The indicator that measures the acceleration and the deceleration of the current driving force. It change direction before any changes in the driving force, therefore, change its direction before the price.
Accumulation/Distribution (A/D)
A momentum indicator that attempts to gauge supply and demand by determining whether investors are generally "accumulating" (buying) or "distributing" (selling) by identifying divergences between the price and volume flow. It is calculated using the following formula:
Acc/Dist = ((Close - Low) ? (High - Close)) / (High - Low) * Period's volume
Alligator
Consists of three lines, overlaid on a pricing chart, that represent the jaw, the teeth and the lips of the beast, it is created to help the trader confirm the presence of a trend and its direction. The tool works best when combined with a momentum indicator.
Jaw - a 13-period Smoothed Moving Average, moved into the future by 8 bars;
Teeth - a 8-period Smoothed Moving Average, moved into the future by 5 bars;
Lips - a 5-period Smoothed Moving Average, moved into the future by 3 bars.
Aroon
The AROON Oscillator indicator uses AROON Up/Down to calculate the strength of a current trend and the likelihood that this trend will continue. The calculation is Aroon Up ? Aroon Down. Readings above 0 indicate that an upward trend is present, whereas readings below 0 indicate the instrument is on a downtrend. Many traders will set alerts for when the FX instrument has just crossed above the 0 line ? this suggests the beginning of a new uptrend (buy). Similarly, if the indicator starts to drop below the zero line this suggests the very start of a downtrend (sell).
Average Directional Movement Index (ADX)
The Average Directional Index (ADX), developed by Welles Wilder, measures the strength of the current trend, and determines the direction of the market, if any. A strong trend is indicated by a rising ADX, whereas a consolidating, or sideways, market is evident with a falling ADX. Note that the ADX does not indicate whether the market is trending up or down.
Average Directional Movement Index Rating (ADXR)
A technical analysis tool that averages the day's average directional index (ADX) with the ADX from two weeks prior. It is designed to indicate the strength of the ADX trend.
Awesome Oscillator (AO)
Awesome Oscillator (AO) is a momentum indicator reflecting the precise changes in the market driving force which helps to identify the trend's strength up to the points of formation and reversal.
B
Balance of Power (BoP)
An indicator measures the strength of the bulls vs. bears by assessing the ability of each to push price to an extreme level, and is calculated by:
BOP = (Close price ? Open price) / (High price ? Low price)
Base Currency
The first currency in a currency pair. In a currency exchange, the exchange rate is quoted as the units of one currency in terms of a single unit of a base currency. For example, in a currency exchange of U.S. dollars for Japanese Yen, the base currency is the U.S. dollar.
Bear Market
A market distinguished by falling prices.
Bears Power
The Bears' Power indicator shows the strength of the bears. If the indicator is below nought, the bears are strong; if it is above nought, they are weak. It is based on the moving average and the lowest price in a day, the difference shows how strong the bears are; the bigger the gap, the more the bears brought down the price.
The Bears' Power (BEARS) indicator is the lowest price for the day (LOW) minus the 13-day exponential moving average (EMA) price:
BEARS = LOW - EMA (13)
Bollinger Bands ( up to 3 σ)
Bollinger Bands are displayed as three bands. The middle band is a normal moving average. The upper band and lower band are shifted up and down from the middle band by adding and subtracting the number of standard deviations (e.g. 2σ).
Bull Market
A market distinguished by rising prices (i.e. prices going up).
Bulls Power
The Bulls' Power indicator shows the strength of the bulls. If the indicator is above nought, the bulls are strong; if it is below nought, they are weak. It is based on the moving average and the highest price in a day, the difference shows how strong the bulls are; the bigger the gap, the more the bulls pushed up the price.
The Bears' Power (BEARS) indicator is the highest price for the day (HIGH) minus the 13-day exponential moving average (EMA) price:
BULLS = HIGH - EMA (13)
Broker
An individual or firm that acts as an intermediary, put together buyers and sellers for a fee or commission.
C
Cable
Trader jargon referring to the Sterling/US Dollar exchange rate.
