What is “Trading”? It means "exchanging one item for another". We usually understand this to be the exchanging of goods for money or in other words, simply buying something. It is the same principle for trading in the financial market. When someone trades shares, they actually buy shares or a small part of a company. When the value of those shares increase, then they make money by selling them again at a higher price. Trading is buying something for one price and selling it again for another – hopefully a higher price. The value of the shares changes due to supply and demand. The more demand there is for something, the more people are willing to pay for it. Increase in demand means an increase in price. Increase in supply means a decrease in price.
What is investment and why should you invest? The money you earn is partly spent and the rest saved for meeting future expenses. Instead of keeping the savings idle you may like to use savings in order to get return on it in the future. This is called Investment. One needs to invest to earn return on your idle resources, generate a sum of money for a specific goal in life or make a provision for an uncertain future. One of the important reasons why one needs to invest wisely is to meet the cost of Inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past. The aim of investments should be to provide a return above the inflation rate to ensure that the investment does not decrease in value. For example, if the annual inflation rate is 6%, then the investment will need to earn more than 6% to ensure it increases in value. If the after-tax return on your investment is less than the inflation rate, then your assets have actually decreased in value; that is, they won’t buy as much today as they did last year. The sooner one starts investing the better. By investing early you allow your investments more time to grow, whereby the concept of compounding increases your income, by a cumulating the principal and the interest or dividend earned on it, year after year. The three golden rules for a better investor are: invest early, invest regularly and invest for long term and not short term. #1 way of getting rich for both self-made and inherited billionaires is investing. And it shouldn’t be a complete surprise that investments are the most common way for billionaires to make their money. As long as you know how to pick the right companies to invest in, you can make a fortune through your investments. Warren Buffett has simply devoted nearly his entire life to picking the best stock investments and he does it so well that he’s the third richest person in the world with a net worth of $67.6 billion. Buffett is not the only one who
has made a fortune through investments in the financial market, Donald Trump and Walid Bin Talal also are some of the richest men alive thanks to the investment world.
The Foreign Exchange market, also called FOREX or FX, is the global currency trading market. It is a market in which currencies are bought and sold. It is to be distinguished from a financial market where currencies are borrowed and lent. Forex provides the physical and institutional structure through which the money of one country is exchanged for that of another country, the rate of exchange between currencies is determined, and foreign exchange transactions are physically completed. Foreign exchange market is described as an OTC (Over the counter) market as there is no physical place where the participants meet to execute their deals. It is more an informal arrangement among the banks and brokers operating in a financing centre purchasing and selling currencies, connected to each other by tele communications like telex, telephone and a satellite communication network, SWIFT. A foreign exchange transaction is an agreement between a buyer and a seller that a given amount of one currency is to be delivered at a specified rate for some other currency. With a daily volume of more than $5.3 trillion, Forex is considered the biggest and most exciting financial market in the world. Whether you sell 100 EUR to buy US dollars at the airport or bank exchanges 100 million US dollars for Japanese yen with another bank, both of these are FOREX deals. The traders on the FOREX market range from huge financial organizations, managing billions, to individuals trading a few hundred dollars.
Geographically, the foreign exchange market spans the globe, with prices moving and currencies traded somewhere every hour of every business day. It is most liquid early in the
European afternoon, when the markets of both Europe and the U.S. East coast are open, and is thinnest at the end of the day in California, when traders in Tokyo and Hong Kong are just getting up for the next day. Size: In April 1992, the Bank of International Settlements (BIS) estimated the daily volume of trading on the foreign exchange market and its satellites (futures, options, and swaps) at more than USD 1 trillion. This is about 5 to 10 times the daily volume of international trade in goods and services. In April 2010, the Forex market reached $4 trillion in daily average turnover, an increase of 20% since 2007. The market may be large, but until recently the volume came from professional traders, but as currency trading platforms have improved more retail traders have found Forex to be suitable for their investment goal. The major markets are London (USD 300 billion), New York (USD 200 billion), Tokyo (USD 130 billion), Zurich and Frankfurt.
