Glossary

Acronym for European Central Bank, the central bank of the 19 EU member states of the Euro

Short form for Employment Cost Index. ECI is a quarterly economic series used to indicate the rising and falling tendencies in employment costs, thus measuring inflation in salaries, wages and employer-paid benefits in business and government establishments in the United States.

A set of statistics used to show current economic conditions. It allows analysis of economic performance and predictions of future performance. Economic indicators include a series of indices, reports and summaries, such as stock market prices, money supply changes or consumer leverage ratio.

As one of the most relevant technical indicators, Elder-rays combine the properties of trend following indicators and oscillators. Based on the relative strength of market Bull and Bear power, Elder-rays are used to estimate the power struggle between these two powers. The moving average stands for the agreed-on price between sellers and buyers for a certain period of time; the maximum price shows the maximum power of the buyers; the minimum price reflects the maximum power of sellers.

Based on the theory of market behavior and developed by Ralph Nelson Elliot (1871-1948), the Elliot Wave Principle is a form of technical analysis used by traders to analyze financial market cycles and forecast future trends. According to Elliot, prices usually move in five waves in the direction of the larger trend (impulse waves) and in three waves into the opposite direction (corrective waves), and by analyzing these waves, traders can enter their trades at low-risk points and exit them at high-reward points.

ECI is a quarterly economic series used to indicate the rising and falling tendencies in employment costs, thus measuring inflation in salaries, wages and employer-paid benefits in business and government establishments in the United States.

The Envelopes consist of two Moving Average indicators (showing the mean instrument price value for a certain period of time), one of which shifts upwards while the other one shifts downwards. By selecting the optimum relative number of band margins shifting, market volatility can be determined. Envelopes define the upper and lower margins of the price range: sell signals indicate that the price has reached the upper margin of the band; buy signals indicate that the price has reached the lower margin.

The secure amount that clients have in their accounts, taking into consideration the open positions, balance and profit/loss.

The exchange rate shows how much a currency is worth in terms of another currency. For instance, in the pair EUR/USD, the exchange rate is 1.30. This means €1 (base currency) is worth $1.30. So you can buy $1.30 with €1, or sell €1 for $1.30.

The process of completing an order or deal.

Also called trading robots, the EAs are algorithmic trading systems that allow automatic trading on your MT4. The programs are written in MQL, MetaTrader programming language

The due date at which a CFD will no longer be tradable. At this date the new contract will become available.

The Factory Orders report, released by the US Census Bureau, measures dollar volume of new orders, shipments, unfilled orders, and inventories reported by domestic manufacturers. Although the monthly report figures do not affect markets, they help forecast inventory calculations in the quarterly Gross Domestic Product report.

Stands for Financial Conduct Authority, the regulatory body for the financial services industry in the United Kingdom.

The product intervention measures FCA has adopted include:

• Leverage limits on the opening of a position by a retail client from 30:1 to 2:1, which vary according to the volatility of the underlying;
• A margin close out rule on a per account basis. This will standardise the percentage of margin (at 50% of minimum required margin) at which providers are required to close out one or more retail client’s open CFDs;
• Negative balance protection on a per account basis. This will provide an overall guaranteed limit on retail client losses;
• A restriction on the incentives offered to trade CFDs; and
• A standardised risk warning, including the percentage of losses on a CFD provider’s retail investor accounts.

Also known as Federal Reserve, FRS, or simply the Fed, it is the central banking system of the United States.

Refers to state-issued money, without any intrinsic value. Fiat currency is the opposite of a gold standard arrangement, which means that the currency value rises and falls on the market in response to demand and supply pressures.

As a method of technical analysis, the Fibonacci retracement is based on the idea that markets tend to retrace a predictable portion of a move, and then continue moving in the original direction. Fibonacci retracement levels are used as support and resistance levels.

Often used when investors want to buy large quantities of stocks at a particular price, FOK refers to an order to buy or sell a security that must be cancelled if not carried out at once.

The FCA is the UK regulatory authority for financial services.

Document (check, draft, bond, share, futures or options contract, bill of exchange) with monetary value and that represents a binding (legally enforceable) agreement between two or more parties regarding the payment of money. There are two basic types of financial instruments: debt instrument (loan with agreement to pay back funds with interest) and equity security (share or stock).

It is the financial arbitrator for disputes with regulated companies in the financial markets.

A fixed exchange rate that is, however, frequently re-evaluated.

An exchange rate the value of which is determined by market forces.

It refers to the profit or loss that may only be realized in case the open contracts are settled.

