A
ACCRUAL : 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.
ADJUSTMENT : Official action normally
occasioned by a change either in the internal economic policies to
correct a payment imbalance or in the official CFD rate.
AGGRESSIVE : Traders and/or price action
are acting with conviction.
ANALYST : A financial professional who has
expertise in evaluating investments and puts together buy, sell and
hold recommendations for clients.
APPRECIATION : A product is said to
‘appreciate’ when it strengthens in price in response to market
demand.
ARBITRAGE : 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 CFDs as they
manage growing pools of foreign CFD reserves arising from trade
surpluses. Their market interest can be substantial and influence
CFD direction in the short-term.
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 CFD trading,
the Ask represents the price at which a trader can buy the base CFD,
shown to the left in a CFD pair. For example, in the quote USD/CHF
1.4527/32, the base CFD 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.*
AT BEST : An instruction given to a dealer
to buy or sell at the best rate that can be obtained at a specific
time.
AT OR BETTER : Traders and/or price action
are acting with conviction.
AUS 200 : Traders and/or price action are
acting with conviction.
AUSSIE : Refers to the AUD/USD (Australian
Dollar/U.S. Dollar) pair. Also “Oz” or “Ozzie”.
B
BALANCE OF TRADE: The value of a country’s
exports minus its imports.
BAR CHART: 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
horizontal line to the left of the bar; and the closing price, which
is marked with a horizontal line to the right of the bar.
BARRIER LEVEL: 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.
BARRIER OPTION: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.
BASE CFD: The first CFD in a CFD pair. It
shows how much the base CFD is worth as measured against the second
CFD. For example, if the USD/CHF (U.S. Dollar/Swiss Franc) rate
equals 1.6215, then one USD is worth CHF 1.6215. In the CFD market,
the US dollar is normally considered the base CFD for quotes,
meaning that quotes are expressed as a unit of $1 USD per the other
CFD quoted in the pair. The primary exceptions to this rule are the
British pound, the euro and the Australian dollar.
BASE RATE: The lending rate of the central
bank of a given country.
BASING: A chart pattern used in technical
analysis 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.
BASIS POINT: 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.
BEARS:Traders who expect prices to decline
and may be holding short positions.
BID PRICE: The price at which the market
is prepared to buy a product. Prices are quoted two-way as Bid/Ask.
In CFD trading, the Bid represents the price at which a trader can
sell the base CFD, shown to the left in a CFD pair. For example, in
the quote USD/CHF 1.4527/32, the base CFD 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.
BIG FIGURE:Refers to the first three
digits of a CFD 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.
BIS: 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 CFD
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.
BLACK BOX: The term used for systematic,
model-based or technical traders.
BLOW OFF: The upside equivalent of
capitulation. When shorts throw in the towel and cover any remaining
short positions.
BOC:Bank of Canada, the central bank of
Canada
BOE:Bank of England, the central bank of
the UK.
BOJ: Bank of Japan, the central bank of
Japan.
BOLLINGER BANDS: 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.
BOND: A name for debt which is issued for
a specified period of time.
BOOK: 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.
BROKER: 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.
BUCK: Market slang for one million units
of a dollar-based CFD 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.
BULLS:Traders who expect prices to rise
and who may be holding long positions.
BUNDESBANK:Germany’s central bank.
BUY: Taking a long position on a product.
BUY DIPS: Looking to buy 20-30-pip/point
pullbacks in the course of an intra-day trend.
C
CABLE: The GBP/USD (Great British
Pound/U.S. Dollar) pair. Cable earned its nickname because the rate
was originally transmitted to the US via a transatlantic cable
beginning in the mid 1800s when the GBP was the CFD of international
trade.
CAD: The Canadian dollar, also known as
Loonie or Funds.
CALL OPTION: A CFD trade which exploits
the interest rate difference between two countries. By selling a CFD
with a low rate of interest and buying a CFD 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.
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.
CAPITULATION: 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 trading strategy that
captures the difference in the interest rates earned from being long
a CFD that pays a relatively high interest rate and short another
CFD that pays a lower interest rate. For example: NZD/JPY (New
Zealand Dollar/Japanese Yen) 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: The market in the actual
underlying markets on which a derivatives contract is based.
CASH PRICE: The price of a product for
instant delivery; i.e., the price of a product at that moment in
time.
CBS:Abbreviation referring to central
banks.
CENTRAL BANK: 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.
CFD: Any form of money issued by a
government or central bank and used as legal tender and a basis for
trade.