Candlestick Chart
A price chart that displays the high, low, open, and close price over a specified period of time. There are many trading strategies based upon patterns in candlestick charting.
Carry Trade
An investor sells a certain currency with a relatively low interest rate and uses the funds to buy a different currency yielding a higher interest rate.
Cash Market
The marketplace for immediate settlement.
Central Bank
A government body that manages a country's monetary policy.
Commodity Channel Index (CCI)
Commodity Channel Index (CCI) is an oscillator introduced by Donald Lambert in 1980. Though its name refers to commodities, it can also be useful in equities and currency trading as well.
CCI measures the statistical variation from the average. It is an unbounded oscillator that generally fluctuates between +100 and -100.
Approximately 70-80% of the values tend to fall inside the +100 to -100 range. Above the +100 value is considered overbought while below the -100 value is considered oversold. As with other overbought/oversold indicators, this means that there is a large probability that the price will correct to more representative levels. Therefore, if values stretch outside of the above range, a retracement trader will wait for the cross back inside the range before initiating a position.
Consumer Price Index (CPI)
An economic indicator which gauges changes in the cost of living by measuring price changes in a common basket of goods and services that most people use in daily life.
Counter Party
The other party that participates in a financial transaction. For every transaction that must have a counterparty for the transaction in order to go through. Every buyer of an asset must be paired up with a seller that is willing to sell, vice versa.
Cross Rate
The exchange rate between any two currencies that are considered non-standard in the country where the currency pair is quoted.
Currency Risk
The probability of sustaining a financial loss when there is an adverse movement in exchange rates.
Currency Swap
An arrangement in which two parties exchange the holding of different currencies over a specified time period by way of the spot buying/selling of the currencies against a forward reversing exchange contract at an exchange rate calculated by adjusting the interest rate differential between the 2 currencies.
Currency Option
A contract that grants the holder the right, but not the obligation, to buy or sell currency at a specified exchange rate during a specified period of time.
Currency Swaption
The option to enter into an currency swap. In exchange for an option premium, the buyer gains the right but not the obligation to enter into a specified swap agreement with the issuer on a specified future DeMarkerdate.
D
Day Trading
This refers to positions which are opened and closed on the same trading day.
Deflation
A deep and long-lasting decrease in the price of goods and services within an economy.
DeMarker
Demarker Technical Indicator is based on the comparison of the period maximum with the previous period maximum. If the current period (bar) maximum is higher, the respective difference between the two will be registered. If the current maximum is lower or equalling the maximum of the previous period, the naught value will be registered. The differences received for N periods are then summarized. The received value is used as the numerator of the DeMarker and will be divided by the same value plus the sum of differences between the price minima of the previous and the current periods (bars). If the current price minimum is greater than that of the previous bar, the naught value will be registered.
When the indicator falls below 30, the bullish price reversal should be expected. When the indicator rises above 70, the bearish price reversal should be expected.
Directional Movement Index (DMI)
Directional movement compares an asset's trading range for one day to the trading range on the previous day. Positive directional movement (+DM) occurs when today's high is greater than yesterday's high, while negative directional movement (-DM) appears when today's low is less than yesterday's low. Based on the average of positive and negative directional movement over a certain time period, a positive directional movement indicator (+DI) and a negative directional movement indicator (-DI) can be plotted. When the +DI crosses the -DI to the upside, it generates a long signal. On the contrary, a short signal is generated when the +DI crosses through the -DI to the downside.
E
Economic Indicator
Statistics issued by governmental and non-governmental bodies that indicates current economic growth and stability. Common indicators include employment rates, unemployment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
End Of Day Order (EOD)?
An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 5PM NY time.
Envelopes
A type of technical indicator typically formed by two moving averages that define upper and lower price range levels. An envelope is a technical indicator to identify extreme overbought and oversold conditions in a market. The envelopes, which typically appear overlaid on a price chart, are also useful in identifying trading ranges.
Estrangement
Estrangement is a representation of the current price, the moving average line and the degree of separation between the moving average lines.