Forex Opening times: The markets are situated throughout the different time zones of the globe in such a way that when one market is closing the other is beginning its operations. Thus at any point of time one market or the other is open. Therefore, it is stated that foreign exchange market is functioning throughout 24 hours of the day. However, a specific market will function only during the business hours. Some of the banks having international network and having centralized control of funds management may keep their foreign exchange department in the key centre open throughout to keep up with developments at other centers during their normal working hours
World Stock Exchanges opening times (24 hour format) Stock Exchange
Trading Hours
NYSE
New York Stock Exchange
09:30-16:00
TSE
Tokyo Stock Exchange
09:00-11:30 12:30-15:00
LSE
London Stock Exchange
08:00-16:30
HKE
Hong Kong Stock Exchange
09:30-16:00
NSE
National Stock Exchange of India
09:00-15:30
BM&F Bovespa
Bolsa de Valores, Mercadorias & Futuros de Sao Paulo
10:00-17:00
ASX
Australian Securities Exchange
10:00-16:00
FWB
Frankfurt Stock Exchange - Deutsche Borse
09:00-20:00
RTS
Russian Trading System
09:30-19:00
JSE
Johannesburg Stock Exchange
09:00-17:00
DIFX
Dubai International Financial Exchange- now NASDAQ Dubai
10:00-14:00
SSE
Shanghai Stock Exchange
09:15-11:30 13:00-15:00
NZSX
New Zealand Stock Exchange
10:00-17:00
TSX
Toronto Stock Exchange
A closer look
Forex is the biggest trading market in the world. The Forex market is active 24 hours, Monday to Friday, due to the liquidity of the market. 4 trillion dollars are traded in the market on a daily basis allowing you to buy and sell at any time you wish with no delays. Compared to the stocks and bonds markets, Forex is more secure to interact with and open live trades. An important feature in the Forex market is the flat rate. Different platforms and places to trade, do not affect the price. Traders around the world would be able to see the same price regardless of where they are. The Forex market provides the possibility to trade on both major and minor currency pairs. Currencies are divided into pairs and then into groups: Majors: All traded currencies vs. the USD Cross: All currency pairs that don’t include the USD Metals: Gold and silver. They are traded vs. the USD There are different measurement units such as: Pip: used when trading currencies. Lot: is used when trading metals. Each Lot is equals to 100,000 of the currency size being bought.
Leverage: The Financial Leverage is one of the advantages provided by the FOREX market in order to double and increase profits. It allows you to trade with a higher amount than the one you have in your trading account. How is that possible? Most FOREX companies provide the margin, which is the ratio between the available funds that an investor has, to his exposure. Instead of having $100,000 to trade with, you can only have 0.1% of the amount, and the margin provided by the company will double the trade size for you. The margin is split into 2 types: Used Margin: The amount of funds that is set aside to keep the transactions open. Available Margin: is what is left of your balance after deducting the used margin. The difference between the offer and ask price is the company’s commission and it is called “spread”. The percentage depends on each account’s type; it ranges between 2-5 pips of the trade size. The bigger the account balance, the smaller the spread percentage becomes. Charts Technical analysis is a great way to analyze the market data. There are different types of charts: 1- Line chart - shows points on a graph. The points are connected to form a line that shows the different prices of the same indicator. 2- Bar chart - is a graphical display of data using vertical bars of different heights. It shows the opening and closing price. 3- Japanese Candlestick – it’s the most famous and accurate chart type. The body, which looks like a candle with different sizes and colors, represents the difference between opening and closing prices. In some cases, this chart can indicate the volatility of the market. Technical analysis How to rely on technical analysis for maximum profits and minimum risk? If you look closely at a chart, you can see that the market moves randomly and that it requires a professional to analyze it. The most important technical analysis tools are: 1- Elliott wave- A form of technical analysis that identifies highs and lows in prices and allows you to predict the price movement in the market. 2- Support and resistance- Terms used in technical analysis indicating a specific price level at which a currency will have the inability to cross above or below.
3- Indicators/studies: Economic variables such as moving average, RSI and Mac D that analyze the movement of the market and predict future economic activity. 4- Japanese candlestick patterns- have 2 parts: simple patterns and complex patterns. They indicate movements in the market.
