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ASK RATE
The rate at which a
financial instrument is offered for sale (as in bid/ask spread).
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BAR CHART
A type of chart consisting of four
significant points: the high (1) and the low (2) prices, which form the vertical
bar; the opening (3) price, which is marked with a little horizontal line to the
left of the bar; and the closing (4) price, which is marked with a little
horizontal line to the right of the bar.
BEAR
A person who thinks that
market prices will decline.
BEAR MARKET
A market that is
characterized by declining prices.
BID RATE
An expression
indicating the desire to buy at a certain price.
BROKER
An agent who handles
investors orders to buy and sell financial instruments against a commission.
BULL
A person who thinks
that market prices will rise.
BULL MARKET
A market that is
characterized by rising market prices.
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CABLE
A slang used among
traders to indicate GBP/$ exchange rate.
CALL RATE
Overnight inter-bank
interest rate.
CANDLESTICK CHART
A type of chart that
consists of four major prices: high, low, open and close. The body of the
candlestick bar is formed by the opening and closing prices. To indicate that
the opening is higher than closing, the body of the bar is left blank. If theĀ
instrument closes below its opening, the body is filled.
CFD (Contract for Difference)
An agreement between
two parties to exchange, at the close of the contract, the difference between
the opening price and the closing price of the contract, multiplied by the
number of (shares) specified in the contract.
CLOSING PRICE
The last price of a
contract at the end of a trading session.
COMMODITY
Any commodity approved
and designated by the Board for trading in the Exchange hall under the rules of
the Exchange.
CONTRACT
An agreement to buy or
sell a specified amount of a particular commodity as specified by the Exchange.
The contract specifications detail the amount and grade of the product and the
date on which the contract will mature and become deliverable if it is not
liquidated earlier. Also, a term of reference describing a unit of trade for a
commodity futures. Unit of trading for a financial or commodity future. Also,
actual bilateral agreement between the parties (buyer and seller) of a futures
or options on futures transaction as defined by an exchange.
CONTRACT MONTH
Typically identifies
the month and year in which a futures contract expires. Also called the delivery
month.
CONVERTIBLE CURRENCY
A currency that can be
freely exchanged for another or for gold without special authorization from the
appropriate authority.
COMMISION
A transaction fee
charged by a broker.
CONFIRMATION
A document exchanged by
counterparts to a transaction that states the terms of the transaction.
CONTRACT
The standard unit of
trading.
CORRECTIONS
Counter-trend price
movements that are largely the result of profit-taking. These are technical
moves that must occur, and their correction distance can often be measured prior
to occurrence by Fibonacci correction ratios.
COUNTER-PARTY
A party or bank with
whom a deal is made.
CREDIT CHECKING
Credit is an important
consideration when making trades. As large sums of money change hands it is
important to check that the counter-party is capable of making the trade. Once
the price has been agreed then the credit is checked. If the credit is not good
then no trade takes place.
CROSS-RATE
An exchange rate
between two currencies. It is usually made up from the individual exchange rates
of the two currencies, measured against the US$.
CURRENCY
Any form of money
issued by a government or central bank and used as legal tender as a basis for
trade.
CYCLES
Variation where a point
of observation returns to its origin. Certain price movement patterns are
believed and observed to have recurrence according to Fibonacci sequential
numbers, and thus can be predicted accordingly. It is most often used to provide
an estimate of timing of a suspected turn of market movements, or a trend
reversal.
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DAY TRADING
It is a term that
refers to opening and closing the same position/positions within one day`s
trading.
DEALER
An individual who 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.
DERIVATIVES
Derivatives are trades
that are derived from some other existing products, such as shares, bonds,
currencies and commodities. Derivatives can be traded through an exchange or out
of Exchange (Over The Counter or OTC). OTC derivatives carry more credit risk as
they are traded direct with the counter-party rather than through an Exchange.
Examples of derivative instruments include Options, Interest Rate Swaps, Caps,
and floors.
DIVERGANCE
When two or more
indicators fail to pattern after price trends, they are often observed to be an
omen of major market corrections or trend reversals. It shows up nearly without
a fail on all formations of double-tops/bottoms, much more so in case of
triple-tops/bottoms.