The Force Index measures the actual buying or selling pressure: high positive values indicate a strong rising trend, while low values indicate a strong downward trend. The index can be better approximated with the help of the Moving Average (MA): approximation with a short moving average helps to find the best opportunity to open and close positions; with approximation using a long moving average trends and their changes can be indicated.

The system by which one currency is exchanged for another. It enables international transactions to take place.

It is the abbreviation for Foreign Exchange, the market of currencies trading, where participants are able to speculate (buy and sell) on currencies.

Fractals are versatile indicators, pointing the tops and bottoms where the market reverses, and are used either stand-alone or combined with other forex indicators. Fractals are used for trend confirmation and trend consolidation, and they can be filtered with the help of the Alligator Indicator.

The amount of equity not used for the trades open in the market, and therefore available to withdraw.

A method used to forecast future currency value by providing analytical details for economic, political and social factors. While technical analysis is based on the results produced by these factors in terms of various price formations, fundamental analysis mainly deals with defining the causes of existing and future price movements.

A future is a contract for the execution of a transaction at a set date in the future. The price for the future transaction is agreed in the present.

Central marketplace which has established regulations and where buyers and sellers meet to trade futures and options on futures contracts.

Refers to the G7 member states, completed with four further countries (Belgium, the Netherlands, Sweden and Switzerland), and aims to coordinate fiscal and monetary policies for the sake of a stable global economic system.

Stands for Group of Seven, and refers to the worldwide leading industrial nations that meet to discuss global economic issues. The G7 members are Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

A gap is a break between prices that occurs when the price of an instrument moves sharply up or down with no trading occurring in between. A gap can have a significant impact on the execution of pending orders.

The Gator Oscillator helps visualize upcoming changes in trends (i.e. the periods in which Alligator Indicator lines widen or narrow down).

Short form for Gross Domestic Product. GDP is often correlated with the living standard, as it is the market value of all services and goods produced in a country during a particular time period. It indicates the pace of a country’s economic growth and is determined in three different ways: through product output, income and expenditure.

Refers to the purchase of a currency pair.

Also known as selling short, it refers to selling a currency pair by first borrowing it, then returning it at a later time by buying it back.

In technical analysis, a golden cross refers to the fact that two moving averages intersect: usually a short one like a 20-day and a long one such as 40-day. This is considered a favourable sign that the underlying currency will move in the same direction.

The GDP deflator is a measure of price levels for all goods and services in an economy; in other words, it measures the annualized quarterly implied rate of inflation for all economic activities. By using the deflator, the difference between nominal and real GDP can be calculated.

The difference between company revenues or sales and sales costs.

It stands for good-till-cancelled order. It is a type of limit order that remains in effect until it is either executed or cancelled, as opposed to a day order, which expires if not executed by the end of the trading day.

As opposed to soft currency, hard (or strong) currency is currency that investors have confidence. In terms of economics, it refers to a globally traded currency, which is stable. Due to its stability and reliability, investors have confidence in hard currency.

A price trend pattern with three peaks, the one in the middle being higher than the surrounding two. It is a pattern seen as an indicator of a trend reversal.

A position that reduces the risk of a trader’s primary position.

An investment fund that aims to gain absolute return (profit made on an asset irrespective of market movements), using trading methods like short selling, swaps, derivatives, program trading, and arbitrage.

It is a trading practice of holding open buy and sell positions on the same instrument, hence mitigating the risk of market fluctuation.

Selling at the bid price.

Refers to extremely high, out-of-control inflation: the general price level increases rapidly as the internal currency, as opposed to a foreign currency, and loses its value at an accelerated rate (e.g. the hyperinflation in Zimbabwe between 2004-2009).

The IKH, also called ichimoku, is a candlestick charting technique that provides a clearer picture of potential price action, as it indicates market movement with its entry and exit points. It is used to determine market trends, support and resistance levels, and to create sale and purchase signals.

It stands for Institute for Economic Research (Institut für Wirtschaftsforschung). Based on the feedback of over 7,000 German business leaders, the German IFO business survey is considered to be a leading economic indicator for both Germany and Europe. It provides assessment of the current and upcoming economic climate, based on latest economic data.

Short form for International Monetary Fund, which consists of 186 member countries and provides financing and policy advice to members in economic difficulties. It cooperates with developing countries to help them achieve macroeconomic stability and decrease poverty.

The volatility (degree to which the value of a security changes over time) that the market expects in the price of a security. It is a measure, but not the direction, of future price movements, with a tendency to rise in bear markets and fall in bull markets.