What to look for in a Forex Brokerage Company
In today’s fast paced world, Forex trading can offer big profits in a very short time and it has been attracting lots of investors who have tired of other trading instruments and have lost interest in different financial markets. But let’s face it, with hundreds of brokers pedaling their wares, deciding on the right broker can be challenging and time consuming. To ease the process of selecting a Forex broker, the team at Safe4traders has tested and reviewed dozens of the top rated Forex brokers and we have compiled our findings into thorough and honest Forex broker appraisals. We say it like it is and post the truth and nothing but the truth. So before making your selection and registering for an account, spend some time going over our Forex brokers list so you have the best chance of becoming a profitable Forex trader.
Read the following points thoroughly:
Money Security: The feeling of security when dealing with a brokerage company is one of the most important things for a trader, and should be guaranteed before opening any trading account. Most Forex brokers are regulated and/or licensed by international or local regulatory bodies and this entails keeping clients’ funds totally segregated from all other monies. Customer support: For clarification or additional information, traders may need to contact a broker representative or a support center. Contact information such as telephone numbers and email addresses should be listed clearly on the landing page. Live Chat offers immediate contact with an online representative and is available with most brokers.
Account Types: Brokers usually offer their clients different types of trading accounts that may suit all kinds of investors. Accounts can differ according to the amount of money required to open the account, fixed or floating spreads, varying leverages and more. Bonuses can also be contingent on the type of account opened. Initial Deposit: Some trading accounts can be opened with as little as $1.00 while others require a higher minimum. Brokerage companies may provide a choice of accounts and their main difference may be the amounts of the initial deposits. Deposits can be made in a variety of different ways such as credit cards, bank wires, web wallets and more. Charges and Fees: In most cases, there are no charges for opening an account with a broker. Some companies do have a deposit or a withdrawal fee while many don’t have any charges as all. When deciding with which Forex broker to open an account, you should look carefully at all charges and fees and especially the percentage of pips included in losses and profits as this can determine the final outcome of the trade. Leverages: Most brokers offered traders a certain amount of leverage to enable them to increase their investment amount. These differ from broker to broker as well as from one account to another. New traders just starting out should avoid using leverage at first as it can put them at increased risk if their trades end in a loss. Spreads: Spreads are the difference between the buy and sell price and this is where the broker makes money. It is important to check what type of spread-fixed or floating-is levied as well as to compare the amount of the spread with that of several brokers. Free demo account: Another feature to look for in a Forex broker is whether the option of a free demo account is provided. Demo accounts allow you to make trades in a real online account without putting up any money. Brokers offer this option with varying time frames and different amounts of virtual trading funds but even for a short period of time, the use of a demo account offers sufficient opportunity for you to grasp the concept of Forex trading and learn the ins and outs of currency price movements. Currency Pairs offered: Most Forex brokers offer trading in the major currency pairs such as USD/EUR or JPY/USD. Other brokers add on what is considered exotic pairs which are currencies from smaller or developing countries. Still others offer trading in bitcoins, a cryptocurrency. Trading platform: The Forex trading platform offered for use by each broker should also be seriously considered before deciding whether or not to open an account. The trading platform is used to place orders, check out Forex news, perform technical analysis, manage the trading account and much more. Sometimes the platform is a third party application but in many cases it is also a specific application created, designed or modified by the Forex broker. Comparing the features provided in the different versions of both the basic platform and those on the higher upgrades is necessary in assessing whether or not the platform works for you. Educational Materials: The more you know, the better trader you will be. Some brokers place a strong focus on education and provide a host of different venues such as videos, seminars, webinars and more. Most broker websites post daily—sometimes weekly—news updates and analysis and many provide additional fundamental analysis of what is happening
in the markets. Economic calendars list upcoming financial events around the world and different calculators help traders calculate margin interest, pips, profits and more. Bonuses and Promotions: Some brokers find bonuses and promotions to be an important way to attract new clients and they offer them generously. Welcome bonuses or loyalty bonuses are common and can add significantly to a trader’s account balance. There are some brokers who come up with unique promotions such as cash prizes, electronic devices and even cars or trips.
Regulatory bodies Due to its decentralized and global nature, foreign exchange market has been more prone to foreign exchange fraud and has been less regulated than other financial markets, however, some countries do regulate Forex brokers through governmental and independent supervisory bodies. Forex regulations are controlled and monitored by various international bodies and they make sure that Forex traders and brokers adhere to these regulations. Unfortunately for these legal regulatory bodies, most Forex trades take place online and many illegal transactions are never detected. To make sure you chose a legal broker and to avoid common legal mistakes in Forex trading, read the following information on Forex laws and regulations.
