Glossary – Trading

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There are 50 names in this directory beginning with the letter C.
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.

Candlestick chart
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.

Carry trade
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’.

Cash market
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”.

Cash price
The price of a product for instant delivery; i.e. the price of a product at that very moment.

Abbreviation referring to central banks.

Central bank
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.

Cleared funds
Funds that are available to withdraw or used in financial transactions.

The process of settling a trade.

Closed position
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.

Closing price
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.

Commodity currencies
Currencies from economies whose exports are heavily based in natural resources, often referring to Canada, New Zealand, Australia and Russia.

Commodity Pairs
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.

Competitive Devaluation
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.

Contract note
A confirmation containing the exact details of a deal.

Contract size
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.

Corporate action
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.

Correspondent Bank
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.

Counter currency
The second listed currency in a currency pair.

One of the participants in a financial transaction.

Country risk
Risk associated with a cross-border transaction, including but not limited to legal and political conditions.

Coupon Value
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.

Credit Risk
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.

Crown currencies
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.

Currency Arbitrage
A forex strategy in which a currency trader takes advantage of different spreads offered by brokers for a particular currency pair by making trades.

Currency pair
The two currencies that make up a foreign exchange rate, for example EUR/USD.

Currency risk
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.

Current account
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.

Current Balance
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.
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