In a broader sense, an index is a statistical measure of change in economy. In the financial markets, indices are imaginary securities portfolios that represent a particular market or market segment, and index variations indicate market trends.

The world’s indices are the exchanges where a country’s stocks are traded, such as the Japanese NIKKEI, the German DAX, the English FTSE and the American NASDAQ.

IP is an economic measure of the changes in output for the industrial sector (such as manufacturing, mining and utilities) of the economy, indicating a country’s industrial capacity.

An economic condition in which prices for consumer goods and services rise, eroding purchasing power.

The deposit that clients need to make before they are allocated a trading limit. The first deposit that a client makes and that determines a corresponding maximum trade size.

Any tradeable financial product such as a currency pair, a CFD or a commodity.

The percentage of an amount of money paid for the use of borrowed funds.

International Trade measures the difference between imports and exports (trade balance) of all goods and services. The level of the international trade balance, along with the changes in exports and imports, indicate market trends, and so they are closely followed by foreign exchange markets.

Positions that are supposed to be opened and closed within one day.

JPY is the acronym for Japanese Yen. For further information about currency pairs and their symbols, please read our Trading Guides.

Informal name given to the New Zealand dollar (NZD). The $1 coin depicts the kiwi bird, which New Zealand is mostly associated with.

Leverage is a way for an investor to boost their trading power and manage a greater position in the market with a nominal investment. An online broker may offer leveraged trading for up to 30 times the value of trader’s investment. It is important to consider the potential downside of using leverage as well.

It is a pending order used to close a trade when the market is moving profitably to the open position.

As a basic chart type, line charts visualize a trend in data over time intervals by connecting the closing price values straight-line segments.

Refers to the closing of an existing position through the execution of an offsetting transaction.

Refers to the relationship between transaction size and price movements. If large transactions can occur with only minimal price changes, a market can be called ‘liquid’.

A live account gives you access and the ability to deal in the financial market through your trading platform.

Hedging position that involves the purchase of futures contracts in order to protect investors and traders against price rises in the corresponding cash markets.

When a currency pair is bought, the primary currency in the pair is ‘long’, and the secondary currency is ‘short’.

Positions supposed to last for several months or even years.

Foreign exchange is traded in lots. A standard lot means $100,000 of any currency you fund your account with. Trading with only $1 is not possible.

The main principle on which regulated futures bookkeeping is based. It refers to the adjustment made to trading accounts at the end of the day in order to reflect profits and losses on existing positions. Accordingly, winnings are credited to the account, while losses are debited with instant execution.

Volume of market liquidity that refers to the ability of the market to handle large trading volumes without significantly affecting prices. Market depth is relevant to traders as they can study it to to determine how and when particular orders may impact price action, and to help them find the right timing for entering and exiting trades.

The MFI determines the efficiency of price movement by analyzing the amount that the price changes for each unit of volume. The BW MFI (Bill Williams Market Facilitation Index) evaluates the efficiency of market price movements. Changes in the value of this index are usually compared to changes in volume in order to determine market interest in a particular price trend.

An independent trading software platform developed for trading forex, options and futures; best known for its diverse technical analysis ability and the option to run forex robots and experts advisors.

A position the goal of which should be reached within 1-3 weeks.

Controlling of trading accounts via mobile devices such a cell phone or a PDA (Personal Digital Assistant). Wireless access technologies WAP and GPRS provide access to the Internet.

An indicator for market movement and the strength of trends through time. When a trend starts, momentum is the highest, and as the trend changes, it is the lowest. When price and momentum diverge, it suggests weakness. If price extremes occur with weak momentum, it signals the end of movement in that direction. A potential change in price direction can be expected if momentum is trending strongly and prices are flat.

The MFI is an indicator that shows the intensity and volume of money invested in and withdrawn from a commodity. It compares the value traded on up-days to the value traded on down-days, anticipating trend weakness and points of reverse shift.

The Moving Average is a technical indicator that shows the mean instrument price value for a certain period of time. There are four main types of moving averages (simple, exponential, smoothed and linear).

The MACD turns two-trend following indicators (moving averages) into a momentum oscillator by subtracting the longer moving average from the shorter moving average. It is one of the most effective momentum indicators as it combines trend following and momentum; and traders can look for signal crossovers, centerline crossovers and divergences to generate signals.

Though similar to the MACD (Moving Average Convergence/Divergence), the OsMA is a modified version of the latter. It applies more smoothing features, and helps spot out convergences and divergences that indicate market changes.