Forex Regulation Bodies: FCA- It came into force on 1 April 2013. The Financial Conduct Authority is a financial regulatory body in the United Kingdom, but operates independently of the UK Government. The FCA regulates financial firms providing services to consumers and maintains the integrity of the UK's financial markets. It focuses on the regulation of conduct by both retail and wholesale financial services firms. MiFID- the markets in financial instruments directive is a regulation that increases the transparency across the European Union's financial markets and standardizes the regulatory disclosures required for particular markets. It has been applicable across the European Union since November 2007. MiFID sets out:
Conducts of business and organizational requirements for investment firms; Authorization requirements for regulated markets; Regulatory reporting to avoid market abuse; Trade transparency obligation for shares; Rules on the admission of financial instruments to trading.
CFTC- the Commodity Futures Trading Commission was started in 1974 in the USA. This independent body can issue foreign exchange regulations for financial markets in the US. Their regulations boost competition and efficiency in the markets and as a result assures economic utility of these markets. The CTFC shields traders and brokers from illegal Forex trading practices. NFA- the National Futures Association is an independent agency with no specific connections to any market. By law, all Forex brokers must be members of the NFA to be able to operate in the US. NFA is a self- regulatory body protecting the American futures industry. This agency protects traders and investors and the integrity of the market by implementing foreign exchange regulations. CySEC- the Cyprus Securities and Exchange Commission is a financial regulatory agency of Cyprus. As a member of the European Union, CySEC is part of the European MiFID financial harmonization law. It was established in 2004. CySEC has the following responsibilities: 1. To supervise and control the operation of the Cyprus Stock Exchange and the transactions carried out in the Stock Exchange, its listed companies, brokers and brokerage firms. 2. To supervise and control Licensed Investment Services Companies, Collective Investment funds, investment consultants and mutual fund management companies. 3. To grant operation licenses to investment firms, including investment consultants, brokerage firms and brokers. 4. To impose administrative sanctions and disciplinary penalties to brokers, brokerage firms, investment consultants as well as to in any other legal or natural person whom fall under the provisions of the Stock Market legislation. ASIC- the Australian Securities and Investment Commission, established on 1 July 1998. It is an independent Australian government body that acts as Australia's corporate regulator. ASIC's role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors. FSPR- the Financial Service Providers Register is a searchable online register of the people, businesses, and organizations that offer financial services in New Zealand. Other National Authorities- All countries have their own regulatory bodies and they decide Forex regulations specific to local needs. Brokers and traders must adhere to these country specific regulations. Make sure the broker you have chosen has a valid license in the country where they operate.
Rules and Regulations
Traders must avoid legal mistakes to continue investing and trading in the Forex market. Before choosing your Forex broker, service provider or dealer make sure you read these regulations.
Brokers must have approval from national regulatory institutions, which ensures that they maintain strict quality control levels. Dealings with such brokers are honest, safe and fair. All Forex dealers, service providers and traders must have valid licenses in the countries they operate in. This is the first regulation you must check as you could be trading illegally if your broker is not licensed. By law; periodical audits, evaluations and reviews are to be conducted on all licensed dealers and brokers. This ensures that they strictly adhere to industry standards and national regulations. Forex brokers are bound by law to honour every contract they have with their clients. Brokers can lose their licenses if they fail to comply with the contract.
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Foreign exchange brokers must maintain enough funds to cover their clients' needs. This Forex regulation safeguards the clients and ensures that the brokers can complete the contracts they made with their clients. Forex brokers and dealers must follow fair representation laws. They must disclose all the risks and policies involved in trading with them. Forex brokers cannot make false claims and promises of profits in the market. By regulation, brokers cannot promise profits to their clients.