CFD PAIR:The two CFDs that make up a
foreign exchange rate. For example EUR/USD (Euro/U.S. Dollar).
CFD RISK: The probability of an adverse
change in exchange rates.
CFDS: 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.
CFD SYMBOLS: A three-letter symbol that
represents a specific CFD. For example, USD (U.S. Dollar).
CHARTIST: An individual, also known as a
technical trader, who uses charts and graphs and interprets
historical data to find trends and predict future movements.
CHOPPY: Short-lived price moves with
limited follow-through that are not conducive to aggressive trading.
CLEARED FUNDS: Funds that are freely
available, sent in to settle a trade.
CLEARING: The process of settling a trade.
CLOSING: 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.
COLLATERAL: An asset given to secure a
loan or as a guarantee of performance.
COMMISSION: A fee that is charged for
buying or selling a product.
COMMODITY CFDS: CFDs from economies whose
exports are heavily based in natural resources, often specifically
referring to Canada, New Zealand, Australia and Russia.
COMPONENTS: 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.
COMPX: Symbol for NASDAQ Composite Index.
CONFIRMATION: A document exchanged by
counterparts to a transaction that states the terms of said
transaction.
CONSOLIDATION:A period of range-bound
activity after an extended price move.
CONSTRUCTION SPENDING: Measures the amount
of spending towards new construction, released monthly by the U.S.
Department of Commerce’s Census Bureau.
CONTAGION: The tendency of an economic
crisis to spread from one market to another.
CONTRACT:The standard unit of CFD trading.
CONTRACT NOTE: A confirmation sent that
outlines the exact details of the trade.
CONTROLLED RISK: 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.
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.
CORPORATES: 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.
COUNTER CFD: The second listed CFD in a
CFD pair.
COUNTERPARTY: One of the participants in a
financial transaction.
COUNTRY RISK: Acronym for Consumer Price
Index, a measure of inflation.
CRATER: The market is ready to sell-off
hard.
CROSS: A pair of CFDs that does not
include the U.S. dollar.
CROWN CFDS: Refers to CAD (Canadian
Dollar), Aussie (Australian Dollar), Sterling (British Pound) and
Kiwi (New Zealand Dollar) – countries off the Commonwealth.
CTAS: 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.
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.
D
DAY TRADER: Speculators who take positions
in commodities and then liquidate those positions prior to the close
of the same trading day.
DAY TRADING: Making an open and close
trade in the same product in one day.
DEAL: A term that denotes a trade done at
the current market price. It is a live trade as opposed to an order.
DEALER: 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.
DEALING SPREAD: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.
DEFICIT:A negative balance of trade or
payments.
DELISTING:Removing a stock’s listing on an
exchange.
DELIVERY:A trade where both sides make and
take actual delivery of the product traded.
DELTA: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.
DEPRECIATION:The decrease in value of an
asset over time.
DERIVATIVE: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 CFDs.
DEVALUATION:When a pegged CFD is allowed
to weaken or depreciate based on official actions; the opposite of a
revaluation.
DISCOUNT RATE:Interest rate that an
eligible depository institution is charged to borrow short-term
funds directly from the Federal Reserve Bank
DIVERGENCE: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.
DIVIDEND: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.
DOVE:Dovish refers to data or a policy
view that suggests easier monetary policy or lower interest rates.
The opposite of hawkish.
DOWNTREND:Price action consisting of lower
lows and lower highs.
DXY$Y:Symbol for the US Dollar Index.
E
ECB: European Central Bank, the central
bank for the countries using the euro.
ECONOMIC INDICATOR: A government-issued
statistic that indicates current economic growth and stability.
Common indicators include employment rates, Gross Domestic Product
(GDP), inflation, retail sales, etc.
END OF DAY ORDER (EOD):An order to buy or
sell at a specified price that remains open until the end of the
trading day, typically at 5pm/17:00 New York time.
EST/EDT:The time zone of New York City,
which stands for United States Eastern Standard Time/Eastern
Daylight time.
ESTX50:A name for the Euronext 50 index.
EURO:The CFD of the Eurozone.
EUROPEAN MONETARY UNION (EMU):An umbrella
name for the group of policies that aims to coordinate economic and
fiscal policies across EU Member States
EUROPEAN SESSION:07:00 – 16:00 (London).
EUROZONE LABOR COST INDEX:Measures the
annualized rate of inflation in the compensation and benefits paid
to civilian workers and is seen as a primary driver of overall
inflation.