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EURO
The currency of the
European Monetary Union (EMU). A replacement for the European Currency Unit
(ECU).
EURODOLLARS
US dollars on deposit
with a bank outside the United States, even if this bank is a subsidiary of a
U.S. bank. Consequently this deposit is outside the jurisdiction of the United
States.
EUROPEAN CENTRAL BANK (ECB)
The Central Bank for
the new European Monetary Union.
EXPIRATION DATE
The last day of trading
for a futures contract.
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FEDERAL RESERVE
(Fed)
The Central Bank for
the United States.
FILL OR KILL
A client order that is
a price limit order that must be filled immediately or cancelled.
FLAT/SQUARE
To be flat or square is
to be neither long nor short, or to have no positions, or if all the positions
held cancel each other out.
FLOATING INTEREST RATE
An interest rate that
fluctuates as market rates move.
FOREIGN EXCHANGE MARKET (Fx/Forex)
The buying and selling
of foreign currency. Most FX is quoted against US$. If other currencies are
traded (e.g. CHF) then it is known as a cross rate.
FOREX (see Foreign Exchange Market)
An abbreviation of
Foreign Exchange Market.
FORWARD
A deal that will
commence at an agreed date in the future i.e. a 3 month GBP/$ will commence 3
months from the deal date.
FRONT AND BACK OFFICE
The `front office`
usually means the trading room, while the `back office` is where settlement of
trades takes place.
FUNDAMENTAL ANALYSIS
A cause-and-effect
study of market behavior based on factors of news, events, economy and politics.
FUTURES
Futures is a way of
trading financial instruments, currencies or commodities for forward value dates
or delivery.
FUTURES CONTRACT
A futures contract is a
legally binding standardized agreement made to buy or sell a commodity or
financial instrument sometime in the future.
Fx (see Foreign Exchange Market)
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GTC (Good Till
Cancelled)
An order left with a
Dealer to buy or sell at a fixed price. The order remains standing until it is
cancelled by the client.
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HEDGING
The practice of
undertaking an investment activity in order to protect against loss in another.
An example of this is selling short to nullify a previous purchase, or buying
long to offset a previous short sale.
HIGH/LOW
High/Low is the highest
traded price and the lowest traded price for an underlying instrument for a
current trading day.
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INDICATED AND FIRM
PRICES
An "indicated price "
is one that is not a "firm price". An "indicated price" is for information
purposes and would need to be `firmed up` in order to transact a deal.
INITIAL MARGIN
It is the deposit
required before a client can transact any deal.
INSTRUMENT
Contract to be traded.
INTEREST RATE SWAPS (IRS)
It is a transaction
whereby two counter-parties exchange fixed and floating interest with each
other. This transaction can be regarded as two parallel loans, one fixed and one
floating. The floating is set against LIBOR, and the difference between the two
rates is paid in the appropriate direction on each rollover. In a single
currency Interest Rate Swaps, no principal changes hands, only Interest.
INTRODUCING BROKER (IB)
A person or
organization that solicits or accepts orders to buy or sell futures contracts or
forex but does not accept money or other assets from the customers to support
such orders.
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LEVERAGE
The ability to control
large amounts of currency/commodity with a comparatively small amount of
capital.
LIBOR
LIBOR stands for London
Inter-Bank Offer Rate. It is a reference point used in IRS transactions for
setting the floating side of derivative deals. It is used as the reference point
for most trades around the globe.
LIMIT ORDER
It is an order given to
sell at an agreed price sometime in the future.
LIQUID/ILLIQUID MARKET
A Liquid Market is a
situation when a "close" spread is obtained between the bid and the offer price.
It can also mean that the number of institutions trading in the market is high.
An Illiquid Market is the opposite of a liquid market.
LIQUIDATION
The closing of an
existing position through the execution of an offsetting transaction.
LONG (Long Position/Going Long)
It is a market position
where the client has bought a financial instrument he previously did not
hold/own . If a trader is "long $" that means that he owns $. It is the opposite
of "short".
LOT
The term used to
describe a designated number of contracts, e.g., a five lot purchase.
