The price at which the market sells a currency. The trader can buy the base currency at this price.
An item that has exchange value.
This is a list of all our underlying assets with definitions regarding as to what each asset is. To find out about our underlying assets, look at the asset index here.
This is one of the most popular types of financial charts. Each bar on a chart represents the open, high, low and close for that time period displayed as a bar. This type of chart is sometimes referred to an OHLC.
A market in which prices are noticeably declining.
The price at which the market buys a currency. This is the price that the trader may sell the base currency.
Bitcoin, created in early 2009, by Satoshi Nakamoto, is a form of digital currency, that you can’t hold it in your hand as you would with a traditional currency. Instead, bitcoin is created and held in digital form and relies on cryptography for security. Bitcoin is a decentralized currency, meaning it is not controlled by a single entity (like a central bank). Nobody controls it.
Bitcoin Cash is peer-to-peer electronic cash for the internet. It is fully decentralized, with no central bank and requires no trusted third parties to operate. It was created in August 2017 and is essentially a clone of the original Bitcoin blockchain but has increased block size capacity (from 1 MB to 8 MB) which improves its ability to grow and scale.
A blockchain is decentralized, digital ledger where transactions made in bitcoin or other cryptocurrencies are recorded chronologically and publicly. The block contains information that, once added to the blockchain, becomes part of the permanent and immutable database, connecting to other blocks in the blockchain like the links in a chain.
Bollinger Bands are a technical analysis tool, specifically they are a type of trading band or envelope. Trading bands and envelopes serve the same purpose, they provide relative definitions of high and low that can be used to create rigorous trading approaches, in pattern recognition, and for much more.
When the market price of an asset moves through a previously strong support or resistance area or level of interest. Typically followed by increased volatility and heavy volume.
An agent or company who executes orders to buy and sell currencies and related instruments for their clients
A market characterized by rising prices.
When the trader has chosen the upward direction for an asset price by expiry.
Type of chart used to indicate the trading range for the day and opening/closing prices. This is one of the oldest charting methods as well as a trading system. Japanese candlesticks were developed by rice traders in the 1700’s. A candlestick is drawn on a financial chart to represent the movement of an asset in a specific time period. The wicks denote the highs and the lows and the body of the candle shows the move between the open and the close. Candlesticks are colored in bullish and bearish colour codes depend if the price moved up from the open to the close or declined from the open to the close. There are over 32 distinct candlestick patterns and offer great trading insights
The Carry Trade is a trading strategy where investors/traders sell or borrow assets (such as currencies) with lower yielding interest rate] to fund or buy higher yielding assets. In the Foreign exchange, interest is debited or credit from a trader’s account everyday on open positions.
Central banks play a key role in the currency markets because of their power over monetary policy. They have a direct influence over money supply, which in turn affects demand and price of the currency. Through the use of different policies, central banks can try to manipulate the markets so that they can keep their currency at specific levels. Some countries and their central banks try to peg their currency to that of another currency or basket of currencies (for example, China to the U.S.). The central bank can participate in the Forex market by buying and selling their currency at the spot market in order to keep it from changing too much. Another motivation for central banks is to keep the local currency at a specific price in order to make their local economy more attractive for international trade.
For each asset, you can plot a chart of price movements over a specific time period. This is an important tool, allowing traders to analyze historical prices and forecast future activity. A chart is a picture of image of price movements. Patterns develop on charts which help traders understand market movement and trader psychology.
Close means the end of a trading period, In the share market it is the end of the trading day but in forex which traders 24 hours a day, can be the end of a time period (such as at trade rollover) or the end of day at midnight. Close is also what you do when you want to end your position. The process of stopping (closing) a real trade by executing a trade that is the exact opposite of the open trade.
A transaction fee charged by a broker.
Commodities are marketable good or service that are produced to meet a demand, whether that be a want or a need. Commodities are also interchangeable with others of the same type. In the financial markets commodities refer to energy, metals, agricultural, and more. Speculators buy and sell commodities but usually do not ever take delivery.
Consumer Price Index
An index that measures the change in price of a representative basket of goods and services such as food, energy, housing, clothing, transportation, medical care, entertainment and education. It’s also known as the cost-of-living index.
