A dictionary for traders and investors to guide them through the markets understanding traditional terminology and a glossary of modern terms from Meme stocks to Reddit threads and more.
- All time high
- At The Money – An option strike at the current market price of the underlying
- To elect not to exercise or offset a long option position
- Adjustable Peg
- An exchange rate system where a country’s exchange rate is “pegged” (i.e. fixed) in relation to another currency. The official rate may be changed from time to time.
- American Option
- An option that can be exercised at any time prior to or on the expiration date
- Apes (gorilla emoji) refers to the community of apes as lowly retail investors.
- If performed correctly a risk-free type of trading where the same instrument is bought and sold simultaneously in two different markets in order to cash in on the difference in these markets.
- Used in quoting forward “premium / discount”, “three-three around” would mean three points on either side of the present spot value.
- Asian Option
- An exotic option whose payoff depends on the average price of the underlying asset during some portion of the life of the option
- At Par Forward Spread
- When the forward price is equivalent to the spot price
- Market jargon used in the foreign exchange market for the Australian dollar. Aussie is traded heavily against the US dollar as AUDUSD, the yen AUDJPY and New Zealand dollar AUDNZD
- Someone who is controlling a stock, usually a market maker
- Buy To Close
- Buy To Open
- Market situation in which futures prices are progressively lower in the distant delivery months. (Backwardation is the opposite of contango)
- Someone stuck in a stock that’s priced lower than their entry cost
- Balance-of-Payments (B.O.P.)
- System of recording a country’s economic transactions
- Bald Lines
- Bald Lines are where the Wick is Missing at One End
#1 Long Red (White) Line – Extremely Strong Line
#2 Long Black Line – Extremely Weak Line
#3 Red (White) Opening Line – Strong Line — Indicates High Prices
#4 Black Opening Line – Weak Line — Indicates Low Prices
#5 Red (White) Closing Line – Strong Line — Indicates High Prices
# 6 Black Closing Line – Weak Line — Indicates Low Prices
- Base Currency
- In general refers to the currency that other currencies are quoted against. In the forex market the US Dollar is normally considered the base currency for quotes. Such quotes are expressed as a unit of $US1 per the other currency quoted in the pair. It also refers to the currency in which an investor or issuer maintains it’s book of accounts.
- The difference between the spot price and the futures price.
- Bermuda Option
- An exotic option which can be exercised on a specified set of predetermined dates during the life of the option
- Bespoke Swap
- A highly customized swap, usually constructed around the needs of a sophisticated customer with specialized risk exposure.
- Bid-Offer Spread
- The difference between the buy (bid) and sell (offer) price of a currency or financial instrument.
- Big Figure
- Dealer phrase referring to the first few digits of an exchange rate. As dealer quotes can be rapid but within a point range in normal market fluctuations, it is customary that they are omitted in dealer quotes, especially in times of high market activity.
For example, a USD/Euro rate might be 106.28/106.35, but would be quoted verbally without the first three digits i.e. “28/35”. To confirm in a fast market it also common to ask What’s the big figure for confirmation.
The whole number, for example Oil has support at the big figure below, when is it trading at $50.22 that would be at $50. The big figure is at $50 here.
It is also usually a Psychological level
- In a professional trading environment, a book is the summary of a trader’s or a desk’s total positions.
- Bradley Turn Dates
- Donald Bradley wrote “Stock Market Prediction: The Planetary Barometer and How to Use It.” in 1948 With a tool known as the Bradley Siderograph (star graph) Donald Bradley’s siderograph is based on major planetary aspects and the declinations of Mars and Venus. The siderograph assigns varying weights to each planetary aspect depending on its exactness which is intended to leverage “the potency of major planetary aspects…to prove the correspondence between planetary operations and market responses.” The siderograph is typically used to identify turning points or inversions (i.e., trend reversals) in the market over the medium to long term market turning points within 4-7 calendar days rather than being exact to the day of the turning point.
- Bretton Woods Accord of 1944
- An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets. Alternative A, p. 16 submitted by the American delegate provided that ’The par value of the currency of each member shall be expressed in terms of gold, as a common denominator, or in terms of a gold-convertible currency unit of the weight and fineness in effect on July 1, 1944’. Subsequently the price of gold was set at US$35 per ounce. This was known as the ’Gold Fix’ and ’Gold Standard’ which was removed in 1971 for free floating exchange rates.
- The Central Bank of Germany
- Butterfly Spread
- A three-legged option spread in which each leg has the same expiration date but different strike prices. For example, a butterfly spread in natural gas call options might consist of one long call at a $5.00 strike price, two short calls at a $6.00 strike price, and one long call at a $6.50 strike price.