EUROZONE ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
(OECD) LEADING INDICATOR:A monthly index produced by the OECD. It measures overall economic
health by combining ten leading indicators including average weekly
hours, new orders, consumer expectations, housing permits, stock
prices and interest rate spreads.
EX-DIVIDEND:A share bought in which the
buyer forgoes the right to receive the next dividend and instead it
is given to the seller.
EXPORTERS:Corporations who sell goods
internationally, which in turn makes them sellers of foreign CFD and
buyers of their domestic CFD. Frequently refers to major Japanese
corporations such as Sony and Toyota, who will be natural sellers of
USD/JPY, exchanging dollars received from commercial sales abroad.
EXTENDED:A market that is thought to have
traveled too far, too fast.
EXPIRY DATE/PRICE:The precise date and
time when an option will expire. The two most common option expiries
are 10:00am ET (also referred to as 10:00 NY time or NY cut) and
3:00pm Tokyo time (also referred to as 15:00 Tokyo time or Tokyo
cut). These time periods frequently see an increase in activity as
option hedges unwind in the spot market.
F
FACTORY ORDERS:The dollar level of new
orders for both durable and nondurable goods. This report is more in
depth than the durable goods report which is released earlier in the
month.
FED:The Federal Reserve Bank, the central
bank of the United States, or the FOMC (Federal Open Market
Committee), the policy-setting committee of the Federal Reserve.
FED OFFICIALS:Refers to members of the
Board of Governors of the Federal Reserve or regional Federal
Reserve Bank Presidents.
FIGURE/THE FIGURE:Refers to the price
quotation of ’00’ in a price such as 00-03 (1.2600-03) and would be
read as ‘figure-three.’ If someone sells at 1.2600, traders would
say ‘the figure was given’ or ‘the figure was hit.
FILL OR KILL:An order that, if it cannot
be filled in its entirety, will be cancelled.
FIRST IN FIRST OUT (FIFO):All positions
opened within a particular CFD pair are liquidated in the order in
which they were originally opened.
FIX:One of approximately five times during
the CFD trading day when a large amount of CFD must be bought or
sold to fill a commercial customer’s orders. Typically these times
are associated with market volatility. The regular fixes are as
follows (all times NY): 5:00am – Frankfurt 6:00am – London 10:00am –
WMHCO (World Market House Company) 11:00am – WMHCO (World Market
House Company) – more important 8:20am – IMM 8:15am – ECB
FLAT OR FLAT READING:Economic data
readings matching the previous period’s levels that are unchanged.
FLAT/SQUARE:Dealer jargon used to describe
a position that has been completely reversed, e.g. you bought
$500,000 and then sold $500,000, thereby creating a neutral (flat)
position.
FOLLOW-THROUGH:Fresh buying or selling
interest after a directional break of a particular price level. The
lack of follow-through usually indicates a directional move will not
be sustained and may reverse.
FOMC:Federal Open Market Committee, the
policy-setting committee of the US Federal Reserve.
FOMC MINUTES:Written record of FOMC
policy-setting meetings are released three weeks following a
meeting. The minutes provide more insight into the FOMC’s
deliberations and can generate significant market reactions.
FOREIGN EXCHANGE/CFD/CFD:The simultaneous
buying of one CFD and selling of another. The global market for such
transactions is referred to as the CFD market.
FORWARD:The pre-specified exchange rate
for a foreign exchange contract settling at some agreed future date,
based on the interest rate differential between the two CFDs
involved.
FORWARD POINTS:The pips added to or
subtracted from the current exchange rate in order to calculate a
forward price.
FRA40:A name for the index of the top 40
companies (by market capitalization) listed on the French stock
exchange. FRA40 is also known as CAC40.
FTSE 100:The name of the UK 100 index.
FUNDAMENTAL ANALYSIS:The assessment of all
information available on a tradable product to determine its future
outlook and therefore predict where the price is heading. Often
non-measurable and subjective assessments, as well as quantifiable
measurements, are made in fundamental analysis.
FUNDS:Refers to hedge fund types active in
the market. Also used as another term for the USD/CAD (U.S.
Dollar/Canadian Dollar) pair.
FUTURE:An agreement between two parties to
execute a transaction at a specified time in the future when the
price is agreed in the present.
FUTURES CONTRACT:An obligation to exchange
a good or instrument at a set price and specified quantity grade at
a future date. The primary difference between a Future and a Forward
is that Futures are typically traded over an exchange (Exchange-
Traded Contacts – ETC), versus Forwards, which are considered Over
The Counter (OTC) contracts. An OTC is any contract NOT traded on an
exchange.
