets mistaking buying or selling interest for official government intervention.
A digital or virtual currency that uses peer-to-peer technology to facilitate instant payments. Bitcoin is a type of alternative currency known as a cryptocurrency, which uses cryptography for security, making it difficult to counterfeit.
The term used for systematic, model-based or technical traders.
A sharp price increase that comes after a long period of price appreciation, and is followed by a fall in the price.
Bank of Canada, the central bank of Canada.
Bank of England, the central bank of the UK.
Bank of Japan, the central bank of Japan.
A tool used by technical analysts. A band plotted two standard deviations on either side of a simple moving average, which often indicates support and resistance levels.
A name for debt which is issued for a specified period of time. Depending the terms of the Bond, the issuer owes the holder/s a debt, and is obliged to pay interest and/or repay the principal at a later date which is called the maturity date.
In a professional trading environment, a ‘book’ is the summary of a trader’s or desk’s total positions.
Break Even Point
The price of a financial instrument at which the option buyer recovers the premium, meaning that he makes neither a loss nor a gain. In the case of a call option, the breakeven point is the exercise price plus the premium.
The site of the conference which in 1944 led to the establishment of the post war foreign exchange system that remained intact until the early 1970s. The conference resulted in the formation of the IMF. The system fixed currencies in a fixed exchange rate system with 1% fluctuations of the currency to gold or the dollar.
British Retail Consortium (BRC) shop price index
A British measure of the rate of inflation at various surveyed retailers. This index only looks at price changes in goods purchased in retail outlets.
An individual or firm that acts as an agent, that arranges transactions between buyers and sellers in exchange of a fee or commission.
(1) Commission charged by a broker.
(2) The business of a broker.
The slang name for the American dollar.
Bullish / Bull market
A market in which prices are rising or expected to rise. For example, “We are bullish EUR/USD” means that we think the Euro will strengthen against the dollar.
Traders who expect prices to rise and who may be holding long positions.
Germany’s central bank.
Taking a long position on a product.
Looking to buy 20-30-pip/point pullbacks in the course of an intra-day trend.
The GBP/USD currency pair. ”Cable” earned its nickname because the rate was originally transmitted to the US via a transatlantic cable beginning in the mid 1800’s when the GBP was the currency of international trade.
The Canadian dollar, also known as Loonie or Funds.
An option that gives the holder the right but not the obligation to buy the underlying instrument at a certain time for a certain price. The seller is obliged to sell if the buyer decides so.
A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
A point at the end of an extreme trend when traders who are holding losing positions exit those positions. This usually signals that the expected reversal is just around the corner.
A trade strategy that captures the difference in the interest rates earned from being long that pays a relatively high interest rate and short that pays a lower interest rate. For example: NZD/JPY has been a famous carry trade for some time. NZD is the high yielder and JPY is the low yielder. Traders looking to take advantage of this interest rate differential would buy NZD and sell JPY, or be long NZD/JPY. When NZD/JPY begins to downtrend for an extended period of time, most likely due to a change in interest rates, the carry trade is said to be ‘unwinding’.
Is the marketplace for immediate settlement of transactions, meaning the seller and buyer exchange goods and is at a present time and not in a specified future date. It is also known as the “spot market”.
The price of a product for instant delivery; i.e. the price of a product at that very moment.
Abbreviation referring to central banks.
An institution that manages a country’s monetary policy. For example, the UK central bank is the Bank of England and the German central bank is the Bundesbank.
A Contract for Difference (or CFD) is a type of derivative that gives exposure to the change in value of an underlying asset (such as an index or equity). It allows traders to leverage their capital (by trading notional amounts far higher than the money in their account) and provides all the benefits of trading securities, without actually owning the product. In practical terms, if you buy a CFD at $10 then sell it at $11, you will receive the $1 difference. Conversely, if you went short on the trade and sold at $10 before buying back at $11, you would pay the $1 difference.
The Commodity Futures Trading Commission, the US Federal regulatory agency for futures traded on commodity markets, including financial futures.
A technical trader, who uses charts and graphs and explains historical data to find trends and predict future movements.
Funds that are available to withdraw or used in financial transactions.
The process of settling a trade.
Exposure to a financial contract, such as currency, that no longer exists. A position is closed by placing an equal and opposite deal to offset the open position. Once closed, a position is ‘squared’.
The process of stopping (closing) a live trade by executing a trade that is the exact opposite of the open trade.
The price at which a product was traded to close a position. It can also refer to the price of the last transaction in a day trading session.
An asset given to secure a loan or as a guarantee of performance.
Commodity Exchange of New York.
A fee that is charged for buying or selling a product.
Currencies from economies whose exports are heavily based in natural resources, often referring to Canada, New Zealand, Australia and Russia.