In the commodities market traders invest in contracts for assets, this is needed to keep the assets standardized and make speculating easier. In the context of CFD the contract is the definition of the asset being traded and the rules and specifications for that asset trade.
Contract For Difference (CFD)
In finance, this is a contract between two parties, typically described as “buyer” and “seller” to exchange the difference in value of a financial instrument between the time at which the contract is opened and the time it is closed. In effect CFDs are financial derivatives that allow traders to take advantage of prices moving up or prices moving down on underlying financial instruments and are often used to speculate on those markets.
In trading, correlation is a measurement of the relationship between two assets. A positive correlation suggests that Security B will move in the same direction as Security A. A negative correlation suggests that Security B will move in the opposite direction of Security A.
Crude Oil Inventories
The amount of crude oil, gasoline, and distillate in a country.
A cryptocurrency is a digital currency that uses a blockchain and relies on cryptography for security. The nature of the blockchain means that individuals can transact directly with each other, even if they don’t trust each other. Cryptocurrencies don’t need a centralized party like a bank to carry out transactions between individuals. Cryptography is used to keep transactions secure and to control the creation of additional units of a currency.
Made up for a Base currency and a Quote currency (or Counter currency), it’s the way of displaying and pricing one currency against another to be used to make a trade. Currency pairs are normally shown as two abbreviated currency names, separated by a slash. The slash can sometimes be omitted, showing only the two currency abbreviations, side-by-side. The most traded currency pairs in the world are called the Majors. They include the currencies euro, US dollar, pound sterling, Canadian dollar, Swiss franc, Japanese yen, and Australian dollar. The Majors make up the largest share of the foreign exchange market and exhibit high market liquidity.
The chance that is involved in exchange rates to have negative effects.
A person who makes and closes trades within the same trading day, or “flat” (no open positions) at the end of the session.
Derivatives are financial instruments that acquires the majority of their value from the price of the underlying asset they are tracking such as commodities and currencies, or from securities such as stocks and bonds. Swaps, futures, forwards, and options are the most common derivatives. Investors trade them on exchange or over-the-counter usually as an alternative to speculating in the underlying asset, or to hedge their risk on a position in the underlying asset.
A Double Bottom is a form of chart pattern used in technical analysis. This pattern is characterized by a distinct drop in price, followed by a slight reversal (or recovery) with a second drop occurring soon after to either the same or similar level as the first, before another, significant recovery so that the chart appears to take on the form of the letter ‘W’.
The Dow Jones Industrial Average is one of the premier US stock indices, comprising a weighted average of the stock prices of 30 of the largest US companies.
An economic indicator is a measurement or data point on the economy that provides a barometer of how the country is doing, which could influence an asset’s value.
Ethereum is an open source, decentralized platform based on blockchain technology created by Vitalik Buterin in 2013. It runs smart contracts on a custom-built blockchain that allows developers to create decentralized applications.
European Central Bank
The European Central Bank (ECB) is the central bank for Europe’s single currency, the euro. The ECB’s main task is to maintain the euro’s purchasing power and thus price stability in the euro zone. The euro zone comprises of 17 European Union and 5 non-European Union countries that have introduced the euro since 1999.
A physical location where commodities and futures are traded.
Exchange Rate Risk
The potential loss that could be incurred from an adverse movement in exchange rates.
Refers to a currency that is not popularly traded or considered one of the eight major currencies.
Fibonacci channels are a method of predicting levels of support and resistance for a given market. It makes use of peak and valley formations in the market and lead to conclusions on how to safely forecast major changes in trend directions. The secret of Fibonacci channels is to identify the correct valleys and peaks to work with. Support and resistance lines can be drawn weeks and months into the future, once the appropriate tops and bottoms in the market have been detected. Only major tops and bottoms should be considered for a base line of a Channel with one or more prominent side swings. The widest swing within a time frame of the base line is used for a trigger line.
The foreign exchange market is a global decentralized or over-the-counter market for the trading of currencies. This market determines the foreign exchange rate. It includes all aspects of buying, selling and exchanging currencies at current or determined prices.