- Buying Selling customs
- 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. Traders buy when they expect a currency’s value to rise and sell when they expect a currency to fall.
- The Commitment of Traders (commonly referred to as the COT) report has been published by the Commodity Futures Trading Commission since 1962 and provides information on the open interest in a multitude of commodity, currency, and stock index futures.
- Market jargon used in the foreign exchange market for the British Pound. Purportedly from the telegraph cable under the Atlantic between the UK and the USA. The Pound trades against the US dollar as USDGBP and the Euro as Euro Pound. The pound’s official name is Sterling.
- Candlestick charts
- Designed by Muneshia Homma in 1724 for the rice market in Japan.
There are Nine Daily Lines: # 1 Long White Line # 2 Long Black Line # 3 Short White Line # 4 Short Black Line # 5 White Upper Shadow # 6 Black Upper Shadow # 7 White Lower Shadow # 8 Black Lower Shadow # 9 Doji Line with a number of patterns and interactions for those lines with different meaning
- Cash Settlement
- A procedure for settling futures contracts where the cash difference between the future and current market price is paid instead of physical delivery.
- Central Bank
- A Government or quasi-Governmental organization that manages a country’s monetary policy and oversees functions such as currency float management, employment protection and banking laws and regulations. Each country has different roles for their central bank. Key central banks include The Federal Reserve (USA), ECB (European Union), BOE (Bank of England), BOJ (Bank of Japan), RBA (Australia).
- Chikou Span
- Ichimoku element (Lagging line) represents the asset or index closing price for the last 26 days. The glance view shows how the price will compare to 26 days prior. An upward trend may be indicated if the Chikou Span is above closing price, and downward motion is signaled when the price is below it. Chikou Span is useful in confirming trends, momentum, and support and resistance that other Ichimoku elements may have uncovered.
- Market jargon used in the foreign exchange market for the British Pound rate against the Euro from the Euro tunnel under the English channel it is traded as EURGBP.
- Popularized in 1997 with the Asian markets financial crisis which triggered a domino affect throughout world markets. Thus it has come to refer to the inter-market reflexibility and interaction from one market to another. Initially it referred to the tendency of an economic crisis to spread from one market to another and has come to symbolize all market inter-relations not just currencies.
For example an earthquake in Taiwan may affect Taiwan Semi Conductor (TSM) which may affect the Semi Conductor Index which in turn will affect Intel-which affects the S&P; 500, the Dow Jones Industrials and Nasdaq. This may then affect the US Dollar and so on! To recap on the Asian Crisis of 1997, financial instability in Thailand caused high volatility in its domestic currency, the Baht, which triggered a contagion into the other so called Tiger Economies of East Asia and their currencies. This affect flowed onto Latin America. It is now referred to as the Asian Contagion
- Also Unit or Lot, whatever is the standard unit of trading on exchanges or OTC markets
- Corrective Wave
- In Elliott Wave Theory there are 11 different corrective complexities. Corrective mode is employed by all countertrend interruptions, which include waves 2 and 4 and B. Their structures are called “corrective” because they can accomplish only a partial retracement, or “correction,” of the progress achieved by any preceding motive wave.
- Cost of Carry
- The cost associated with borrowing money in order to maintain a position based on the interest parity.
- Cross Rates
- The exchange rate between two currencies. For example; AUD/JPY, GBP/CHF and CHF/JPY.
- Somebody who is habitually slow and stupid or so disorganized that he causes considerable inconvenience to others. Variations include Dumb Cubits, Dopey Cubits & Silly Cubits
- Currency Risk
- The risk of incurring losses resulting from an adverse change in exchange rates.
- A trader that has no idea
- Due diligence
- A trader who is constantly changing his mind.
- Deep Pegging
- When a trader buys an option with very wide spreads and is unable to exit profitably
- This refers to derived trades from a ’cash’ security or definable ’real asset’. Instruments are constructed or derived off assets such as an equity, bond, currency, or commodity. Derivatives can be both exchange and non-exchange traded (OTC). Derivative instruments include Futures, Options, Interest Rate Swaps, Forward Rate Agreements, Caps and Floors.
- Diamond hands
- Never selling and keep holding. Unclear what the exit strategy is for this. (Diamond and hands up emojis)
- Discount Rate
- The interest rate at which eligible depository institutions may borrow funds directly from their respective Central Bank. In the U.S. there are regional Federal Reserve Banks for this purpose where the rate is decided by the Federal Open Market Committee (FOMC) of the the Federal Reserve.