The three forex pairs which include currencies from countries that possess large amounts of commodities. The commodity pairs are: USD/CAD, USD/AUD, USD/NZD. These pairs are highly correlated to changes in commodity prices, therefore traders looking to gain exposure to commodity fluctuations often take advantage of these pairs.
When a nation tries to devaluate its currency so as to increase its international competitiveness.
The dollar pairs that make up the crosses (i.e. EUR/USD + USD/JPY are the components of EUR/JPY). Selling the cross through the components refers to selling the dollar pairs in alternating fashion to create a cross position.
Symbol for NASDAQ Composite Index.
Contract Expiration Date
The last date on which the holder of a contract may exercising it according to its terms.
A confirmation containing the exact details of a deal.
The notional number of shares one CFD represents.
Convergence of MAs
A technical observation that describes moving averages of different periods towards each other, which generally forecasts a price consolidation.
An event that changes the equity structure (and usually share price) of a stock. For example, acquisitions, dividends, mergers, splits and spinoffs are all corporate actions.
A bank that provides services on behalf of another bank. e.g. to facilitate the transfer of funds.
Cost of Living Index
An index that measures differences in the price of goods and services. It measures the changes in the cost of living over time.
The second listed currency in a currency pair.
One of the participants in a financial transaction.
Risk associated with a cross-border transaction, including but not limited to legal and political conditions.
The annual rate of interest of a bond.
Consumer Price Index. A monthly measurement of the change in the prices of a defined basket of consumer goods including food, clothing, and transport.
The risk of loss of principal or of a financial reward. A lender may suffer from a borrower’s failure to meet a contractual obligation.
A pair of currencies that do not involve the local currency. For example, CAD/JPY when trading in the US.
A trade in which a broker simply matches a buy order and a sell order without recording the orders on the exchange where the trade is taking place. This Cross trade prevents investors from taking advantage of a better price. A Cross Trade may be considered as a form of price manipulation and as such form is prohibited.
Refers to CAD (Canadian Dollar), Aussie (Australian Dollar), Sterling (British Pound) and Kiwi (New Zealand Dollar) – countries off the Commonwealth.
Refers to commodity trading advisors, speculative traders whose activity can resemble that of short-term hedge funds.
Any form of money issued by a government or central bank and used as legal tender and a basis for trade.
A forex strategy in which a currency trader takes advantage of different spreads offered by brokers for a particular currency pair by making trades.
The two currencies that make up a foreign exchange rate, for example EUR/USD.
The probability of an adverse change in exchange rates.
Currency Trading Platform
A type of trading software used to help currency traders with forex trading analysis and trade execution. Currency trading platforms provide charts and order-taking methods. As with trading platforms used for trading other securities like stocks or futures, most can differ greatly and can vary in cost.
The sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). The balance of trade is typically the key component to the current account.
A country’s savings and its investment. The current account balance is defined by the sum of the value of imports of goods and services plus net returns on investments abroad, minus the value of exports of goods and services, where all these elements are measured in the domestic currency.
An order that if not executed on the specific day is automatically canceled.
Speculators who take positions in commodities and then liquidate those positions prior to the close of the same trading day.
Making an open and close trade in the same product in one day.
A term that denotes a trade done at the current market price. It is a live trade as opposed to an order.
An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.
The difference between the buying and selling price of a contract.
Defend a level
Action taken by a trader, or group of traders, to prevent a product from trading at a certain price or price zone, usually because they hold a vested interest in doing so, such as a barrier option.
A negative balance of trade or payments.
Removing a stock’s listing on an exchange.
A trade where both sides make and take actual delivery of the product traded.
The ratio between the change in price of a product to the corresponding change in price of its underlying market.
The decrease in value of an asset over time.
A financial contract whose value is based on the value of an underlying asset. Some of the most common underlying assets for derivative contracts are indices, equities, commodities and currencies.
When a nation tries to devaluate its currency to increase its international competitiveness.
Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank.
In technical analysis, a situation where price and momentum move in opposite directions, such as prices rising while momentum is falling. Divergence is considered either positive (bullish) or negative (bearish); both kinds of divergence signal major shifts in price direction. Positive/bullish divergence occurs when the price of a security makes a new low while the momentum indicator starts to climb upward. Negative/bearish divergence happens when the price of the security makes a new high, but the indicator fails to do the same and instead moves lower. Divergences frequently occur in extended price moves and frequently resolve with the price reversing direction to follow the momentum indicator.
Divergence of MAs
A technical observation that describes moving averages of different periods moving away from each other, which generally forecasts a price trend.
The amount of a company’s earning distributed to its shareholders – usually described as a value per share.
DJIA or Dow
Abbreviation for the Dow Jones Industrial Average or US30.