A deal with a value date greater than the spot value date.
Fundamental analysis is a way of understanding the changes in market valuation by analyzing economic, social, and political forces that affects the supply and demand of an asset. In Forex, the idea behind this type of analysis is that if a country’s current or future economic outlook is good, their currency should strengthen. The better shape a country’s economy is, the more foreign businesses and investors will invest in that country. This results in the need to purchase that country’s currency to obtain those assets. Forex traders who utilize Fundamental analysis often keep one eye focused on the market price action, while keeping the other financial news resources. They will study the news for information on political climate, international relations, natural disasters and other worldly events in order to determine what might be coming up in the trading arena.
An agreement to trade a good at a set price a later date.
Where a market moves directly from one correctly quoted price to another, significantly different, correctly quoted price. There can be many reasons for gapping: economic figures; company announcements; political events; natural disasters etc but the effect is that any fill on a stop loss, limit or new order may be at a different level from that requested by the trader.
The processing fee for every transaction made in the Ethereum network. Gas is the metering unit for executions performed on the EVM. Gas units are a fixed number, depending on the computation, and paid with ether in a denomination called GWei.
Gold is a commodity that is commonly used in jewellery and variety of electronic products and equipment due to its conductivity, malleability, and durability. Previously, it was used as a standard for monetary exchange as well. This practice was stopped with the introduction of the fiat system in the US in 1971.
Gross Domestic Product
The total value of goods and services produced within the borders of the United States, regardless of who owns the assets or the nationality of the labor used in producing that output. The growth of output is measured in real terms, meaning increases in output due to inflation have been removed.
A hedge is an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such an options or a futures contract.
Hedge funds are managed portfolios aimed to generate high returns by using aggressive investment strategies. Hedge funds, despite the misleading name, aims to get the biggest bang for an investor’s money. It engages in practically any investment instrument in the foreign exchange market, from spot to futures to swaps.
Hyperinflation is a condition in which price levels increase rapidly as the nation’s currency loses its value. This often occurs when there is a large increase in the money supply not supported by gross domestic product (GDP) growth, resulting in an imbalance in the supply and demand for the money.
Investopedia defines an index as a statistical measure of the changes in a portfolio of stocks representing a portion of the overall market. The DAX, the ASX200 and the Dow Jones are examples of indices. It’s important to note that an index is nothing more than a list of stocks; anybody can create one.
Inflation is defined as the rise of the overall prices of goods and services over a certain period in time. This means that, as general level of prices climb, the purchasing power for each unit of currency declines.
The original deposit of collateral needed to enter in a trade.
Interest Rate Differential
In the foreign exchange market, the interest rate differential (IRD) refers to the difference in interest rates between two similar interest-bearing currencies. In the spot foreign exchange market, this pertains to the difference in interest rates in a pair.
Interest Rate Risk
The potential for losses arising from changes in interest rates.
The action or process of investing money in the economic market.
The currency of Japan. One of the major currencies traded. Currency code (JPY)
In public key cryptography, a key pair is a pair of private key(s) and public key(s) that are mathematically linked to each other. Public keys are used to encrypt data, and the private key of the key pair is used to decrypt that data. This is known as asymmetric encryption. Key pairs are used to control access to your cryptocurrency.
A ratio of amount used in a transaction to the required deposit. Leverage allows a trader to amplify their investment by only have to put up a small percentage of the value of the trade. The money needed to secure a trade is referred to margin. For example, when you open a position with a value of $10,000 by putting down a margin deposit of $1000 you have a gearing ratio of 10:1.
Stands for the London Inter-Bank Offered Rate. It is used as a reference rate by banks to borrow from other banks. It is the most widely accepted interest rates for forwards, futures and interest rate swap contracts. The British Bankers Association is the institution that sets LIBOR. It is calculated by getting the average offered rate of 16 multinational banks at exactly 11 A.M GMT. This allows banks to secure funds at a cheaper cost, because they are borrowing at the interbank rate.
An order with specified boundaries. Can be used to control how much profit and how much loss a trader is willing to handle.