G
G7:Group of 7 Nations – United States,
Japan, Germany, United Kingdom, France, Italy and Canada.
G8:A quick market move in which prices
skip several levels without any trades occurring. Gaps usually
follow economic data or news announcements.
GAP/GAPPING:All positions opened within a
particular CFD pair are liquidated in the order in which they were
originally opened.
GEARING (ALSO KNOWN AS LEVERAGE):Gearing
refers to trading a notional value that is greater than the amount
of capital a trader is required to hold in his or her trading
account. It is expressed as a percentage or a fraction.
GER30:An index of the top 30 companies (by
market capitalization) listed on the German stock exchange – another
name for the DAX.
GIVEN:Refers to a bid being hit or selling
interest.
GIVING IT UP:A technical level succumbs to
a hard-fought battle.
GMT (GREENWICH MEAN TIME):Greenwich Mean
Time – The most commonly referred time zone in the CFD market. GMT
does not change during the year, as opposed to daylight
savings/summer time.
GOING LONG:The purchase of a stock,
commodity or CFD for investment or speculation – with the
expectation of the price increasing.
GOING SHORT:The selling of a CFD or
product not owned by the seller – with the expectation of the price
decreasing.
GOLD CERTIFICATE:A certificate of
ownership that gold investors use to purchase and sell the commodity
instead of dealing with transfer and storage of the physical gold
itself.
GOLD CONTRACT:The standard unit of trading
gold is one contract which is equal to 10 troy ounces.
GOLD (GOLD’S RELATIONSHIP):It is commonly
accepted that gold moves in the opposite direction of the US dollar.
The long-term correlation coefficient is largely negative, but
shorter-term correlations are less reliable.
GOOD FOR DAY:An order that will expire at
the end of the day if it is not filled.
GREENBACK:Nickname for the US dollar.
GROSS DOMESTIC PRODUCT (GDP):Total value
of a country’s output, income or expenditure produced within its
physical borders.
GROSS NATIONAL PRODUCT:Gross domestic
product plus income earned from investment or work abroad.
GUARANTEED ORDER:An order type that
protects a trader against the market gapping. It guarantees to fill
your order at the price asked.
GUARANTEED STOP:A stop-loss order
guaranteed to close your position at a level you dictate, should the
market move to or beyond that point. It is guaranteed even if
there’s gapping in the market.
GUNNING/GUNNED:Refers to traders pushing
to trigger known stops or technical levels in the market.
H
HANDLE:Every 100 pips in the CFD market
starting with 000.
HAWK/HAWKISH:A country’s monetary
policymakers are referred to as hawkish when they believe that
higher interest rates are needed, usually to combat inflation or
restrain rapid economic growth or both.
HEDGE:A position or combination of
positions that reduces the risk of your primary position.
HIT THE BID:To sell at the current market
bid.
HK50/HKHI:Names for the Hong Kong Hang
Seng index.
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 CFD futures market, that is part of the Chicago
Mercantile Exchange.
IMM FUTURES:A traditional futures contract
based on major CFDs against the US dollar. IMM futures are traded on
the floor 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.
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 CFD 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.
IPO:A private company’s initial offer of
stock to the public. Short for initial public offering.
ISM MANUFACTURING INDEX:An index that
assesses the state of the US manufacturing sector by surveying
executives on expectations for future production, new orders,
inventories, employment and deliveries. Values over 50 generally
indicate an expansion, while values below 50 indicate contraction.
ISM NON-MANUFACTURING: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.
J
JAPANESE ECONOMY WATCHERS SURVEY: Measures
the mood of businesses that directly service consumers such as
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 (New Zealand
Dollar/U.S. Dollar).
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 from a technical standpoint 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/JPY is 117.00/05, then a limit
order to buy USD would be at a price below the current market, e.g.
116.50.
LIQUIDATION: The closing of an existing
position through the execution of an offsetting transaction.
LIQUID MARKET: A market which has
sufficient numbers of buyers and sellers for the price to move in a
smooth manner.
LONDON SESSION: 08:00 – 17:00 (London) .
LONG POSITION: A position that appreciates
in value if market price increases. When the base CFD 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 the Canadian dollar
or the USD/CAD (U.S. Dollar/Canadian Dollar) CFD pair.