Exponential Moving Average (EMA)
A type of moving average that is similar to a simple moving average, except that more weight is given to the latest data. The exponential moving average is also known as "exponentially weighted moving average". It reacts faster to recent price changes than a simple moving average. The 12- and 26-day EMAs are the most popular short-term averages, the 50- and 200-day EMAs are used as signals of long-term trends.
F
Federal Reserve (Fed)
The central bank of the United States.
Floating Profit / Loss
Unrealized profit or loss on open positions calculated at marked-to-market value.
Foreign Exchange - (Forex, FX)
Buying of one currency against the selling of another.
Forward
A contract to buy/sell currencies at a pre-determined FX rate on a specified future date.
Forward Points
The number of basis points added to or subtracted from the current spot rate to determine the forward rate.
Fundamental Analysis
An analysis of economic and political information (macro factors) with the objective of determining future movements in a financial market.
Futures Contract
An agreement to exchange a good or instrument at a pre-price on a future date.
G
Gearing Ratio
An strategy used by investors/traders with the intention to maximise his investment returns by taking an investment portfolio of a greater value relative to the money (margin) deposited as collateral. Gearing ratio measures the multiplying effect of the capital deployed.
Gross Domestic Product (GDP)
The total value of a country's output produced within its physical borders.
H
Heikin-Ashi (Average Bar)
A type of candlestick chart that shares many characteristics with standard candlestick charts, but differs because of the values used to create each bar. Instead of using the open-high-low-close (OHLC) bars like standard candlestick charts, the Heikin-Ashi technique uses a modified formula:
Close = (Open+High+Low+Close)/4
Open = [Open (previous bar) + Close (previous bar)]/2
High = Max (High,Open,Close)
Low = Min (Low,Open, Close)
High/Low Bands
A band created by two winding parallel lines above and below a short-term moving average that borders most price fluctuations. The moving average is based on the high and low prices. The resulting two moving averages define the edges of the band. A close above the middle band suggests a buying signal and a close below gives a selling signal.
I
Ichimoku Kinko Hyo
A technical indicator that is used to gauge momentum along with future areas of support and resistance. The Ichimoku indicator is comprised of five lines called the tenkan-sen, kijun-sen, senkou span A, senkou span B and chickou span. This indicator was developed so that a trader can gauge an asset's trend, momentum and support and resistance points without the need of any other technical indicator.
IFD
If Done Order - a two-legged order, upon execution of the first leg order, the second leg is then activated. Either leg can be a Stop, a Limit, or an OCO in a dormant state.
IFD-OCO
If Done order accompanied by One Cancels the Other order
IMF
International Monetary Fund.
Initial Margin
The initial deposit of collateral required to enter into a position as a guarantee on future performance.
Interbank Rates
Rates banks trade between each other.
K
Kagi-Ashi (Step Chart)
Step charts(KAGI-ashi) were created when the Japanese stock market began trading in the 1870. It displays a series of connecting vertical lines where the thickness and direction of the lines are dependent on the underlying price action. It ignores the passage of time. If prices continue to move in the same direction, Up or Down, the vertical line is extended. However, if prices reverse by a "reversal" amount, a new line is then drawn in a new column. When prices penetrate a previous high or low, the colour of the Kagi line changes. "Reversal" amount is a key factor to this chart, which is depending to volatility or price of the asset.
Keltner Channel
A volatility based 'envelope' indicator that measures the movement of asset in relation to an upper and lower moving-average band.
L
Leverage
Depositing a certain percentage of the total contract value as collateral for entering into a contract. The purpose is to gear up the investment portfolio to maximise the profit opportunity.
LIBOR
London Inter-Bank Offer Rate.
Limit Order
Order to buy / sell at a determined price level.
Linear Regression Line
A statistical measure that attempts to determine the strength of the relationship between one dependent variable (usually denoted by Y) and a series of other changing variables (known as independent variables). Linear regression uses one independent variable to explain and/or predict the outcome of Y.
Linear Regression: Y = a + bX + u, where:
Y= the variable that we are trying to predict
X= the variable that we are using to predict Y
a= the intercept
b= the slope
u= the regression residual
Liquidation?
The mandatory closing of an open position through the execution of an offsetting transaction.