In the Forex market, liquidity pertains to a currency pair’s ability to be bought and sold without causing significant change in its exchange rate. A currency pair is said to have high level of liquidity when it is easily bought or sold and there is a significant amount of trading activity for that pair.
Litecoin (LTC) is a type of cryptocurrency that was created by former Google employee Charlie Lee in 2011. It functions similarly to bitcoin, but with a higher maximum number of coins that can be mined. 84 million litecoins will be produced, which is 4 times as many currency units as bitcoin. Litecoin blocks can also be created faster, once every 2.5 minutes compared to Bitcoin’s algorithm which is one block every 10 minutes. It also offers features such as Segregated Witness and the Lightning Network which allows for faster processing at lower cost.
A position that becomes beneficial as market price rises. A pair in which the base currency is bought is said to be long.
A unit of measurement that measures the amount of the transaction. It is always an integer number.
Moving Average Convergence/Divergence, an indicator used in technical analysis that was invented in the 1970s as a means of showing the differences between both the fast and slow EMAs (Exponential Moving Average) of closing prices, although since 1986 the graph has been produced as a histogram. The moving average as expressed by the MACD is essentially the average of a price over a certain set amount of time and the MACD enables easy demonstration of the relationship between two exponential examples of the moving average.
The necessary money needed to maintain a position. The required initial deposit of collateral to enter into a position or foreign exchange trade.
A demand for additional funds to cover open trade positions.
An order to make a transaction at the current market price.
Momentum, in technical analysis, refers to the overall rate of change in the price of an asset. Momentum is calculated simply by taking the slope of the trendline, which tracks the price levels of an asset over time.
Monetary policy refers to the process by which a monetary authority controls the money supply in the economy. Usually it is the central bank that carries out the task, adjusting the amount of money available in order to spur economic growth, stabilize prices and exchange rates, and promote employment.
The average of prices over a given time. Can be used as a trading tool.
NEM (XEM) refers to the cryptocurrency and the name of a platform for management of a variety of assets, including currencies, supply chains, ownership records, etc. It offers additional features to blockchain technology such as multi-signature accounts, encrypted messaging, etc.
The amount of currency bought or sold that hasn’t been offset by opposite transactions.
Nonfarm Payroll Employment
An estimate of the number of payroll jobs at all nonfarm business establishments and government agencies. Information is also provided on the unemployment rate, average number of hours worked per week, and average hourly and weekly earnings. Nonfarm Payroll numbers are included in the monthly Employment Situation report.
An active trade that has yet to be closed.
A position that stays open until the next trading day.
Over The Counter
A market conducted directly between dealers and principals via a telephone and computer network rather than a regulated exchange trading floor. Stocks of small companies, bonds, and other securities that aren’t traded over a formal exchange can be traded over the counter. In over-the-counter markets, dealers, also known as market makers, buy and sell securities from their own inventories. As such, if an investor wanted to buy or sell a certain security, he would contact a dealer of the particular security and ask for appropriate bid or ask price.
The most common increment of currencies is know as the “pip.” It is the smallest value change in a currency pair exchange rate. A pip is the last decimal place of a quotation. A positive or negative pip value is how you measure your profit or loss.
The net total exposure in a given currency. A position can be either flat or square (no exposure), long (more currency bought than sold), or short (more currency sold than bought).
Price action refers to a security’s price movement. It can be represented in terms of charts, graphs, and tables.
Producer Price Index
The Producer Price Index, or PPI, is a monthly report released by the Bureau of Labor and Statistics detailing the purchasing price of various consumer goods. The report is released in the second week of every month and includes data on the previous month. Traders mainly use the PPI as an indicator of price inflation over time. Although the similarly-functioning Consumer Price Index (CPI) is considered to be a more useful measure of present inflation, the PPI’s inclusion of goods in production makes it a potential leading indicator of future price inflation in certain industries.
The second currency in a currency pair. Also known as the Counter currency
Relative Strength Index
Relative Strength Index, sometimes shortened to RSI, is a price oscillator used in technical analysis to show changes in the strength of prices. The Relative Strength Index is considered a popular tool and is a relatively easy one to interpret. This price following oscillator is depicted as a basic graph and ranges from zero to one hundred.