Dovish refers to data or a policy view that suggests easier monetary policy or lower interest rates. The opposite of hawkish.
Price action consisting of lower-lows and lower-highs.
European Central Bank, the central bank for the countries using the Euro.
The term electronic communication network (ECN) is used to describe the type of computer software which facilitates trading of financial products. These financial products include stocks and currencies.
An economic indicator is a statistic about an economic activity. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
Electronic Fund Transfer
End of day order (EOD)
An order to buy or sell at a specified price that remains open until the end of the trading day, typically at 5pm / 17:00 New York.
The time zone of New York City, which stands for United States Eastern Standard Time/Eastern Daylight time.
A name for the Euronext 50 index.
The currency of the Eurozone.
European Monetary Union (EMU)
An umbrella name for the group of policies that aim to coordinate economic and fiscal policies across EU Member States.
07:00 – 16:00 (London).
A share bought where the buyer forgoes the right to receive the next dividend and instead it is given to the seller.
A less traded currency.
Expiry date / price
The precise date and time when an option will expire. The two most common option expiries are 10:00am ET (also referred to as 10:00 NY time or NY cut) and 3:00pm Tokyo time (also referred to as 15:00 Tokyo time or Tokyo cut). These time periods frequently see an increase in activity as option hedges unwind in the spot market.
The difference between the price of a derivative contract and the underlying cash market price. Fair value means there are no arbitrage opportunities between the two prices.
The Federal Reserve Bank, the central bank of the United States, or the FOMC (Federal Open Market Committee), the policy-setting committee of the Federal Reserve.
Figure / The figure
Refers to the price quotation of ’00’ in a price such as 00-03 (1.2600-03) and would be read as ‘figure-three.’ If someone sells at 1.2600, traders would say ‘the figure was given’ or ‘the figure was hit.
When an order has been fully executed.
Fill or kill
An order that, if it cannot be filled in its entirety, will be cancelled.
First In First Out (FIFO)
All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.
One of approximately 5 times during the FX trading day when a large amount of currency must be bought or sold to fill a commercial customer’s orders. Typically these times are associated with market volatility. The regular fixes are as follows (all times NY):
5:00am – Frankfurt
6:00am – London
10:00am – WMHCO (World Market House Company)
11:00am – WMHCO (World Market House Company) – more important
8:20am – IMM
8:15am – ECB
Flat or flat reading
Economic data readings matching the previous period’s levels that are unchanged.
Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 and then sold $500,000, thereby creating a neutral (flat) position.
Floating Exchange Rate
When the value of a currency is allowed to fluctuate according the market forces controlling the demand and supply of that particular currency.
Federal Open Market Committee, the policy-setting committee of the US Federal Reserve.
Foreign exchange (forex, fx)
The simultaneous buying of one currency and selling of another. The global market for such transactions is referred to as the “forex” or “FX” market.
The type of account a forex trader opens with a retail forex broker. Forex accounts come in many forms, but the first that is opened is often the forex demo account.
An examination of the changes in the forex market that are used by a trader to determine whether to buy or sell a currency pair at any time. Forex analysis could be technical in nature, using charting tools, or fundamental, using economic indicators and/or news-based events.
A trading strategy that is used by forex traders who attempt to make a profit on the inefficiency in the pricing of currency pairs. The strategy involves reacting quickly to opportunities, and is usually accomplished through the use of computers.
Firms that provide currency traders with access to a trading platform that allows them to buy and sell foreign currencies. A currency trading broker, also known as a retail forex broker, or forex broker, handles a very small portion of the volume of the overall foreign exchange market. Currency traders use these brokers to access the 24-hour currency market.
Forex Charting Software
An analytical, computer-based tool used to help currency traders with forex trading analysis by charting the price of various currency pairs along with various indicators. Forex charting software packages are used by many traders to determine the direction on any given currency pair.
A charting package that allows a trader to view historical currency exchange rates. Currency charts are provided within forex charting software, which usually comes free of charge when a trading account is opened with a forex broker. As with charts used for trading other securities, like stocks or futures, they are used primarily by the technical analyst, or chartist.
A transaction implemented by a forex trader to protect an existing or anticipated position from an unwanted move in exchange rates. By using a forex hedge properly, a trader who is long a foreign currency pair can be protected from downside risk, while the trader who is short a foreign currency pair can be protected against upside risk.
Forex Market Hours
The hours during which trading takes place and forex market participants are able to buy, sell, exchange and speculate on currencies. The forex market is open 24 hours a day and five days a week. Due to the fact that the market operates in multiple time zones, trading can take place at any time.
Forex Pivot Points
A set of indicators developed by floor traders in the commodities markets to determine potential turning points, also known as “pivots”. Forex pivot points are calculated to determine levels in which the sentiment of the market could change from “bullish” to “bearish.” Currency traders see pivot points as markers of support and resistance.