Liquidity
A market's ability to accept large transaction with minimal to no impact on price stability.
Long Position
Long position is when the bought quantity is more than the sold quantity. A long position appreciates in value if market prices increase.
M
Maintenance Margin
Minimum margin deposit required for an investor to maintain his open positions. Margin call will be triggered if the margin deposit fall below this required level.
Margin
The required amount of equity that an investor must deposit to open a position.
Margin Call
A demand on an investor to deposit additional funds to top up the deposit back to initial margin level.
Marked-to-Market
Process of re-evaluating all open positions at current market prices. These new values then determine margin requirements.
Market Order
Order to buy / sell at immediate price level.
Market Risk
An exposure to changes in market prices.
Maturity
The pre-determined time of settlement for a transaction.
Momentum
Momentum indicator can be used as a trend-following oscillator similar to the MACD. Buy when the indicator bottoms and turns up, and sell when the indicator peaks and turns down. If the Momentum indicator reaches extremely high or low values (relative to its historical values), it is assume that the current trend is likely to continue.
Moving Average Convergence / Divergence (MACD)
Moving Average Convergence / Divergence (MACD) gives the cross-over of the exponential moving averages (EMA) of 2 selected time periods - "n1" and "n2" with the EMA line of a selected third time period "n3" overlay on top. The common numbers used for "n1", "n2" and "n3" are 12, 26 and 9.
When the MACD is above zero, it means the 12-day moving average is higher than the 26-day moving average. This is a bullish signal because it indicates that current expectations are more bullish than previous expectations. When the MACD falls below zero, it means that the 12-day moving average is less than the 26-day moving average, implying that a bearish force makes a shift in the supply/demand lines.
O
OCO
One Cancels the Other - a two way order that consist of a limit order and a stop order placed at the same time, as one order executed, the other will be cancelled.
Offsetting Transaction
A trade which serves to cancel or offset some or all of the open positions.
One Cancels the Other Order (OCO)
When the first order of an conditional order is executed, the second order will be cancelled automatically.
Open Order
An order that is still valid.
Open Position
A position that has not yet been offset / closed.
Overnight
A trade that remains open until the next business day.
Over the Counter (OTC)
A transaction that is not conducted over an exchange.
P
Parabolic SAR
A technical indicator to determine the direction of an asset's momentum and the point in time when this momentum has a higher-than-normal probability of switching directions. Also known as the "stop and reversal system", it is shown as a series of dots placed either above or below an asset's price on a chart.
Pips
Digits added to or subtracted from the fourth decimal place, i.e. 0.0001, also called Points.
Point and Figure
A chart that plots day-to-day price movements without taking into consideration the passage of time. Point and figure charts are composed of a number of columns that either consist of a series of stacked X's or O's. A column of X's is used to illustrate a rising price, while O's represent a falling price. This type of chart is used to filter out non-significant price movements, and enables the trader to easily determine critical support and resistance levels.
Political Risk
An exposure to changes in governmental status or policy in which there will be an adverse effect on an investor's position.
Position
The net holding of a investment product.
Premium
This represents the amount by which the forward or futures price exceed the spot price.
Price Transparency
Quotes made openly to all market participants.
Producer Price Index
An economic indicator that gauges price changes that producers receive for their output.
Psychological Line
An indicator in the ratio of the number of rising periods over the total number of periods. It reflects the buying power in relation to the selling power.
If PSY is above 50%, it indicates that buyers are in control. Likewise, if it is below 50%, it indicates the sellers are in control. If the PSY moves along the 50% area, it indicates balance between the buyers and sellers and therefore there is no direction movement for the market.
R
Rank Correlation Index (RCI)
Rank Correlation Index (RCI) is an oscillator which evaluates the correlation between the rank of the price and the rank of the date within a certain period. "RCI Above" is a trigger which occurs when the RCI is above the given threshold. "RCI Below" is a trigger which occurs when the RCI is below the given threshold.
Rate (FX)
The exchange rate of converting one currency into another.