An estimated price level at which people will sell.
An estimate of the total sales of goods by all retail establishments in the U.S. (Sales of services are not included) for month prior to the release of the report. Data are presented in nominal, or current, dollars, meaning they are not adjusted for inflation. However, the data are adjusted for seasonal, holiday, and trading-day differences between the months of the year.
The reward-to-risk ratio measures a trade’s expected returns against its predetermined risk of loss. The ratio is computed by dividing the profit that a trade is expected to yield by the loss that the trade may incur.
Ripple (XRP) refers to the cryptocurrency and the name of an open source payment platform where the cryptocurrency (XRP) can be transferred. The vision for the platform is to enable real-time global payments anywhere around the world. The Ripple payment protocol was built by OpenCoin which was founded in 2012.
Amount of money a person is willing to lose.
Scalping or short-term trading involves making dozens or hundreds of trades a day, trying to scalp a small profit from each trade by exploiting the bid-ask spread.
When the trader has chosen a downward direction for the asset price.
A position in which the base currency is sold. It is beneficial when a price declines.
The difference between the expected fill price and the actual fill price. High probably of slippage may occur in highly volatile markets (i.e. during news or economic releases.)
Also known as the current market price.
The spread is the difference between the ASK and the BID price of an asset. All assets are quoted in a BID/ASK scenario. To better understand look up bid and ask in the glossary. The spread is small but can eat into your profits or magnify your losses as you must execute two sides of a trade to open and then close a position. Spreads for the most commonly traded assets are relatively small.
Stochastic is an indicator used in technical analysis. Stochastic compares closing prices in a market to the high and low prices for that market over a certain period of time. Stochastic is calculated by taking the lowest low price and the highest high price for a number of previous trading periods, usually fourteen.
Stocks or equities refer to partial ownership of a company’s assets and profits. If you own a stock of a particular company, you are entitled to a proportional share of its profits. Stocks of companies can be bought and sold in stock markets, such as the New York Stock Exchange.
A limit order in which a trade is closed when a specified price is reached causing a loss. Used to limit amount of losses in trades.
The price that the market is at when an option is opened.
The simultaneous buying and selling of the same amount of a given currency at a forward exchange rate.
Traders who can react quickly to market changes, including at-home and day traders, benefit from swing trading, which is a trade strategy that involves holding a position for longer than a day. If a trade seems to be going sour, swing traders can exit the market before losing too much money.
An order used by currency traders to automatically close their position once a certain profit has been made. Although it halts any further advance in profit, it guarantees a specific profit after a level has been hit.
Test Glossary 24112019
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A minimum change in price, up or down.
Trading alerts, also known as signals, are alerts that give suggestions to the traders as to what underlying asset and direction could be profitable to open a position on.
The total amount that was traded during a certain period of time.
A trendline is one of the basic components of most technical analysis patterns. To construct a trendline, simply connect either the high prices or low prices on an asset’s chart. The resulting line is the trendline.
The unemployment rate is basically the percentage of the people in the work force without jobs but is able and willing to work. It is measured by getting the ratio of unemployed people who are willing and able to work versus the total number of people in the work force.
U.S. Department Of The Treasury
Formally established as an executive department by the 1789 Act of Congress, the Department of the Treasury serves as the treasury of the federal government and is the agency responsible for managing the money resources of the United States.
A measure of the amount by which an asset price is expected to fluctuate over a given period. Normally measured by the annual standard deviation of daily price changes (historic). Can also be implied from futures/options pricing, which is referred to as implied volatility.
A way of storing your cryptocurrency.
The World Bank is a group of international financial organizations around the globe aimed provide assistance to its 187 member countries. The World Bank was formed after World War II to help devastated Western European countries and provide them with capital.
Yield is the return on an investment and is usually expressed as a percentage.
Zig Zag Indicator
A ZigZag is a technical indicator which is usually used when analysing price fluctuations on a graph with the aim of uncovering previous substantial changes in the trend. By using the ZigZag indicator, traders can often make out Elliot waves.