National Association of Securities Dealers Automatic Quotation System. NASDAQ provides market participants with price quotations about common stock issues most actively traded in the OTC (over-the-counter) market.

Refers to the difference between long and short market positions held by an individual or a company. A dealer with 100 short futures contracts and 80 long contracts will have a net short position of 20 contracts. Conversely, once he sold 120 contracts and bought 150 contracts, he will have a net long position of 30 contracts.

Also known by the name NYSE, or the Big Board, it is the world’s biggest equity exchange based on the total market capitalization of its listed securities. Operated by NYSE Euronext, its average daily trading value was estimated to 153 billion USD in 2008.

It is an essential economic indicator and statistic released every month by the US Department of Labor. As part of a comprehensive report on the current state of the labor market, nonfarm payroll employment reports include 80% of the workers who produce the entire GDP in the United States. These reports are also used to predict future levels of economic activity.

Official Cash Rate (OCR) is the interest rate set by the Reserve Bank of Australia and New Zealand, and used to influence the general level of interest rates in banking and the economy. Changes to the cash rate, also called official interest rates, flow on to variable home loan, personal loan and credit card rates within weeks.

As one of the first technical indicators to measure positive and negative volume flow (i.e. the buying and selling pressure), the OBV is used to predict price movements, or to confirm price trends.

A buy or sell order that does not expire until it is cancelled. Theoretically speaking, an order does not expire. However, it usually does so in practice, at the end of the trading month rather than lasting forever.

It is a trade in the market which has not been closed yet.

It gives the buyer the right, without obliging him, to buy or sell an underlying financial asset at a pre-determined price. An option gives the buyer the right to decide whether to exercise it (i.e. buy or sell it) or not. As flexible instruments, options allow investors to profit from favorable price movements and decrease the consequences of unfavorable price moves.

Any instruction to trade as either a market order or pending order.

Also known as OTC or off-exchange trading. It refers to trading financial instruments (stocks, bonds, commodities) between two parties directly.

A term used with reference to currency pairs. A currency pair is overbought when its price rises much more quickly than usual in response to net buying. Once overbought, the pair is expected to make a contrarian move (i.e. a fall in its price is to be expected).

An overnight position is a trade that remains open until the next business day.

A term used in technical analysis showing that the price of a certain currency, compared to another currency, has moved too far and fast into a certain direction.

The official value of a currency. In finance, par value means stated value. The term ‘at par’ is used when two currencies are exchanged at equal value.

Originally called Parabolic Time/Price System and referring to a price- and time-based trading system, SAR (stop and reverse) is an indicator used in this system. The SAR indicates price changes over time; it stops and reverses at the same time when a price trend reverses and moves above or below the indicator.

It is when the trader closes part of an open position.

A fixed exchange rate meaning that the value on one currency is matched to the value of another single currency or a set of other currencies. It is mostly used to stabilize the value of one currency against the currency it is pegged to.

An order set in the trading platform for the execution of a trade at a later time or market level.

A pip is the smallest measure of a currency. It is a 10 thousandth of a currency unit, and the fourth and final number after the decimal point. Pips are the means by which market profits and losses are quantified.

A price level of significance used in technical analysis of a financial market. Pivot points are used by traders as predictive indicators of market movements, and they are calculated as an average of relevant prices (i.e. high, low, close) from the performance of a market during the previous trading period.

Short form for Purchasing Managers Index. It indicates economic activity by reflecting the percentage of purchasing managers (employees of a company or business in charge of acquisition of goods and services needed by the company) in a certain economic sector. The PMI is released by the Institute for Supply Management on the first business day of every month. A PMI over 50 is often taken to indicate that the economy is expanding, while anything below 50 suggests economic contraction.

A technique that uses numerical filters to mark price changes, without showing a time scale to associate a certain day with a certain price action.

A set of investments held either by an individual investor or a financial institution, and it may include stocks, futures, bonds, options, contracts, real estate investments, or any other items that the holder believes will retain their value.

A type of trading during which the trader either buys or sells contracts and holds them for an extended period of time.

Short form for Producer Price Index, formerly known as Wholesale price Index (WPI). As one of several price indices, it measures average price changes received by domestic producers for their output.

A weighted average of prices for a particular class of services or goods available in a given region and during a given time interval. It is a statistic used to compare how these prices, all taken together, differ between time periods or geographical locations.

Closing a position with the purpose to make a gain.

The proceeds of a trade.

It involves computer-based trading techniques that rely on the flow of trading and price levels rather than on demand factors and fundamental supply.