A trading strategy used by forex traders to buy a currency pair and then to hold it for a short period of time in an attempt to make a profit. A forex scalper looks to make a large number of trades and earn a small profit each time.
Forex Signal System
A set of analyses that a forex trader uses to determine whether to buy or sell a currency pair at any given time. Forex signal systems could be based on technical analysis charting tools or news-based events.
Forex Trading Robot
A computer program based on a set of forex trading signals that helps determine whether to buy or sell a currency pair at any one time. Forex robots are designed to remove the psychological element of trading, which can be detrimental.
An abbreviation of foreign exchange.
The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.
The pips added to or subtracted from the current exchange rate to calculate a forward price.
A name for the index of the top 40 companies (by market capitalization) listed on the French stock exchange. FRA40 is also known as CAC 40.
The activities carried out by the dealer, normal trading activities.
The name of the UK 100 Index.
A sum of money or other resources saved or made available for a specific purpose.
The assessment of all information available on a tradable product to determine its future outlook and therefore predict where the price is heading. Often non-measurable and subjective assessments, as well as quantifiable measurements, are made in fundamental analysis.
A contract to buy a commodity or security on a future date at a price that is fixed today. Unlike forward contracts, futures are generally traded on organized exchanges and are marked to market daily.
An obligation to exchange a good or instrument at a set price and specified quantity grade at a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange- Traded Contacts – ETC), versus Forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.
G7 plus Belgium, Netherlands and Sweden, a group associated with IMF discussions. Switzerland is sometimes peripherally involved.
The five leading industrial countries – US, Germany, Japan, France, UK.
Group of 7 Nations – United States, Japan, Germany, United Kingdom, France, Italy and Canada.
Group of 8 – G7 nations plus Russia.
Gap / Gapping
A quick market move in which prices skip several levels without any trades occurring. Gaps usually follow economic data or news announcements.
An index of the top 30 companies (by market capitalization) listed on the German stock exchange – another name for the DAX.
Greenwich Mean Time – The most commonly referred time zone in the forex market. GMT does not change during the year, as opposed to daylight savings/summer time.
The purchase of a stock, commodity or currency for investment or speculation – with the expectation of the price increasing.
The selling of a currency or product not owned by the seller – with the expectation of the price decreasing.
A certificate of ownership that gold investors use to purchase and sell the commodity instead of dealing with transfer and storage of the physical gold itself.
The standard unit of trading gold is one contract which is equal to 10 troy ounces.
Good ‘til date
An order type that will expire on the date you choose, should it not be filled beforehand.
Good \’til cancelled order (GTC)
An order to buy or sell at a specified price that remains open until filled or until the client cancels.
Good for day
An order that will expire at the end of the day if it is not filled.
Gross domestic product (GDP)
Total value of a country’s output, income or expenditure produced within its physical borders.
Gross national product
Gross domestic product plus income earned from investment or work abroad.
An order type that protects a trader against the market gapping. It guarantees to fill your order at the price asked.
A stop-loss order guaranteed to close your position at a level you dictate, should the market move to or beyond that point. It is guaranteed even if there’s gapping in the market.
A very short-term trading technique that aims to generate small profits while taking on very little risk per trade and repeating this multiple times in a trading session.
Refers to traders pushing to trigger known stops or technical levels in the market.
Every 100 pips in the FX market starting with 000.
A currency whose value is expected to remain stable or increase in terms of other currencies.
A position or combination of positions that reduces the risk of your primary position.
A hedging transaction is one whose main aim is to protect an asset or liability against a fluctuation in the foreign exchange rate rather than profit from the exchange rate fluctuations.
Historical Currency Exchange Rates
A collection of historical exchange rates that are used to provide traders with a historical reference to where a currency pair has traded in the past. Historical currency rates are used by many forex traders to help shed light on the direction of a given currency pair.
Hit the bid
To sell at the current market bid.
HK40 / HKHI
A name for the Hong Kong Hang Seng Index.
Very high and self sustaining inflation levels. One definition being the period while inflation exceeds 50% until it drops below that level for 12 months.
Little volume being traded in the market; a lack of liquidity often creates choppy market conditions.
International Monetary Fund, established in 1946 to provide international liquidity on a short and medium term and encourage liberalization of exchange rates. The IMF helps its members to tide over the balance of payments problems with supplying the necessary loans.
International Monetary Market, the Chicago-based currency futures market, that is part of the Chicago Mercantile Exchange.
A traditional futures contract based on major currencies against the US dollar. IMM futures are traded on the floor of the Chicago Mercantile Exchange.
8:00am – 3:00pm New York.
Abbreviation for the Dow Jones Industrial Average.
