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## Trading Glossary

In our learn to trade section you will find easy-to-understand information on how trading works, fundamental and technical analysis, simple explanations on technical indicators and key components you will need to get started.

#### A

#### Accrual:

The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (interest arbitrage) deals, over the period of each deal.

#### Adjustment:

Official action normally occasioned by a change either in the internal economic policies to correct a payment imbalance or in the official currency rate.

#### Aggressive:

Traders and/or price action are acting with conviction.

#### Analyst:

A financial professional who has expertise in evaluating investments and puts together buy, sell and hold recommendations for clients.

#### Appreciation:

A product is said to ‘appreciate’ when it strengthens in price in response to market demand.

#### Arbitrage:

The simultaneous purchase or sale of a financial product in order to take advantage of small price differentials between markets.

#### Asian session:

23:00 – 08:00 GMT.

#### Ask ( Offer ) Price

The price at which the market is prepared to sell a product. Prices are quoted two-way as Bid/Ask. The Ask price is also known as the Offer.

#### At Best

An instruction given to a dealer to buy or sell at the best rate that can be obtained at a specific time.

#### AUS 200

A term for the Australian Securities Exchange (ASX 200), which is an index of the top 200 companies (by market capitalization) listed on the Australian stock exchange.

#### B

#### Balance of Trade

The value of a country’s exports minus its imports.

#### Bar Chart

A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar; the opening price, which is marked with a horizontal line to the left of the bar; and the closing price, which is marked with a horizontal line to the right of the bar.

#### Barrier Level

A certain price of great importance included in the structure of a Barrier Option. If a Barrier Level price is reached, the terms of a specific Barrier Option call for a series of events to occur.

#### Barrier Option

Any number of different option structures (such as knock-in, knock-out, no touch, double-no-touch-DNT) that attaches great importance to a specific price trading. In a no-touch barrier, a largely defined payout is awarded to the buyer of the option by the seller if the strike price is not ‘touched’ before expiry. This creates an incentive for the option seller to drive prices through the strike level and creates an incentive for the option buyer to defend the strike level.

#### Base Currency

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

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.

#### Bears

Traders who expect prices to decline and may be holding short positions.

#### Bid / Ask Price

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. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the Bid price is 1.4527, meaning you can sell one US Dollar for 1.4527 Swiss francs. In CFD trading, the Bid also represents the price at which a trader can sell the product. For example, in the quote for UK OIL 111.13/111.16, the Bid price is £111.13 for one unit of the underlying market.*

#### Buck

Market slang for one million units of a dollar-based currency pair, or for the US dollar in general.

#### 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.

#### 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. For example: NZD/JPY (New Zealand Dollar/Japanese Yen) has been a famous carry trade for some time. NZD is the high yielder and JPY is the low yielder. Traders looking to take advantage of this interest rate differential would buy NZD and sell JPY, or be long NZD/JPY. When NZD/JPY begins to downtrend for an extended period of time, most likely due to a change in interest rates, the carry trade is said to be unwinding.

#### Cash Price

The price of a product for instant delivery; i.e., the price of a product at that moment in time.

#### CBS

Abbreviation referring to central banks.

#### Central Bank

A government or quasi-governmental organization that manages a country’s monetary policy. For example, the US central bank is the Federal Reserve and the German central bank is the Bundesbank.

#### CFDS*

A Contract for Difference (or CFD) is a type of derivative that gives exposure to the change in value of an underlying asset (such as an index or equity). It allows traders to leverage their capital (by trading notional amounts far higher than the money in their account) and provides all the benefits of trading securities, without actually owning the product. In practical terms, if you buy a CFD at $10 then sell it at $11, you will receive the $1 difference. Conversely, if you went short on the trade and sold at $10 before buying back at $11, you would pay the $1 difference.

#### D

#### Day Trader

Speculators who take positions in commodities and then liquidate those positions prior to the close of the same trading day.

#### Deal

A term that denotes a trade done at the current market price. It is a live trade as opposed to an order.

#### Dealear

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.

#### Delivery

A trade where both sides make and take actual delivery of the product traded.

#### Delta

The ratio between the change in price of a product and the change in price of its underlying market.

#### Depreciation

The decrease in value of an asset over time.

#### Derivative

A financial contract whose value is based on the value of an underlying asset. Some of the most common underlying assets for derivative contracts are indices, equities, commodities and currencies.

#### Dove

Dovish refers to data or a policy view that suggests easier monetary policy or lower interest rates. The opposite of hawkish.

#### DXY$Y

Symbol for the US Dollar Index.

#### E

#### ECB

European Central Bank, the central bank for the countries using the euro.

#### Euro

The currency of the Eurozone.

#### Extended

A market that is thought to have traveled too far, too fast.

#### Ex-Dividend

A share bought in which the buyer forgoes the right to receive the next dividend and instead it is given to the seller.

#### F

#### Factory Orders

The dollar level of new orders for both durable and nondurable goods. This report is more in depth than the durable goods report which is released earlier in the month.

#### FED

The Federal Reserve Bank, the central bank of the United States, or the FOMC (Federal Open Market Committee), the policy-setting committee of the Federal Reserve.

#### 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

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/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.

#### FOMC

Federal Open Market Committee, the policy-setting committee of the US Federal Reserve.

#### 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.

#### Future 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

A quick market move in which prices skip several levels without any trades occurring. Gaps usually follow economic data or news announcements.

#### Ger30

An index of the top 30 companies (by market capitalization) listed on the German stock exchange – another name for the DAX.

#### Given

Refers to a bid being hit or selling interest.

#### Giving It Up

A technical level succumbs to a hard-fought battle.

#### 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.

#### Gold

It is commonly accepted that gold moves in the opposite direction of the US dollar. The long-term correlation coefficient is largely negative, but shorter-term correlations are less reliable.

#### Gold Contract

The standard unit of trading gold is one contract which is equal to 10 troy ounces.

#### H

#### Handle

Every 100 pips in the FX market starting with 000.

#### HAWK

A country’s monetary policymakers are referred to as hawkish when they believe that higher interest rates are needed, usually to combat inflation or restrain rapid economic growth or both.

#### Hedge

A position or combination of positions that reduces the risk of your primary position.

#### Hit The Bid

To sell at the current market bid.

#### HK 50

Names for the Hong Kong Hang Seng index.

#### I

#### ILLIQUID

Little volume being traded in the market; a lack of liquidity often creates choppy market conditions.

#### IMM

International Monetary Market, the Chicago-based currency futures market, that is part of the Chicago Mercantile Exchange.

#### IMM / Futures

A traditional futures contract based on major currencies against the US dollar. IMM futures are traded on the floor of the Chicago Mercantile Exchange.

#### IMM Session

8:00am – 3:00pm New York.

#### INDU

Abbreviation for the Dow Jones Industrial Average.

#### Inflation

An economic condition whereby prices for consumer goods rise, eroding purchasing power.

#### Interest

Adjustments in cash to reflect the effect of owing or receiving the notional amount of equity of a CFD position.

#### Intervention

Action by a central bank to affect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

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