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TRADING TERMINOLOGY

i

Illiquid

Little volume being traded in the market; a lack of liquidity often creates choppy market conditions.

IMM

International Monetary Market, the Chicago-based currency futures market, that is part of the Chicago Mercantile Exchange.

IMM session

8:00am – 3:00pm New York.

INDU

Abbreviation for the Dow Jones Industrial Average.

Industrial production

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.

Inflation

An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Initial margin requirement

The initial deposit of collateral required to enter into a position.

IPO

A private company’s initial offer of stock to the public – short for Initial Public Offering.

Interbank rates

The Foreign Exchange rates which large international banks quote to each other.

Interest

Adjustments in cash to reflect the effect of owing or receiving the notional amount of equity of a CFD position.

Intervention

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.

Introducing broker

A person or corporate entity which introduces accounts to a broker in return for a fee.

INX

Symbol for S&P 500 Index.

ISM manufacturing index

An index that surveys service sector firms for their outlook, representing the other 80% of the US economy not covered by the ISM Manufacturing Report. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.

ISM non-manufacturing

An index that survey service sector firms for their outlook, representing the other 80% of the U.S. economy not covered by ISM Manufacturing Report. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.

j

Japanese economy watchers survey

Measures the mood of businesses that directly service consumers such 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.

JPN225

A name for the NEKKEI index.

k

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.

Kiwi

Nickname for NZD/USD.

Knock-ins

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.

Knock-outs

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.

l

Last dealing day

The last day you may trade a particular product.

Last dealing time

The last time you may trade a particular product.

Leading indicators

Statistics that are considered to predict future economic activity.

Level

A price zone or particular price that is significant technically or based on reported orders/option interest.

Leverage

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: leverage of 100:1 means you can trade a notional value 100 times greater than the capital in your trading account.*

Leveraged names

Short-term traders, referring largely to the hedge fund community.

Liability

Potential loss, debt or financial obligation.

LIBOR

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.

Liquid market

A market which has sufficient numbers of buyers and sellers for the price to move in a smooth manner.

Liquidation

The closing of an existing position through the execution of an offsetting transaction.

Liquidity

The ability of a market to accept large transaction with minimal to no impact on price stability.

London session

08:00 – 17:00 (London).

Long position

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.

Longs

Traders who have bought a product.

Loonie

Nickname for USD/CAD.

Lot

A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.

m

Macro

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.

Manufacturing production

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.

Margin

The required collateral that an investor must deposit to hold a position.

Margin call

A request from a broker or dealer for additional funds or other collateral on a position that has moved against the customer.

Market capitalization

The total value of a listed company – share price multiplied by the number of shares issued.

Market maker

A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial product.

Market order

An order to buy or sell at the current price.

Market risk

Exposure to changes in market prices.

Mark-to-market

Process of re-evaluating all open positions in light of current market prices. These new values then determine margin requirements.

Maturity

The date for settlement or expiry of a financial product.

Medley report

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.

Models

Synonymous with black box. Systems that automatically buy and sell based on technical analysis or other quantitative algorithms.

MoM

Abbreviation for month over month, which is the change in a data series relative to the prior month’s level.

Momentum

A series of technical studies (e.g. RSI, MACD, Stochastics, Momentum) that assesses the rate of change in prices.

Momentum players

Traders who align themselves with an intra-day trend that attempts to grab 50-100 pips.

n

NAS100

A name for the NASDAQ 100 index.

Net position

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).

No touch

An option that pays a fixed amount to the holder if the market never touches the predetermined Barrier Level.

NYA.X

Symbol for NYSE Composite Index.