Measures the total value of output produced by manufacturers, mines and utilities. This data tends to react quickly to the expansions and contractions of the business cycle and can act as a leading indicator of employment and personal income data.
An economic condition whereby prices for consumer goods rise, eroding purchasing power.
The deposit required by the Broker before a client can trade/transact a deal to have some cushion in the event of default by the party.
Initial margin requirement
The initial deposit of collateral required to enter into a position.
The Foreign Exchange rates which large international banks quote to each other.
A fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets.
Action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
A person or corporate entity which introduces accounts to a broker in return for a fee.
Symbol for S&P 500 Index.
Industrial Production Index. A coincident indicator measuring physical output of manufacturing, mining and utilities.
A private company’s initial offer of stock to the public – short for Initial Public Offering.
Japanese economy watchers survey
Measures the mood of businesses that directly service consumers such as waiters, drivers and beauticians. Readings above 50 generally signal improvements in sentiment.
Japanese machine tool orders
Measures the total value of new orders placed with machine tool manufacturers. Machine tool orders are a measure of the demand for companies that make machines, a leading indicator of future industrial production. Strong data generally signals that manufacturing is improving and that the economy is in an expansion phase.
A name for the NEKKEI index.
Keep the powder dry
To limit your trades due to inclement trading conditions. In either choppy or extremely narrow markets, it may be better to stay on the sidelines until a clear opportunity arises.
Nickname for NZD/USD.
Option strategy that requires the underlying product to trade at a certain price before a previously bought option becomes active. Knock-ins are used to reduce premium costs of the underlying option and can trigger hedging activities once an option is activated.
Option that nullifies a previously bought option if the underlying product trades a certain level. When a knock-out level is traded, the underlying option ceases to exist and any hedging may have to be unwound.
Last dealing day
The last day you may trade a particular product.
Last dealing time
The last time you may trade a particular product.
To carry out a transaction in the market to offset a previous transaction and return to a square position.
Statistics that are considered to predict future economic activity.
A price zone or particular price that is significant technically or based on reported orders/option interest.
Also known as margin, this is the percentage or fractional increase you can trade from the amount of capital you have available. It allows traders to trade notional values far higher than the capital they have. For example, a leverage of 100:1 means you can trade a notional value 100 times greater than the capital in your trading account.
Potential loss, debt or financial obligation.
The London Inter-Bank Offered Rate. Banks use LIBOR as a base rate for international lending.
Limits / Limit order
An order that seeks to buy at lower levels than the current market or sell at higher levels than the current market. A limit order sets restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 117.00/05, then a limit order to buy USD would be at a price below the current market, e.g. 116.50.
A market which has sufficient numbers of buyers and sellers for the price to move in a smooth manner.
The closing of an existing position through the execution of an offsetting transaction.
The ability of a market to accept large transactions with minimal to no impact on price stability.
08:00 – 17:00 (London).
A position that appreciates in value if market price increases. When the base currency in the pair is bought, the position is said to be long. This position is taken with the expectation that the market will rise.
Traders who have bought a product.
Nickname for USD/CAD.
A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.
The longest-term trader who bases their trade decisions on fundamental analysis. A “macro” trade’s holding period can last anywhere from around 6 months to multiple years.
Measures the total output of the manufacturing aspect of the Industrial Production figures. This data only measures the 13 sub sectors that relate directly to manufacturing. Manufacturing makes up approximately 80% of total Industrial production.
The required collateral that an investor must deposit to hold a position.
A request from a broker or dealer for additional funds or other collateral on a position that has moved against the customer.
Process of re-evaluating all open positions in light of current market prices. These new values then determine margin requirements.
The total value of a listed company – share price multiplied by the number of shares issued.
A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial product.
An order to buy or sell at the current price.
Exposure to changes in market prices.
Market value of a forex position at any time is the amount of the domestic currency that could be purchased at the then market rate in exchange for the amount of foreign currency to be delivered under the forex Contract.
The date for settlement or expiry of a financial product.
Refers to Medley Global Advisors, a market consultancy that maintains close contacts with central bank and government officials around the world. Their reports can frequently move the currency market as they purport to have inside information from policy makers. The accuracy of the reports has fluctuated over time, but the market still pays attention to them in the short-run.
Synonymous with black box. Systems that automatically buy and sell based on technical analysis or other quantitative algorithms.
Abbreviation for month over month, which is the change in a data series relative to the prior month’s level.
A series of technical studies (e.g. RSI, MACD, Stochastics, Momentum) that assesses the rate of change in prices.
Traders who align themselves with an intra-day trend that attempts to grab 50-100 pips.
The amount of money in the economy, which can be measured in a number of ways.
An open-end investment company. Equivalent to unit trust.
A name for the NASDAQ 100 index.