- Doing an Alain
- A chemically prepared trader that jumps between stocks, lets profits become losses and is renowned as a bag holder
- A doji candle stick has a long upper wick or lower wick. The wick refers to the high or low of day. The body of a doji is smaller than the candle wick which tells us the open and close price were fairly close together.
- Doji Lines
- #1 Doji – Turning Point; Slightly Bearish
#2 Long-legged Doji Rickshaw Man – Turning Point if Both Shadows are Long and Equal in Length
#3 Doji – Turning Point; Slightly Bullish
#4 Dragonfly Doji – Turning Point in the Market
#5 Gravestone Doji – Either a Turn in the Market or a Stable Market
#6 Four-Price Doji – Possible Turning Point; the Market is Unsure
- Donkey Punched
- When you buy a stock or future and you immediately take a massive loss that you never saw coming
- Earnings Report, which can lead the investor to visit the Emergency Room 🙂
- Economic Indicators
- These are statistics that indicate current economic conditions. They can by issued by Government, Quasi-Government or an academic or commercial institution. Examples are CPI, PPI, Gross Domestic Product (GDP), Unemployment, Balance of Payments, Industrial Production, Business Inventories and Retail Sales.
- Economic and Monetary Union (EMU)
- The irrevocable fixing of exchange rates between member currencies and their replacement by a single European currency, the euro. The euro is issued by the European Central Bank (ECB), independent of political control and federal in nature. All countries included fulfilled five convergence criteria set in 1998.
- Elliot Wave Principle
- A system developed by Ralph Elliott taking into account sentiments and patterns of empirically derived rules for interpreting action in the markets. It refers to a five-wave/three-wave pattern, which forms one complete bull market /bear market cycle of eight waves.
- End of Day Book
- End Of Day or Mark to Market – Traders account for their positions in two ways: accrual or mark-to-market. An accrual system accounts only for cash flows when they occur; hence, it only shows a profit or loss when realized. The mark-to-market method values the trader’s book at the end of each working day using the closing market rates or revaluation rates. Any profit or loss is booked and the trader will start the next day with a net position.
- The currency of the European Monetary Union (EMU) which replaced the European Currency Unit (ECU)
- U.S. dollar deposits placed with banks outside the U.S. Holders may include individuals, companies, banks, and central banks.
- European Central Bank (ECB)
- The Central Bank for the European Monetary Union.
- European Option
- An option that may be exercised on the expiration date
- Evening Southern Cross
- Candlesticks (Hoshi) A three-period pattern formed when the middle candle is a Doji, the pattern is called a “Evening Southern Cross”.
- Evening Star
- Candlesticks (Hoshi) “Evening Star” is a three-period pattern formed when the middle period has a window between the real bodies of the first and third candles in the formation. This is analogous to an “island top” in conventional charting. If the middle candle is a Doji, the pattern is called a “Evening Southern Cross”. If the middle candle is a small inverted Hammer, the pattern is called a “Shooting Star”.
- Expanded Flat or Irregular Flat
- In Elliott Wave Theory an Expanded Flat or Irregular Flat is composed of five waves, which have an internal structure of 3-3-5.
- Fill or Kill, you get your entire order filled or the order won’t fill at all to prevent partial orders.
- Federal Reserve (Fed)
- The Central Bank of the United States
- A number sequence discovered by thirteenth century Italian mathematician Leonardo Fibonacci (circa 1170-1250) in which the sum of any two consecutive numbers equals the next highest number—i.e., following this sequence: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, and so on. The ratio of any number to its next highest number approaches 0.618 after the first four numbers. These numbers are used by technical analysts to determine price objectives from percentage retracements and extensions.
- To be neither long nor short is the same as to be flat or square. One would have a flat book if he/she has no positions or if all the positions cancel each other out.
- Flat Pattern
- Flats are very common forms of corrective patterns, which generally show a sideways direction. Waves A and B of the Flat are both corrective patterns. Wave C on the contrary is an impulsive pattern.
- A deal struck for delivery at an agreed date in the future different from spot delivery. Forward trades in FX are usually expressed as a margin above (premium) or below (discount) the spot rate. To obtain the actual forward FX price, one adds the margin to the spot rate. The rate will reflect what the FX rate has to be at the forward date so that if funds were re-exchanged at that rate there would be no profit or loss (i.e. a neutral trade). The rate is calculated from the relevant deposit rates in the 2 underlying currencies and the spot FX rate. As the primary purpose for Foreign Exchange was to facilitate foreign trade, unlike in the futures market with fixed expiration, forward trading can be customized according to the needs of importers and exporters and involves more flexibility.
- Forward Points
- The pips added to or subtracted from the current exchange rate to calculate a forward price.