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MANAGED ACCOUNT/
DISCRETIONARY ACCOUNT
An arrangement by which
the holder of the account gives written power of attorney to a person, often his
broker, to make trading decisions.
MARGIN
Margin is the deposit
withdrawn from the client account as collateral to cover for losses if any, that
may result from trades that the client makes. It is returned to the client
account when a trade is closed.
MARGIN CALL
It is a demand for
additional funds from the client to bring the client`s margin deposits to a
required minimum level to cover for a possible adverse movement in price in the
market.
MARK TO MARKET
It is a method that
values the client`s books at the end of each working day i.e. to debit or credit
on a daily basis the clients margin account based on the close of that day`s
trading session. It protects against the possibility of contract default.
MARKET MAKER
Market Maker is a
"principal" that supplies prices to create a market by supplying an offer and a
bid price, thereby running a trading book.
MARKET RISK
Exposure to changes in
market prices.
MINIMUM PRICE FLUCTUATION
The smallest increment
of price movement possible in trading a given contract, often referred to as a
tick. The minimum unit by which the price of a commodity can fluctuate.
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OFFSET
Taking a second futures
position opposite to the initial or opening position.
ONE CANCELS OTHER ORDER
Where the execution of
one order automatically cancels a previous one.
OPEN POSITION
A deal that has not
been settled by being reversed by an opposite deal.
ORDER
An order is an
instruction to make a trade.
OVER-THE-COUNTER MARKET (OTC)
A market where
financial products such as foreign currencies, stocks and other items are bought
and sold outside an exchange market, by telephone and other means of
communication.
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PIP or POINTS
Depending on context,
normally one basis point. ie 0.0001
POSITION
A position is a market
commitment expressed by buying or selling.
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QUOTE
An indicative market
price, normally used for information purposes only.
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RATE
The price of one
currency in terms of another, typically used for dealing purposes.
RESISTANCE (Resistance Level)
A price level at which
you expect selling to take place.
RISK
Exposure to uncertain
change, most often used with a negative connotation of adverse change.
ROLL OVER
It is a situation where
a deal is rolled forward to another value date based on the differential of the
interest rates of two currencies involved .
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SETTLEMENT
The process by which a
trade is entered into the books and records of the counterparts to a
transaction. The settlement of currency trades may or may not involve the actual
physical exchange of one currency for another.
SHORT
It is a market position
where a client sells a currency that he does not already own. If a trader is
`short $` then he sold at a certain price level expecting to buy later when the
price level declines.
SPECULATOR
A market participant
who tries to profit from buying and selling futures contracts by anticipating
future price movements.
SPOT
It usually refers to a
cash market price for a financial instrument/commodity.
SPREAD
The difference in
prices between bid and offer rates.
STERLING
Slang for British
Pound.
STOCK INDEX
An indicator used to
measure and report value changes in a selected group of stocks.
STOCK MARKET
A market in which
shares of stock are brought and sold.
STOP ORDER / STOP LOSS ORDER
It is an order to sell
or buy when the market reaches a particular price.
SUPPORT or SUPPORT LEVEL
The bottoms
representing the price level where selling decreases and buying increases.
Downward price movements are expected to slow down when coming close to support
levels. A strong support can turn the market tide into either upside correction
or upward trend reversal.
SWAPS
Swaps are used to
exchange one currency for another and then back again for a fixed period of
time. The swap rate calculation indicates the interest rate differential between
two underlying currencies.
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TECHNICAL ANALYSIS
Analysis based on
movements in a market through chart study, moving averages, volume and other
technical indicators.
TICK
The smallest allowable
increment of price movement allowed for a product during a trading session.
TREND
The general direction
of a moving market, as shown by acceding to descending peaks and bottoms of
price movements.
TICKER
A ticker is a table and
or a graph or both, showing a trade by trade history of a said instrument. A
ticker shows direction of a market movement. There are tickers for day trading
showing a days movements and historic tickers showing long term movements.
Traders like to use graphs as they show direction of market movement in an easy
to understand format.
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VOLUME
The number of contracts
made during a specified period of time.
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YARD
Slang for a billion.
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