The amount of currency bought or sold which has not yet been offset by opposite transactions.
New York session
8:00am – 5:00pm (New York time).
An option that pays a fixed amount to the holder if the market never touches the predetermined Barrier Level.
A financial instrument consisting of a promise to pay rather than an order to pay or a certificate of indebtedness.
Symbol for NYSE Composite Index.
The operations of a financial institution which although physically located in a country, has little connection with that country’s financial systems. In certain countries a bank is not permitted to do business in the domestic market but only with other foreign banks. This is known as an off shore banking unit.
Offer (also known as the Ask price)
The price at which the market is prepared to sell a product. Prices are quoted two-way as Bid/Offer. The Offer price is also known as the Ask. The Ask represents the price at which a trader can buy the base currency, which is shown to the right in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the ask price is 1.4532, meaning you can buy one US dollar for 1.4532 Swiss francs.
If a market is said to be trading ‘offered’, it means a pair is attracting heavy selling interest, or offers.
A trade that cancels or offsets some or all of the market risk of an open position.
Attempting to sell at the current market order price.
One cancels the other order (OCO)
A designation for two orders whereby if one part of the two orders is executed, then the other is automatically cancelled.
An option that pays a fixed amount to the holder if the market touches the predetermined Barrier Level.
An order that will be executed when a market moves to its designated price. Normally associated with Good ’til Cancelled Orders.
An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.
A derivative which gives the right, but not the obligation, to buy or sell a product at a specific price before a specified date.
An instruction to execute a trade.
A system used to show market depth of traders willing to buy and sell at prices beyond the best available.
Over the counter (OTC)
Informal market that does not involve a securities exchange. Specifically used to refer to the NASDAQ dealer market for common stocks.
A trade that remains open until the next business day.
Refers to the offer side of the market dealing.
The forex quoting convention of matching one currency against the other.
A very heavy round of selling.
A market that moves a great distance in a very short period of time, frequently moving in an accelerating fashion that resembles one half of a parabola. Parabolic moves can be either up or down.
Where only part of an order has been executed.
Waiting for certain levels, or news events to hit the market before entering a position.
Measures an individual’s total annual gross earnings from wages, business enterprises and various investments. Personal income is the key to personal spending, which accounts for 2/3 of GDP in the major economies.
The smallest unit of price for any foreign currency, pips refer to digits added to or subtracted from the fourth decimal place, i.e. 0.0001.
Exposure to changes in governmental policy which may have an adverse effect on an investor’s position.
A collection of investments owned by an entity.
The net total holdings of a given product.
Producer Price Indices. See wholesale price indices.
The amount by which the forward or futures price exceeds the spot price.
Describes quotes to which every market participant has equal access.
The difference between the cost price and the sale price, when the sale price is higher than the cost price.
The tendency of a trending market to retrace a portion of the gains before continuing in the same direction.
Purchasing managers index (PMI)
An economic indicator which indicates the performance of manufacturing companies within a country.
Purchasing managers index services (France, Germany, Eurozone, UK)
Measures the outlook of purchasing managers in the service sector. Such managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries and inventories. Readings above 50 generally indicate expansion, while readings below 50 suggest economic contraction.
A product which gives the owner the right, but not the obligation, to sell it at a specified price.
When a central bank injects money into an economy with the aim of stimulating growth.
A type of future with expiry dates every three months (once per quarter).
An indicative market price, normally used for information purposes only.
A recovery in price after a period of decline.
When a price is trading between a defined high and low, moving within these two boundaries without breaking out from them.
The price of one currency in terms of another, typically used for dealing purposes.
Reserve Bank of Australia, the central bank of Australia.
Reserve Bank of New Zealand, the central bank of New Zealand.
Traders of significant size including pension funds, asset managers, insurance companies, etc. They are viewed as indicators of major long-term market interest, as opposed to shorter-term, intraday speculators.
Realized profit / loss
The amount of money you have made or lost when a position has been closed.
A decline in business activity, often defined as two consecutive quarters with a real fall in GNP.
A price that might act as a ceiling. The opposite of support.
An individual investor who trades with money from personal wealth, rather than on behalf of an institution.
Retail Price Index
Measurement of the monthly change in the average level of prices at retail, normally of a defined group of goods.
Measures the monthly retail sales of all goods and services sold by retailers based on a sampling of different types and sizes. This data provides a look into consumer spending behavior, which is a key determinant of growth in all major economies.
When a pegged currency is allowed to strengthen or rise as a result of official actions; the opposite of a devaluation.
A form of corporate action where shareholders are given rights to purchase more stock. Normally issued by companies in an attempt to raise capital.
Exposure to uncertain change, most often used with a negative connotation of adverse change.
The employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.