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 six 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 CALL: A request from a broker or
dealer for additional funds or other collateral on a position that
has moved against the customer.
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-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 of 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 CFD 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: An abbreviation for the NASDAQ 100
index.
NET POSITION: The amount of CFD 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.
O
OFFER/ASK PRICE: The price at which the
market is prepared to sell a product. Prices are quoted two-way as
Bid/Offer. The Offer price is also known as the Ask. The Ask
represents the price at which a trader can buy the base CFD, which
is shown to the right in a CFD pair. For example, in the quote
USD/CHF 1.4527/32, the base CFD 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 represents the price 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
OFFERED: If a market is said to be trading
offered, it means a pair is attracting heavy selling interest, or
offers
OFFSETTING TRANSACTION: A trade that
cancels or offsets some or all of the market risk of an open
position
ONE CANCELS THE OTHER ORDER (OCO):A
designation for two orders whereby if one part of the two orders is
executed, then the other is automatically cancelled
ONE TOUCH:An option that pays a fixed
amount to the holder if the market touches the predetermined Barrier
Level
ON TOP:Attempting to sell at the current
market order price
OPEN ORDER:An order that will be executed
when a market moves to its designated price. Normally associated
with good ’til cancelled orders
OPEN POSITION:An active trade with
corresponding unrealized P&L, which has not been offset by an equal
and opposite deal
OPTION:A derivative which gives the right,
but not the obligation, to buy or sell a product at a specific price
before a specified date
ORDER:An instruction to execute a trade
ORDER BOOK:A system used to show market
depth of traders willing to buy and sell at prices beyond the best
available
OVERNIGHT POSITION:A trade that remains
open until the next business day
OVER THE COUNTER (OTC):Used to describe
any transaction that is not conducted via an exchange
P
PAID: Refers to the offer side of the
market dealing
PAIR: The CFD quoting convention of
matching one CFD against the other
PANELED: A very heavy round of selling
PARABOLIC: A market that moves a great
distance in a very short period of time, frequently moving in an
accelerating fashion that resembles one half of a parabola.
Parabolic moves can be either up or down
PARTIAL FILL: When only part of an order
has been executed
PATIENT FILL: Waiting for certain levels
or news events to hit the market before entering a position
PATIENT: Waiting for certain levels or
news events to hit the market before entering a position
PERSONAL INCOME: Measures an individual’s
total annual gross earnings from wages, business enterprises and
various investments. Personal income is the key to personal
spending, which accounts for 2/3 of GDP in the major economies
PIPS: The smallest unit of price for any
foreign CFD, pips refer to digits added to or subtracted from the
fourth decimal place, i.e. 0.0001
POLITICAL RISK: Exposure to changes in
governmental policy which may have an adverse effect on an
investor’s position
PORTFOLIO: A collection of investments
owned by an entity
POSITION: The net total holdings of a
given product
PREMIUM: The amount by which the forward
or futures price exceeds the spot price
PRICE TRANSPARENCY: Describes quotes to
which every market participant has equal access
PROFIT: The difference between the cost
price and the sale price, when the sale price is higher than the
cost price
PULLBACK: TThe tendency of a trending
market to retrace a portion of the gains before continuing in the
same direction
PURCHASING MANAGERS INDEX (PMI): An
economic indicator which indicates the performance of manufacturing
companies within a country « Back to Glossary Index
PURCHASING MANAGERS INDEX SERVICES (FRANCE, GERMANY, EUROZONE,
UK):
Measures the outlook of purchasing managers in the service sector.
Such managers are surveyed on a number of subjects including
employment, production, new orders, supplier deliveries and
inventories. Readings above 50 generally indicate expansion, while
readings below 50 suggest economic contraction « Back to Glossary
Index
PUT OPTION: A product which gives the
owner the right, but not the obligation, to sell it at a specified
price « Back to Glossary Index
Q
QUANTITATIVE EASING: When a central bank
injects money into an economy with the aim of stimulating growth
QUARTERLY CFDS: A type of future with
expiry dates every three months (once per quarter)
QUOTE: An indicative market price,
normally used for information purposes only
R
RALLY:A recovery in price after a period
of decline.
RANGE:When a price is trading between a
defined high and low, moving within these two boundaries without
breaking out from them.
RATE:The price of one CFD in terms of
another, typically used for dealing purposes.
RBA:Reserve Bank of Australia, the central
bank of Australia
RBNZ:Reserve Bank of New Zealand, the
central bank of New Zealand
REALIZED PROFIT/LOSS:The amount of money
you have made or lost when a position has been closed
REAL MONEY:Traders of significant size
including pension funds, asset managers, insurance companies, etc.
