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.
A financial professional who has expertise in evaluating investments and puts together buy, sell and hold recommendations for clients.
A currency is said to ‘appreciate’ when it strengthens in price in response to market demand.
The simultaneous purchase or sale of a financial product in order to take advantage of small price differentials between markets.
Asian central banks
Refers to the central banks or monetary authorities of Asian countries. These institutions have been increasingly active in major currencies as they manage growing pools of foreign currency reserves arising from trade surpluses. Their market interest can be substantial and influence currency direction in the short-term.
23:00 – 08:00 (Tokyo).
Ask (offer) price
The price at which the market is prepared to sell a product. Prices are quoted two-way as Bid/Ask. The Ask price is also known as the Offer.
In FX trading, the Ask represents the price at which a trader can buy the base currency, shown to the right in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the Ask price is 1.4532, meaning you can buy one US dollar for 1.4532 Swiss francs.
In CFD trading, the Ask also represents the price at which a trader can buy the product. For example, in the quote for UK OIL 111.13/111.16, the product quoted is UK OIL and the Ask price is £111.16 for one unit of the underlying market.*
A name for the Australian Securities Exchange (ASX 200) which is an index of the top 200 companies (by market capitalization) listed on the Australian stock exchange.
An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or better
An order to deal for a specific price or better.
Also, “Oz” or “Ozzie”; refers to the AUD/USD pair.
Balance of trade
The value of a country’s exports minus its imports.
A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line to the right of the bar.
A certain price of great importance included in the structure of a Barrier Option. If a Barrier Level price is reached, the terms of a specific Barrier Option call for a series of events to occur.
Any number of different option structures (such as knock-in, knock-out, no touch, double-no-touch-DNT) that attaches great importance 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 in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.6215 then one USD is worth CHF 1.6215. In the forex markets, the US Dollar is normally considered the ‘base’ currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.
The lending rate of the central bank of a given country.
A 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.
A unit of measurement used to describe the minimum change in the price of a product.
Bearish / Bear market
Negative for price direction; favoring a declining market. For example, “We are bearish EUR/USD” means that we think the Euro will weaken against the dollar.
Traders who expect prices to decline and may be holding short positions.
The price at which the market is prepared to buy a product. Prices are quoted two-way as Bid/Ask.
In FX trading, the Bid represents the price at which a trader can sell the base currency, shown to the left in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the Bid price is 1.4527, meaning you can sell one US Dollar for 1.4527 Swiss francs.
In CFD trading, the Bid also represents the price at which a trader can sell the product. For example, in the quote for UK OIL 111.13/111.16, the Bid price is £111.13 for one unit of the underlying market.*
The difference between the Bid and the Ask (Offer) price.
Refers to the first 3 digits of a currency quote, such as 117 USD/JPY or 1.26 in EUR/USD. If the price moves by 1.5 big figures, it has moved 150 pips.
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.
The term used for systematic, model-based or technical traders.
The upside equivalent of capitulation. When shorts throw in the towel and cover any remaining short positions.
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.
In a professional trading environment, a ‘book’ is the summary of a trader’s or desk’s total positions.
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 intermediary, bringing buyers and sellers together for a fee or commission. In contrast, a ‘dealer’ commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
Market slang for 1 million units of a dollar-based currency pair or for the US dollar in general.
Bullish / Bull market
Favoring a strengthening market and rising prices. For example, “We are bullish EUR/USD” means that we think the Euro will strengthen against the dollar.
Traders who expect prices to rise and who may be holding long positions.
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 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.
A currency trade which exploits the interest rate difference between two countries. By selling a currency with a low rate of interest and buying a currency with a high rate of interest, the trader will receive the interest difference between the two countries while this trade is open.
Canadian Ivey Purchasing Managers (CIPM) index
A monthly gauge of Canadian business sentiment issued by the Richard Ivey Business School.
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 a currency that pays a relatively high interest rate and short another currency 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’.
The market in the actual underlying markets on which a derivatives contract is based.
The price of a product for instant delivery; i.e. the price of a product at that moment in time.
Abbreviation referring to central banks.
A government or quasi-governmental organization that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.
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.
An individual, also known as a technical trader, who uses charts and graphs and interprets historical data to find trends and predict future movements.
Short-lived price moves with limited follow-through that are not conducive to aggressive trading.
Funds that are freely available, sent in to settle a trade.
The process of settling a trade.
Exposure to a financial contract, such as currency, that no longer exists. A position is closed by placing an equal and opposite deal to offset the open position. Once closed, a position is ‘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.
A fee that is charged for buying or selling a product.
Currencies from economies whose exports are heavily based in natural resources, often specifically referring to Canada, New Zealand, Australia and Russia.
The dollar pairs that make up the crosses (i.e. EUR/USD + USD/JPY are the components of EUR/JPY). Selling the cross through the components refers to selling the dollar pairs in alternating fashion to create a cross position.
Symbol for NASDAQ Composite Index.
A document exchanged by counterparts to a transaction that states the terms of said transaction.
A period of range-bound activity after an extended price move.
Measures the amount of spending towards new construction, released monthly by the U.S. Department of Commerce’s Census Bureau.
The tendency of an economic crisis to spread from one market to another.
The standard unit of forex trading.
A confirmation sent that outlines the exact details of the trade.
The notional number of shares one CFD represents.
A position which has a limited risk because of a Guaranteed Stop.*
Convergence of MAs
A technical observation that describes moving averages of different periods moving 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.
Refers to corporations in the market for hedging or financial management purposes. Corporates are not always as price-sensitive as speculative funds and their interest can be very long-term in nature, making corporate interest less valuable to short-term trading.
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.
A measure of inflation – short for Consumer Price Index.
The market is ready to sell-off hard.
Cross (e.g. Yen cross)
A pair of currencies that does not include the US Dollar.
Refers to CAD (Canadian Dollar), Aussie (Australian Dollar), Sterling (British Pound) and Kiwi (New Zealand Dollar) – countries off the Commonwealth.
Refers to commodity trading advisors, speculative traders whose activity can resemble that of short-term hedge funds; frequently refers to the Chicago-based or futures-oriented traders.
Any form of money issued by a government or central bank and used as legal tender and a basis for trade.
The two currencies that make up a foreign exchange rate, for example EUR/USD.
The probability of an adverse change in exchange rates.
A three-letter symbol that represents a specific currency, for example USD (US Dollar).
The sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid). The balance of trade is typically the key component to the current account.
Speculators who take positions in commodities and then liquidate those positions prior to the close of the same trading day.
Making an open and close trade in the same product in one day.
A term that denotes a trade done at the current market price. It is a live trade as opposed to an order.
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 and the change in price of its underlying market.
Department of Communities and Local Government (DCLG) UK house prices
A monthly survey produced by the DCLG that uses a very large sample of all completed house sales to measure the price trends in the UK real estate 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 pegged currency is allowed to weaken or depreciate based on official actions; the opposite of a revaluation.
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.
Symbol for US Dollar Index.