FOREX Glossary:
A Analyst- A financial professional who has expertise in evaluating investments and puts together buy, sell and hold recommendations for clients. Arbitrage- The simultaneous purchase or sale of a financial product in order to take advantage of small price differentials between markets. Ask Price- Also known as the Offer. It is the price at which the market is prepared to sell a product. Prices quoted two-way as Bid/Ask. The Ask represents the price at which a trader can buy the base currency, shown to the left in a currency pair. Aussie- Refers to the AUD/USD (Australian Dollar/U.S. Dollar) 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. Base Currency- Is 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 (U.S. Dollar/Swiss Franc) rate equals 1.6215, then one USD is worth CHF 1.6215. In the FOREX market, 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. Base Rate- Is 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/Ask Spread: The difference between the bid and the ask (offer) price. Bid Price: 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. In CFD trading, the Bid also represents the price at which a trader can sell the product. 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. 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 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. Bulls- Traders who expect prices to rise and who may be holding long positions. Buy- Taking a long position on a product.
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 currency of international trade. CAD- The Canadian dollar, also known as Loonie or Funds.
Call Option- 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. 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 currency that pays a relatively high interest rate and short another currency that pays a lower interest rate. Cash Market- The market in the actual underlying markets on which a derivatives contact 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. 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 and provides all the benefits of trading securities, without actually owning the product. Chartist- An individual, also known as a technical trader, who uses charts and graphs and interprets historical data to find trends and predict future movement. Cleared Funds- Funds that are freely available, sent in to settle a trade. Clearing- The process of settling a trade. Closed Position- 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 considered squared. Closing- The process of stopping (closing) a live trade by executing a trade that is the exact opposite of the open trade. Closing Price- A 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. Commission- A fee that is charged for buying or selling a product. Commodity Currencies- Currencies from economies whose exports are heavily based in natural resources, often specifically referring to Canada, New Zealand, Australia and Russia. 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. Contract- The standard unit if Forex trading. Contract note- A confirmation sent that outlines the exact details of the trade. Contract Size- The notional number of shares one CFD represents. Counter Currency- The second listed currency in a currency pair. CPI- Acronym for Consumer Price Index, a measure of inflation. Cross- A pair of currencies that does not include the U.S. dollar. Crown Currencies- Refers to CAD (Canadian Dollar), Aussie (Australian Dollar), Sterling (British Pound) and Kiwi (New Zealand) - countries off the Commonwealth. Currency- Any form of money issued by a government or central bank and used as legal tender and a basis for trade. Currency Pair- The two currencies that make up a foreign exchange rate. Currency Risk- The probability of an adverse change in exchange rates. Currency Symbols- A three-letter symbol that represents a specific currency. For example, USD (U.S. Dollar).
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. Depreciation- The decrease in value of an asset over time. Devaluation- When a pegged currency is allowed to weaken or depreciate based on official actions; the opposite of a revaluation. 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. 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.
E ECB- European Central Bank, the central bank for the countries using the euro. End of Day Order (EOD)- An order to buy or sell at a specific 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/Easter Daylight time. EURO- The currency of the Euro zone. European Session- 07:00-16:00 (London). Expiry Date/ Price- the date and time when an option will expire. Extended- A market that thought to have traveled too far, too fast.
F 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- When an order has been fully executed. 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 currency pair are liquidated in the order in which they were originally opened. Fix- One of approximately five times during the FOREX trading day when a large amount of currency 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. FOREIGN EXCHANGE/FOREX/FX- The simultaneous buying of one currency and selling of another. The global market for such transactions is referred to as the forex or FX 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 currencies involved. Forward Points- The pips added to or subtracted from the current exchange rate in order to calculate a forward price. 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- Group of 8- G7 nations plus Russia. Gap/Gapping- A quick market move in which prices skip several levels without any trades occurring. Gaps usually follow economic data or news announcements. Gearing (also known as Leverage)- 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 of a fraction. Giving it up- A technical level succumbs to a hard-fought battle.
GMT (Greenwich Mean Time)- It is the most commonly referred time zone in the Forex market. GMT doest change during the year, as opposed to daylight savings/summer time. Going Long- The purchase of a stock, commodity or currency for investment or speculation- with the expectation of the price increasing. Going Short- The selling of a currency or product not owned by the seller- with the expectation of the price decreasing. Good For Day- An order that will expire at the end of the day if it is not filled. Good 'till Cancelled Order (GTC)- An order to buy or sell at a specific price that remains open until filled or until the client cancels. Good 'till date- An order type that will expire on the date you choose, should it not be filled beforehand. Greenback- Nickname for the US dollar. Guaranteed Order- An order type that protects a trader against the market gapping. It guaranteed 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 pip in the FX market starting with 000. 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.