A rollover is the simultaneous closing of an open position for today’s value date and the opening of the same position for the next day’s value date at a price reflecting the interest rate differential between the two currencies. In the spot forex market, trades must be settled in two business days. For example, if a trader sells 100,000 Euros on Tuesday, then the trader must deliver 100,000 Euros on Thursday, unless the position is rolled over. As a service to customers, all open forex positions at the end of the day (5:00 PM New York time) are automatically rolled over to the next settlement date. The rollover (or swap) adjustment is simply the accounting of the cost-of-carry on a day-to-day basis.
A trade that has been opened and subsequently closed by an equal and opposite deal.
Running profit / loss
An indicator of the status of your open positions; that is, unrealized money that you would gain or lose should you close all your open positions at that point in time.
Symbol for Russell 2000 Index.
Standards and Poors. A US firm engaged in assessing the financial health of borrowers.
Securities and Exchange Commission.
A group of securities that operate in a similar industry.
Taking a short position in expectation that the market is going to go down.
The process by which a trade is entered into the books, recording the counterparts to a transaction. The settlement of currency trade may or may not involve the actual physical exchange of one currency for another.
Symbol for Shanghai A Index.
An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.
A situation in which traders are heavily positioned on the short side and a market catalyst causes them to cover (buy) in a hurry, causing a sharp price increase.
After a decline, traders who earlier went short begin buying back.
Traders who have sold, or shorted, a product, or those who are bearish on the market.
Sidelines, sit on hands
Traders staying out of the markets due to directionless, choppy, unclear market conditions are said to be ‘on the sidelines’ or ‘sitting on their hands’.
Simple Moving Average (SMA)
A simple average of a pre-defined number of price bars. For example, a 50 period daily chart SMA is the average closing price of the previous 50 daily closing bars. Any time interval can be applied.
The difference between the price that was requested and the price obtained typically due to changing market conditions.
A term used when the market feels like it is ready for a quick move in any direction.
Choppy trading conditions that lack any meaningful trend and/or follow-through.
Swiss National Bank, the central bank of Switzerland.
More potential sellers than buyers, which creates an environment where rapid price falls are likely.
Refers to central banks active in the spot market.
A market whereby products are traded at their market price for immediate exchange.
The current market price. Settlement of spot transactions usually occurs within two business days.
The purchase or sale of a product for immediate delivery (as opposed to a date in the future). Spot contracts are typically settled electronically.
The difference between the bid and offer prices.
A name for the S&P index.
Purchase and sales are in balance and thus the dealer has no open position.
Nickname for GBP/USD. Also known as Pound or British Pound.
A market on which securities are traded.
The combined price of a group of stocks – expressed against a base number – to allow assessment of how the group of companies is performing relative to the past.
Stop entry order
This is an order placed to buy above the current price, or to sell below the current price. These orders are useful if you believe the market is heading in one direction and you have a target entry price.
Stop loss hunting
When a market seems to be reaching for a certain level that is believed to be heavy with stops. If stops are triggered, then the price will often jump through the level as a flood of stop-loss orders are triggered.
Stop loss order
This is an order placed to sell below the current price (to close a long position), or to buy above the current price (to close a short position). Stop loss orders are an important risk management tool. By setting stop loss orders against open positions you can limit your potential downside should the market move against you. Remember that stop orders do not guarantee your execution price – a stop order is triggered once the stop level is reached, and will be executed at the next available price.
A stop order is an order to buy or sell once a pre-defined price is reached. When the price is reached, the stop order becomes a market order and is executed at the best available price. It is important to remember that stop orders can be affected by market gaps and slippage, and will not necessarily be executed at the stop level if the market does not trade at this price. A stop order will be filled at the next available price once the stop level has been reached. Placing contingent orders may not necessarily limit your losses.
Refers to stop-loss orders building up; the accumulation of stop-loss orders to buy above the market in an upmove, or to sell below the market in a downmove.
STP stands for Straight Through Processing – and means FX traders are connected directly with liquidity providers such as banks and other financial institutions.
The defined price at which the holder of an option can buy or sell the product.
Unemployment levels inherent in an economic structure.
A price that acts as a floor for past or future price movements.
A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.
A temporary halt in the trading of a product.
A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.
Society for Worldwide Inter-bank Financial Telecommunication is a clearing system for international trading.
The nickname for USD/CHF.
Stands for “take profit.” Refers to limit orders that look to sell above the level that was bought, or buy back below the level that was sold.
Assuming control of a company by buying its stock.
The process by which charts of past price patterns are studied for clues as to the direction of future price movements.
Technicians or Techs
Traders who base their trading decisions on technical or charts analysis.
Ten (10) yr.
For example: US 10-year note – US government issued debt which is repayable in ten years.