They are viewed as indicators of major long-term market interest, as
opposed to shorter-term, intra-day speculators.
RESISTENCE LEVEL:A price that may act as a
ceiling. The opposite of support.
RETAIL INVESTOR:An individual investor who
trades with money from personal wealth, rather than on behalf of an
institution.
RETAIL SALES:Measures the monthly retail
sales of all goods and services sold by retailers based on a
sampling of different types and sizes. This data provides a look
into consumer spending behavior, which is a key determinant of
growth in all major economies.
REVALUATION:When a pegged CFD is allowed
to strengthen or rise as a result of official actions; the opposite
of a devaluation.
RIGHTS ISSUE:A form of corporate action
where shareholders are given rights to purchase more stock. Normally
issued by companies in an attempt to raise capital.
RISK:Exposure to uncertain change, most
often used with a negative connotation of adverse change.
RISK MANAGEMENT:The employment of
financial analysis and trading techniques to reduce and/or control
exposure to various types of risk.
ROLLOVER:A rollover is the simultaneous
closing of an open position for today’s value date and the opening
of the same position for the next day’s value date at a price
reflecting the interest rate differential between the two CFDs. In
the spot CFD market, trades must be settled in two business days.
For example, if a trader sells 100,000 Euros on Tuesday, then the
trader must deliver 100,000 Euros on Thursday, unless the position
is rolled over. As a service to customers, all open CFD positions at
the end of the day (5:00 PM New York time) are automatically rolled
over to the next settlement date. The rollover adjustment is simply
the accounting of the cost-of-carry on a day-to-day basis. Learn
more about CFD.com’s rollover policy.
ROUND TRIP:A trade that has been opened
and subsequently closed by an equal and opposite deal.
RUNNING PROFIT/LOSS:An indicator of the
status of your open positions; that is, unrealized money that you
would gain or lose should you close all your open positions at that
point in time.
RUT:Symbol for Russell 2000 index
S
SEC:The Securities and Exchange Commission
SECTOR:A group of securities that operate
in a similar industry
SELL:Taking a short position in
expectation that the market is going to go down
SETTLEMENT:The process by which a trade is
entered into the books, recording the counterparts to a transaction.
The settlement of CFD trades may or may not involve the actual
physical exchange of one CFD for another.
SHGA.X:Symbol for the Shanghai A index
SHORT-COVERING:After a decline, traders
who earlier went short begin buying back
SHORT POSITION:An investment position that
benefits from a decline in market price. When the base CFD in the
pair is sold, the position is said to be short.
SHORT SQUEEZE:A situation in which traders
are heavily positioned on the short side and a market catalyst
causes them to cover (buy) in a hurry, causing a sharp price
increase.
SIDELINES, SIT ON HANDS:Traders staying
out of the markets due to directionless, choppy or unclear market
conditions are said to be on the sidelines or sitting on their
hands.
SIMPLE MOVING AVERAGE SMA:A simple average
of a pre-defined number of price bars. For example, a 50 period
daily chart SMA is the average closing price of the previous 50
daily closing bars. Any time interval can be applied.
SLIPPAGE:The difference between the price
that was requested and the price obtained typically due to changing
market conditions.
SLIPPERY:A term used when the market feels
like it is ready for a quick move in any direction.
SLOPPY:Choppy trading conditions that lack
any meaningful trend and/or follow-through.
SNB:Swiss National Bank, the central bank
of Switzerland
SOVEREIGN NAMES:Refers to central banks
active in the spot market
SPOT MARKET:A market whereby products are
traded at their market price for immediate exchange.
SPOT PRICE:The current market price.
Settlement of spot transactions usually occurs within two business
days.
SPOT TRADE:The purchase or sale of a
product for immediate delivery (as opposed to a date in the future).
Spot contracts are typically settled electronically.
SPREAD:The difference between the bid and
offer prices.
SPX500:A name for the S&P index.
SQUARE:Purchase and sales are in balance
and thus the dealer has no open position.
STERLING:A nickname for the British pound
or the GBP/USD (Great British Pound/U.S. Dollar) CFD pair.
STOCK EXCHANGE:A market on which
securities are traded.
STOCK INDEX:The combined price of a group
of stocks – expressed against a base number – to allow assessment of
how the group of companies is performing relative to the past.
STOP ENTRY ORDER:This is an order placed
to buy above the current price, or to sell below the current price.
