Glossary

Analyst — an expert who studies financial data of securities or financial patterns

Ask — the price at which the currency or stock is offered

Base Currency — the currency in which the operating results of the bank or institution are reported

BackTesting — creating a hypothetical portfolio performance history by applying current asset selection criteria to prior time periods

Bear Market –— a market distinguished by declining prices

Bid-Offer Spread –— the difference between the buy (bid) and sell (offer) price of a currency or financial instrument

Broker — an agent, who executes orders to buy and sell currencies and related instruments either for a commission or on a spread. In the foreign exchange market, brokers tend to act as intermediaries between banks, bringing buyers and sellers together for a commission paid by the initiator or by both parties.

Bull Market — a market distinguished by rising prices

Buying Selling FX –— Buying and selling in the foreign exchange market always happens in the currency that is quoted first. "Buy dollar/mark" means buy the dollar, sell the mark.

Candlestick Chart — a type of chart that consists of four major prices: high, low, open, close. The body of the candlestick bar is formed by the opening and closing prices. To indicate that the opening was lower than the closing, the body of the bar is blue. If the currency closes below its opening, the body is red. The rest of the range is marked by two "shadows": the upper shadow and the lower shadow.

Chartist –— an individual who studies graphs and charts of historic data to find trends and predict trend reversals, which include the observance of certain patterns and characteristics of the price performance.

Closed Position –— a transaction that leaves the trade with a zero net commitment to the market with respect to a particular currency

Commission –— a transaction fee charged by a broker.

Cross Rate — The exchange rate between any two currencies considered non-standard in the country where the currency pair is quoted. For example, in the US, a GBP/JPY quote would be considered a cross rate, whereas in UK or Japan,. it would be one of the primary currency pairs traded.

Crossover — the crossing of two indicator lines on a chart, usually two moving average lines

Currency –— the type of money that a country uses. It can be traded for other currencies on the foreign exchange market, so each currency has a value relative to another

Currency Symbols

AUD — Australian Dollar

CAD — Canadian Dollar

EUR — Euro

JPY — Japanese Yen

GBP — British Pound

CHF — Swiss Franc

Currency Pair — The two currencies that make up a foreign exchange rate. For example, EUR/USD

Day Trader — speculators who take positions in currencies, stocks or commodities, which are then liquidated prior to the close of the same trading day

Equities — an instrument that signifies an ownership position in a corporation. See Stock.

EURO (ECU) — the currency of the European Monetary Union (EMU); a replacement for the European Currency Unit

Exponential Moving Average (EMA) — The average price of a security or currency over a specified time period used to spot pricing trends by smoothing out the large fluctuations. The exponential variety assigns more value or weight to the most recent data.

Fibonacci Retracement — A retracement is a price movement in the opposite direction of the previous trend. Fibonacci refers to a number sequence prevalent in nature that shows trends that adhere to certain percentages. The key retracement values in the form of a percentage are 38.2%, 50% and 61.8%.

Financial Instrument — an instrument having monetary value, i.e. currencies, stocks, bonds, commodities

Foreign Exchange (Forex, FX) — the simultaneous buying of one currency and selling of another

Foreign Exchange Market — Market where currencies are traded internationally. About a trillion (a million, million) dollars’ worth of foreign exchange is traded globally every day, making forex larger than all bond markets put together. Currency markets exist in the form of spot, forward, futures and options markets. Foreign exchange transactions are made up mainly of speculative short-term investment based on expected currency movements. This accounts for the lion's share of forex market volume.

Fundamental Analysis — analysis of economic and political information with the objective of determining future movements in a financial market

FX — foreign exchange

Gap — The price gap between consecutive trading ranges. For example, a gap would occur if the open price of today was different than the closing price yesterday.

Going Long — the purchase of a stock, commodity or currency for investment or speculation

Going Short — the selling of a currency or instrument not owned by the seller

Leverage (also called margin) — the ratio of the amount used in a transaction to the required security deposit

Liquidity — the ability of a market to accept large transactions without large price changes

Long — the holding of an excess of a particular currency, or buying and holding a currency or stock

Long Position –— A position that appreciates in value if market prices increase. When the base currency in the pair is bought, the position is said to be long.

MACD — the Moving Average Convergence Divergence is a common crossover technical indicator

Margin — Borrowed money to purchase securities. Buying or selling on credit. The required equity that an investor must deposit to collateralize a position.

Margin Call –— a request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer

Market Order –— an order to buy or sell a financial instrument immediately at the best possible price

Microsoft Excel — a software program that allows the easy analysis and manipulation of data using tables and formulas

Moving Average (MA) — The average price of a security or currency over a specified time period used to spot pricing trends by smoothing out the large fluctuations. See Simple Moving Average and Exponential Moving Average.

Offer The price at which a seller is willing to sell. The best offer is the lowest such price available.

Open Position — the amount of a security either owned (a long position) or owed (a short position) by an investor or dealer. A position that is not yet closed.

Overnight –— a deal from today until the next business day

Overnight Position - A trade that remains open until the next business day

Pip –— digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called points. In the case of the Japanese yen, a pip is 0.01.

Pip Cost — the amount that you will make or lose for each pip movement. Basically the dollar value of 1 pip move. This depends on whether you have a mini or full size account.

Position –— The netted total commitments in a given currency. A position can be either flat or square (no exposure), long (more currency bought than sold) or short (more currency sold than bought).

Profit Taking –— the closing out of a position to realize profits.

Profit /Loss or "P/L" –— the actual "realized" gain or loss resulting from trading activities on closed positions, plus the theoretical "unrealized" gain or loss on open positions

Rally –— a recovery in price after a period of decline

Range –— the difference between the highest and lowest price of a currency recorded during a given trading session

Resistance Point or Level –— a price recognized by technical analysts as a price which is likely to result in a rebound but if broken through is likely to result in a significant price movement

Risk –— the degree of uncertainty associated with an investment

Risk/Return –— The relationship between the risk and return on an investment. Usually, the more risk you are prepared to take, the higher the return you can expect. Depositing your money in a bank is safe and therefore a low return is regarded as sufficient. Investing in the stock market exposes you to more risk (from capital losses), so investors will expect a higher return.

Short Position –— An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.

Short Covering –— buying to unwind a shortage of a particular currency or asset

Signal — a technical analysis term for any indication of when it’s time to buy or sell

Simple Moving Average (SMA) — The average price of a security or currency over a specified time period used to spot pricing trends by smoothing out the large fluctuations. The Simple variety assigns equal weight to each data point in the period.

Spread –— the difference between the bid and ask price of a currency

Spreadsheet — an organization of numerical data in rows and columns in order to calculate and make adjustments

Stock — a financial instrument that signifies an ownership position (called equity) in a corporation

Stop Loss Order — Order given to ensure that, should a currency weaken by a certain amount, a short position will be covered even though his involves taking a loss. Often used to minimize exposure to losses if the market moves against an investor's position.

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.

Technical Analysis –— is concerned with past price trends and often with the help of chart analysis in a market in order to be able to make forecasts about future price developments of the currency being traded

Technical Correction –— an adjustment to price not based on market sentiment but technical factors such as volume and charting

Tick — a minimum change in price, up or down

Up-Tick –— a transaction executed at a price greater than the previous transaction

Volatility –— a measure of the amount by which an asset price is expected to fluctuate over a given period

Whipsaw — slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal

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