- The five leading industrial countries: The United States, Germany, Japan, France and the United Kingdom.
- The seven leading industrial countries: The United States, Germany, Japan, France, United Kingdom, Canada, and Italy.
- G7 (G8)
- Regular meetings of G-7 finance ministers and central bank governors were instituted at the 1986 G-7 Leaders’ Summit in Tokyo. The purpose of doing this was to improve communication and cooperation on matters that fall under the mandate of finance ministers and central bank governors, including economic and financial growth and stability, inflation and currency developments. It was at the Tokyo Summit that Canadian and Italian finance ministers were invited to join ministers from France, Germany, Japan, the United States and the United Kingdom, who had already been meeting as a group for some time
In 1997 the Leaders’ Summit became known as the G-8 to reflect Russia’s participation. Russia does not participate in the G-8 chair rotation, and is not a full member of the G-7 finance ministers’ process, although it does take part in some meetings of G-7 finance ministers, primarily in discussions concerning the Russian economy. Recently Russia has also participated in G-7 discussions on ways to combat the financing of terrorism.
Until 1998 G-8 foreign ministers and G-7 finance ministers met in conjunction with G-8 Summits. At the Birmingham Summit in 1998, the G-8 introduced the “leaders only”; format, with foreign ministers and finance ministers meeting separately in advance of the Summit.
- Good Till Cancelled. That means the order will stay on the brokers servers until you cancel it. Often jokingly called Good Till Close with traders tendency to change orders when price gets close.
- Iconic song from Kenny Rogers often known as a trader’s lament
The Gambler – Kenny Rogers
“If you’re gonna play the game, boy
You gotta learn to play it right”
You got to know when to hold ’em
Know when to fold ’em
Know when to walk away
And know when to run
You never count your money
When you’re sitting at the table
There’ll be time enough for counting
When the dealing’s done
“Every gambler knows
That the secret to surviving
Is knowing what to throw away
Knowing what to keep
‘Cause every hand’s a winner
And every hand’s a loser
And the best that you can hope for
Is to die in your sleep”
- Gann’s theory represents geometric technical analysis based on time and price. Developed by William Delbert Gann (1878-1955). W.D. Gann’s uses Natural Law and geometric proportions based on the circle, square, and triangle to mathematically calculate using price, price range and time as inputs. Gann’s theory analyzes trading markets’ cyclical nature or Seasonality. Gann says that there can be nine mathematical proofs of any point of resistance
- Gann Wheel
- The Square of Nine, also called a “Square Root Calculator” that “Squares the Circle.” W.D. Gann says that 90 degrees in very important in the stock market. Adding and subtracting .5 (and exact multiples or proportions of .5) to the square root of a stock price and then squaring the result is very important. The Square of Nine is totally indifferent to whether the input variable is a price, a range of prices, or a number of trading days or calendar days. They are all the same and completely interchangeable and Gann looked at the orbital relationship. Are they in opposition, conjunction or square?
- The index options market maker collective
- Gatlin Boys
- Pump and dumpers
- A megalomaniac trader with a very exaggerated self-image; who consider themselves powerful and important, if not bigger than the market. They exaggerate their abilities and dramatize their achievements, They feel indestructible, They don’t admit to their mistakes, so they never learn from them. Hyperawareness of people’s reaction to what they do or say. If they lose they think the market is the problem and not them.
- As the 20th century drew to a close the deterritorialization of money (Cohen 1998) occurred rapidly. What this meant was that since the removal of Foreign Exchange controls the circulation of sovereign currencies was no longer confined within the territorial frontiers of nation-states. Competition and technological innovation, national financial and monetary systems have become increasingly integrated, effectively widening the array of currency choice for many transactors and investors. As a result, strictly territorial currencies are fast disappearing in most parts of the world. Today, as we enter the twenty-first century, money is becoming increasingly deterritorialized.
- An electronic platform for global after hours electronic trading in futures and options developed by Reuters for the CME and the CBOT for use in conjunction with various exchanges around the world.
- Gold Standard
- The original system for supporting the value of currency issued. The price of gold was fixed against the currency as such it was not the supply and demand of Gold itself that determined the price of gold.
- High of day
- Hold On for Dear Life, Hold the line, asking people to not sell and believe in the long term growth.
- Harami Pattern is an Inside Day. When a line with little or no movement is unable to move above or below the previous day’s line, it is called a “Harami line” If the previous line was a red (white) line in a rising market (Candles #1 and #2), the probabilities of hitting a ceiling are extremely strong. If the Harami line is also a Doji line, it is especially helpful. The Doji form of the Harami line (Candles #5 and #6) tends to form at a very high ceiling. The other Doji form (Candles #7 and #8) tend to form at a support area.