Illiquid, slippery, or choppy market environment. A light volume market that produces erratic trading conditions.
Thirty (30) yr.
For example: UK 30-year gilt – UK government issued debt which is repayable in 30 years.
A minimum change in price, up or down.
Time to maturity
The remaining time until a contract expires.
09:00 – 18:00 (Tokyo).
Tomorrow next (Tom/Next)
Simultaneous buying and selling of a currency for delivery the following day.
Measures the difference in value between imported and exported goods and services. Nations with trade surpluses (exports greater than imports), such as Japan, tend to see their currencies appreciate, while countries with trade deficits (imports greater than exports), such as the US, tend to see their currencies weaken.
The number of units of product in a contract or lot.
A pair is acting strong and/or moving higher; bids keep entering the market and pushing prices up.
A postponement to trading that is not a suspension from trading.
A market that feels like it wants to move lower, usually associated with an offered market that will not rally despite buying attempts.
A pair is acting weak and/or moving lower, and offers to sell keep coming into the market.
The range between the highest and lowest price of a stock usually expressed with reference to a period of time. For example: 52-week trading range.
A trailing stop allows a trade to continue to gain in value when the market price moves in a favorable direction, but automatically closes the trade if the market price suddenly moves in an unfavorable direction by a specified distance. Placing contingent orders may not necessarily limit your losses.
The cost of buying or selling a financial product.
The date on which a trade occurs.
Price movement that produces a net change in value. An uptrend is identified by higher highs and higher lows. A downtrend is identified by lower highs and lower lows.
The total money value or volume of all executed transactions in a given time period.
When both a bid and offer rate is quoted for an FX transaction.
Describing unforgiving market conditions that can be violent and quick.
UK average earnings including bonus/ Excluding bonus
Measures the average wage including/excluding bonuses paid to employees. This is measured QoQ from the previous year.
UK claimant count rate
Measures the number of people claiming unemployment benefits. The claimant count figures tend to be lower than the unemployment data since not all of the unemployed are eligible for benefits.
UK HBOS house price index
Measures the relative level of UK house prices for an indication of trends in the UK real estate sector and their implication for the overall economic outlook. This index is the longest monthly data series of any UK housing index, published by the largest UK mortgage lender (Halifax Building Society/Bank of Scotland).
UK jobless claims change
Measures the change in the number of people claiming unemployment benefits over the previous month.
UK manual unit wage costs
Measures the change in total labor cost expended in the production of one unit of output.
A name for Brent Crude Oil.
UK producers price index input
Measures the rate of inflation experienced by manufacturers when purchasing materials and services. This data is closely scrutinized since it can be a leading indicator of consumer inflation.
UK producers price index output
Measures the rate of inflation experienced by manufacturers when selling goods and services.
A name for the FTSE 100 index.
The actual traded market from where the price of a product is derived.
Measures the total workforce that is unemployed and actively seeking employment, measured as a percentage of the labor force.
University of Michigan\’s consumer sentiment index
It polls 500 US households each month. The report is issued in a preliminary version mid-month and a final version at the end of the month. Questions revolve around individuals’ attitudes about the US economy. Consumer sentiment is viewed as a proxy for the strength of consumer spending.
The theoretical gain or loss on open positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains/Losses become Profits/Losses when the position is closed.
A new price quote at a price higher than the preceding quote.
In the US, a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.
A name for WTI Crude Oil.
US prime rate
The interest rate at which US banks will lend to their prime corporate customers.
A name for the Dow Jones index.
Also known as the maturity date, it is the date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward.
Funds traders must hold in their accounts to have the required margin necessary to cope with market fluctuations.
VIX or Volatility index
Shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. The VIX is a widely-used measure of market risk and is often referred to as the “investor fear gauge.”
Referring to active markets that often present trade opportunities.
Long-term call option issued by a company.
Wedge chart pattern
Chart formation that shows a narrowing price range over time, where price highs in an ascending wedge decrease incrementally, or in a descending wedge, price declines are incrementally smaller. Ascending wedges typically conclude with a downside breakout and descending wedges typically terminate with upside breakouts.
Slang for a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.
Measures the changes in prices paid by retailers for finished goods. Inflationary pressures typically show earlier than the headline retail.
Where a limit order has been requested but not yet filled.
The World Bank is an international financial institution that provides loans to developing countries for capital programs.
Stands for The Wall Street Journal.
Symbol for Silver Index.
Symbol for Gold Index.
Symbol for AMEX Composite Index.
The percentage return from an investment.
Abbreviation for year over year.
The Yuan is the base unit of currency in China. The Renminbi is the name of the currency in China, where the Yuan is the base unit.
Zero Coupon Bond
A bond that pays no interest. The bond is initially offered at a discount to its redemption value.