These orders are useful if you believe the market is heading in one
direction and you have a target entry price.
STOP-LOSS HUNTING:When a market seems to
be reaching for a certain level that is believed to be heavy with
stops. If stops are triggered, then the price will often jump
through the level as a flood of stop-loss orders are triggered.
STOP LOSS ORDER:This is an order placed to
sell below the current price (to close a long position), or to buy
above the current price (to close a short position). Stop loss
orders are an important risk management tool. By setting stop loss
orders against open positions you can limit your potential downside
should the market move against you. Remember that stop orders do not
guarantee your execution price – a stop order is triggered once the
stop level is reached, and will be executed at the next available
price.
STOP ORDER:A stop order is an order to buy
or sell once a pre-defined price is reached. When the price is
reached, the stop order becomes a market order and is executed at
the best available price. It is important to remember that stop
orders can be affected by market gaps and slippage, and will not
necessarily be executed at the stop level if the market does not
trade at this price. A stop order will be filled at the next
available price once the stop level has been reached. Placing
contingent orders may not necessarily limit your losses.
STOPS BUILDING:Refers to stop-loss orders
building up; the accumulation of stop-loss orders to buy above the
market in an upmove, or to sell below the market in a downmove.
STRIKE PRICE:The defined price at which
the holder of an option can buy or sell the product.
SUPPORT:A price that acts as a floor for
past or future price movements.
SUPPORT LEVELS:A technique used in
technical analysis that indicates a specific price ceiling and floor
at which a given exchange rate will automatically correct itself.
Opposite of resistance.
SUSPENDED TRADING:A temporary halt in the
trading of a product.
SWAP:A CFD swap is the simultaneous sale
and purchase of the same amount of a given CFD at a forward exchange
rate.
SWISSIE:The nickname for the Swiss franc
or the USD/CHF (U.S. Dollar/Swiss Franc) CFD pair
T
TAKEOVER:Assuming control of a company by
buying its stock.
TECHNICAL ANALYSIS:The process by which
charts of past price patterns are studied for clues as to the
direction of future price movements.
TECHNICIANS/TECHS:Traders who base their
trading decisions on technical or charts analysis.
TEN (10) YR:US government-issued debt
which is repayable in ten years. For example, a US 10-year note.
THIN:A illiquid, slippery or choppy market
environment. A light-volume market that produces erratic trading
conditions.
THIRTY (30) YR:UK government-issued debt
which is repayable in 30 years. For example, a UK 30-year gilt.
TICK (SIZE):A minimum change in price, up
or down.
TIME TO MATURITY:09:00 – 18:00 (Tokyo)
TOMORROW NEXT (TOM/NEXT):Simultaneous
buying and selling of a CFD for delivery the following day.
T/P:Stands for “take profit.” Refers to
limit orders that look to sell above the level that was bought, or
buy back below the level that was sold.
TRADE BALANCE:Measures the difference in
value between imported and exported goods and services. Nations with
trade surpluses (exports greater than imports), such as Japan, tend
to see their CFDs appreciate, while countries with trade deficits
(imports greater than exports), such as the US, tend to see their
CFDs weaken.
TRADE SIZE:The number of units of product
in a contract or lot.
TRADING BID:A pair is acting strong and/or
moving higher; bids keep entering the market and pushing prices up.
TRADING HALT:A postponement to trading
that is not a suspension from trading.
TRADING HEAVY:A market that feels like it
wants to move lower, usually associated with an offered market that
will not rally despite buying attempts.
TRADING OFFERED:A pair is acting weak
and/or moving lower, and offers to sell keep coming into the market.
TRADING RANGE:The range between the
highest and lowest price of a stock usually expressed with reference
to a period of time. For example: 52-week trading range.
TRAILING STOP:A trailing stop allows a
trade to continue to gain in value when the market price moves in a
favorable direction, but automatically closes the trade if the
market price suddenly moves in an unfavorable direction by a
specified distance. Placing contingent orders may not necessarily
limit your losses.
TRANSACTION COST:The cost of buying or
selling a financial product
TRANSACTION DATE:The date on which a trade
occurs
TREND:Price movement that produces a net
change in value. An uptrend is identified by higher highs and higher
lows. A downtrend is identified by lower highs and lower lows.
TURNOVER:The total money value or volume
of all executed transactions in a given time period.