I Illiquid- Little volume being traded in the market; a lack of liquidity often creates choppy market conditions. INDU- Abbreviation for the Dow Jones Industrial Average. 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. Introducing broker- A person or corporate entity which introduces accounts to a broker in return for a fee.
IPO- A private company's initial offer of stock to the public. Short for Initial Public Offering.
K 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. 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. 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. London Session- 08:00 – 17:00 (London). Long Possession- 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 the Canadian dollar or the USD/CAD (U.S. Dollar/Canadian Dollar) currency 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. 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 twosided market for any financial product. Market Order- An order to buy or sell at the current price. Maturity- The date of Settlement or expiry of a financial product. 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 that assesses the rate of change in prices. Momentum Players- Traders who align themselves with an intra-day trend that attempts to grab 50100 pips.
N Nas100- An abbreviation 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.
O Offer/Ask Price- The price at which the market is prepared to sell a product. Prices are quoted twoway 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 currency, which is shown to the right in a currency pair. In CFD trading, the Ask represents the price a trader can buy the product. 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. On Top- Attempting to sell at the current market order price. 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. Open Order- An order that will be executed when a market moves to its designated price. Normally associated with good 'till cancelled order. 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. Over the Counter (OTC)- Used to describe any transaction that is not conducted via an exchange.
Over Night Position- A trade that remains open until the next business day.
P Pair- Refers to the offer side of the market dealing. Pair- The Forex quoting convention of matching one currency against the other. 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. Pips- The smallest unit of price for any foreign currency, pips refer to digits added to or subtracted from the fourth decimal place, i.e. 0.0001. 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- The tendency of a trending market to retrace a portion of the gains before continuing in the same direction. Put Option- A product which gives the owner the right, but not the obligation, to sell it at a specified price.
Q 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 currency 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. Resistance 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. Revaluation- When a pegged currency is allowed to strengthen or rise as a result of official actions; the opposite of a devaluation. 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 currencies. 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.
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.
Short-covering- After a decline, traders who earlier went short begin buying back. Short Position- An investment position that benefits from a decline in the market price. When the base currency in the pair is sold, the position is said to be short. Shorts- Traders who have sold, of shorted, a product, or those who are bearish on the market. 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. Spot Market- A market whereby products are traded at their market price for immediate exchange. Spot Price- The current market price. Settlements of spot transactions usually occurs within 2 business days. Spot Trade- The purchase or sale of a product for immediate delivery. Spot contracts are typically settled electronically. Spread- The difference between the bid and offer prices. 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 currency pair. Stock Exchange- A market on which securities are traded. Stop Entry Order- This is an order placed to buy above the current price, or to sell bellow the current 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. Stop Order- 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. Stop orders can be affected by the market gaps and slippage, and will not necessarily be executed at the stop level if the market does not trade at this price. Stop Building- Refers to stop loss orders building up; the accumulation of stop-loss orders to buy above the market in an up move, or to sell below the market in a down move. Strike Price- The defined price at which the holder of an option can buy or sell the product.
Support- A price that acts as floor for past or future price movement. 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 currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate. Swissie- The nickname for the Swiss franc or the USD/CHF 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. Thin- A illiquid, slippery or choppy market environment. A light-volume market that produces erratic trading conditions. Tick (size)- A minimum change in price, up or down. Time of Maturity- The time remaining until a contract expires. Tokyo Sessions- 09:00 – 18:00 (Tokyo). Tomorrow Next (Tom/Next)- Simultaneous buying and selling of a currency 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 currencies appreciate, while countries with trade deficits (imports greater than exports), such as the US, tend to see their currencies 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 FOREX transaction.
U Ugly- Describing unforgiving market conditions that can be violent and quick. 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 an a percentage of the labor force. Uptick- A new price quote at a price higher than the preceding quote.
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 currency 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 terminates with upside breakout.
Whipsaw- A highly volatile market where a sharp price movement is quickly followed by a sharp reversal. Working Order- Where a limit order has been requested but not yet filled.