Rate Of Change (ROC)
The speed at which a variable changes over a specific period of time. Rate of change is often used when speaking about momentum, and it can generally be expressed as a ratio between a change in one variable relative to a corresponding change in another. Graphically, the rate of change is represented by the slope of a line.
Relative Strength Index (RSI)
Relative Strength Index (RSI) has a value between 0 and 100. A lower level and an upper level should be shown to indicate oversold and overbought levels. Typically, the upper and lower levels are recognized at 70 and 30, respectively. When the RSI moves below the lower level and reverses direction, a bullish buy signal appears. When the RSI moves above the upper level and peaks, a bearish sell signal occurs. The most commonly used time spans "n" are 10 days and 14 days.
Relative Vigor Index (RVI)
An indicator used in technical analysis that measures the conviction of a recent price action and the likelihood that it will continue. The RVI compares the positioning of an asset's closing price relative to its price range, and the result is smoothed by calculating an exponential moving average of the values.
Resistance
A term used in technical analysis indicating a specific price level above which analysis predicts the product will not break through.
Revaluation
The calculation of the book value of the open position using the market closing rate.
Risk
An exposure to uncertain change, most often used with a negative connotation of adverse change.
Risk Management
A system control policy to mitigate or control various types of risk.
Roll-Over?
Positions not closed at day end are extended to the next trade day, calculated from the interest differential between the two currencies.
S
Sell/Buy Spread
The difference between the sell price and the buy price of an exchange rate.
Settlement
The physical delivery of the currencies traded between the two parties to a contract on maturity date.
Simple Moving Average (SMA)
SMA is calculated by adding the asset prices for the most recent "n" time periods and divided by "n". Moving average represents the consensus of investor expectations over a specific time span (e.g. 20 days). Investors typically buy when asset price rises above its moving average and sell when the price drops below.
Shin-Ne-Ashi (Trident Chart)
Trident chart(SHIN-NE-ashi), same as Step chart, display a series of connecting vertical lines where the direction of the lines are dependent on the price action. The charts ignore the passage of time. If prices continue to move in the same direction, Up or Down, the vertical line is extended. However, if prices reverse by the amount more than last three, a new line is then drawn in a new column. Unlike other charts such as, Step chart or Brick chart, it reverse only when a new price exceeds or underlies the latest three prices(high or low). When prices penetrate a previous high or low, the colour of the Trident line changes.
Short Position
The net sold quantity of a financial product. Short Positions benefit from a decline in market price.
Spot Price
The current market price. Spot transactions are settled two business days after trade day.
Sterling
A jargon for British Pound.
Stochastic Oscillator
A technical momentum indicator that compares the closing price to its price range over a given time period. The oscillator's sensitivity to market movements can be reduced by adjusting the time period or by taking a moving average of the result.
Stop Order
Order to limit trading losses by liquidating positions when the market price breaks a pre-determined level.
Support Levels
A term used in technical analysis indicating a specific price level below which analysis predicts the product will not drop further.
Swap
A currency swap is the simultaneous sale and purchase of the same amount of a given currency at agreed spot rate and forward rate between the two parties.
T
Technical Analysis
An effort to forecast prices by analysing market data, i.e. historical price trends and averages, volumes, open interest, etc.
Transaction Cost
The cost of buying or selling a financial product.
Transaction Date
The execution date of trade.
Turnover
The total money value of all executed transactions in a given time period.
Two-Way Price
The bid and offer rate of a FX quote.
V
Value Date
The date on which counterparts to a financial transaction agree to settle their respective obligations. For spot currency transactions, the value date is normally two business days after trade date.
Volatility (Vol)
A statistical measure of a market's price movements over time.
Volume
The number of contracts traded over a given period of time.
W
Williams' Percent Range
A dynamic technical indicator, which determines whether the market is overbought/oversold. Williams' %R is very similar to the Stochastic Oscillator. The only difference is that %R has an upside down scale and the Stochastic Oscillator has internal smoothing.
Z
Zigzag
A trend following indicator that is used to predict if the momentum on reversal. The indicator is to eliminate random price fluctuations and attempts to profit when the trend changes. The Zig Zag tool is often used in wave analysis to determine the positioning of the asset in the overall cycle.