TWO-WAY PRICE:When both a bid and offer
rate is quoted for a CFD transaction
TYO10:Symbol for CBOE 10-Year Treasury
Yield Index
U
UGLY: Describing unforgiving market
conditions that can be violent and quick
UGLY: Describing unforgiving market
conditions that can be violent and quick
UK100: A name for the FTSE 100 index
UK AVERAGE EARNINGS INCLUDING BONUS/EXCLUDING BONUS:
Measures the average wage including/excluding bonuses paid to
employees. This is measured quarter-on-quarter (QoQ) from the
previous year
UK CLAIMANT COUNT RATE: Measures the
number of people claiming unemployment benefits. The claimant count
figures tend to be lower than the unemployment data since not all of
the unemployed are eligible for benefits
UK HBOS HOUSE PRICE INDEX: Measures the
relative level of UK house prices for an indication of trends in the
UK real estate sector and their implication for the overall economic
outlook. This index is the longest monthly data series of any UK
housing index, published by the largest UK mortgage lender (Halifax
Building Society/Bank of Scotland)
UK JOBLESS CLAIMS CHANGE: Measures the
change in the number of people claiming unemployment benefits over
the previous month
UK MANUAL UNIT WAGE LOSS: Measures the
change in total labor cost expended in the production of one unit of
output
UK OIL*: A name for Brent Crude Oil
UK PRODUCERS PRICE INDEX INPUT: Measures
the rate of inflation experienced by manufacturers when purchasing
materials and services. This data is closely scrutinized since it
can be a leading indicator of consumer inflation
UK PRODUCERS PRICE INDEX OUTPUT: Measures
the rate of inflation experienced by manufacturers when selling
goods and services
UNDERLYING: The actual traded market from
where the price of a product is derived
UNEMPLOYMENT RATE: Measures the total
workforce that is unemployed and actively seeking employment,
measured as a percentage of the labor force
UNIVERSITY OF MICHIGAN’S CONSUMER SENTIMENT INDEX:
Polls 500 US households each month. The report is issued in a
preliminary version mid-month and a final version at the end of the
month. Questions revolve around individuals’ attitudes about the US
economy. Consumer sentiment is viewed as a proxy for the strength of
consumer spending
UNREALIZED GAIN/LOSS: The theoretical gain
or loss on open positions valued at current market rates, as
determined by the broker in its sole discretion. Unrealized
gains/losses become profits/losses when the position is closed
UPTICK: A new price quote at a price
higher than the preceding quote
UPTICK RULE: In the US, a regulation
whereby a security may not be sold short unless the last trade prior
to the short sale was at a price lower than the price at which the
short sale is executed
US30: A name for the Dow Jones index
US OIL: A name for WTI Crude Oil
US PRIME RATE: The interest rate at which
US banks will lend to their prime corporate customers
V
VALUE DATE: Also known as the maturity
date, it is the date on which counterparts to a financial
transaction agree to settle their respective obligations, i.e.,
exchanging payments. For spot CFD transactions, the value date is
normally two business days forward
VARIATION MARGIN: Funds traders must hold
in their accounts to have the required margin necessary to cope with
market fluctuations
VIX OR VOLATILITY INDEX: Shows the
market’s expectation of 30-day volatility. It is constructed using
the implied volatilities of a wide range of S&P 500 index options.
The VIX is a widely used measure of market risk and is often
referred to as the “investor fear gauge”
VOLATILITY: Referring to active markets
that often present trade opportunities
W
WEDGE CHART PATTERN: Chart formation that
shows a narrowing price range over time, where price highs in an
ascending wedge decrease incrementally, or in a descending wedge,
price declines are incrementally smaller. Ascending wedges typically
conclude with a downside breakout and descending wedges typically
terminate with upside breakouts
WHIPSAW: Slang for a highly volatile
market where a sharp price movement is quickly followed by a sharp
reversal
WHOLESALE PRICES: Measures the changes in
prices paid by retailers for finished goods. Inflationary pressures
typically show earlier than the headline retail « Back to Glossary
Index
WORKING ORDER: Where a limit order has
been requested but not yet filled « Back to Glossary Index
WSJ:Acronym for The Wall Street Journal
X
XAG/USD:Symbol for Silver Index
XAU/USD:Symbol for Gold Index
XAX.X:Symbol for AMEX Composite Index
Y
YARD: A billion units
YIELD:The percentage return from an
investment
YOY:Abbreviation for year over year
YUAN:The yuan is the base unit of CFD in
China. The renminbi is the name of the CFD in China, where the Yuan
is the base unit