- An investment position or combination of positions that reduces the volatility of an asset class or portfolio’s value. One can take an offsetting position in a related security. Instruments used are varied and include forwards, futures, options, and combinations of all of them.
- Hedge Ratio
- The number of futures or options required to hedge a given exposure to the cash market.
- International Monetary Fund, was established in 1946 to provide international liquidity on a short and medium term basis. They also encourage liberalization of exchange rates. The IMF supports countries with balance of payments problems with the provision of loans. It was formed with the axiom that governments would not tolerate prolonged and widespread unemployment any more. A revival of international trade after World War II was indispensable if full employment was to be achieved in a peaceful world, and with standards of living which will permit the “realization of men’s reasonable hopes’.
- In The Money – An option strike in the money of the current market price of the underlying
- Ichimoku Kinko Hyo, Ichimoku Clouds represent a Japanese technical charting system. Ichimoku “at first glance”, Kinko “balance or equilibrium”, Hyo “graphical representation or chart” Charts have 5 different elements that are viewed together to provide one overall perspective on the current situation of an asset or index. Senkou Span A & Senkou Span B, Tenkan Sen, Kijun Sen, Kumo, Chikou Span
- Impulse Waves
- In Elliott Wave Theory Impulse patterns are emotive waves and occur in waves 1, 3, 5 and in waves A and C of a correction( this correction could be a wave 2, 4 or a wave B, D, E or wave X).
The internal structure of these waves is 5-3-5-3-5. Note that the mentioned 3s are corrective waves, which should be composed of 5 waves in a corrective triangle.
- Indicative Quote
- A market maker’s quote, which is not firm – just an indication of where the market is trading at.
- Interbank Rates
- The Foreign Exchange rates at which Money Center or large international banks quote other Money center and large international banks directly.
- J Curve
- A term describing the expected effect of devaluation on a country’s trade balance. It is anticipated that import bills rise before export orders and receipts increase.
- Announcements and statements by politicians or monetary authorities to influence or manipulate decisions. It may be directed towards the corporate world, other countries, consumers, lobby groups, trade unions or any influential or key sectors.
- Someone who says, “Trading is not a team sport.”
- Jurisdiction Risk
- This refers to risk inherent in placing funds in a Center where they will be under the jurisdiction of a foreign legal authority. Also refers to the risks in having a contract or agreement or indeed in making a loan subject to the laws of another country.
- Keep Yourself Safe, take your money off the table
- Kabuse Line
- Is the “Dark Cloud Cover”, a two-period pattern which occurs when a red (white) line is followed by a black line which has a higher price than the red line and which closes inside the body of the red line.
This is a bearish formation which indicates that the bulls are unable to sustain the upward momentum, and the bears are taking control.
In a rising market, the “Kabuse Line” usually appears near the ceiling.
- Kijun Sen
- Ichimoku element (Standard line) the second moving average in Ichimoku Cloud charting. Measures the highest high and the lowest low for the last 26 trading days. Kijun Sen may also be called the baseline, used in tandem with Tenkan Sen to measure momentum.
- Kirikomi Line
- The “Piercing Pattern” is a 2-period pattern which is basically the opposite of the “Dark Cloud Cover” (Kabuse Line). The black line of this pattern often occurs on Friday (market close); the bullish red (white) line then occurs on the following Monday. This pattern may occur during a break in the market. The “Kirikomi Line” rarely appears at a market bottom. At a bottom, the price movement can be fairly stable for a long period of time.
- Market jargon used in the foreign exchange market for the New Zealand and is traded mainly against the US dollar as NZDUSD, the yen NZDJPY and Australian dollar AUDNZD
- Knife Catch
- To buy into a stock that is “falling like a knife”. very fast and within an unknown bottom and you could get hurt buying it. A knife catch would be near the lowest price before it begins to rebound.
- When you buy the wrong stock thinking it is something else. ” You fool thats the wrong symbol, not Apple, you just pulled a Krupinski
- Ichimoku element the “Cloud”, the Kumo represents the area in between Senkou Span A and Senkou Span B & is the focal point of the Ichimoku system. When the price is over the Kumo, the top line indicates the first level of support, with the bottom line signaling the second support level. If the price is under the Kumo or Cloud, the bottom indicates the first level of resistance, with the top representing the second level.
- An ultimately degenerate trader whose style entirely overrules substance, providing a justification for amorality and evil.
- London Interbank Offer Rate. A key reference rate for loans, many loans are quoted as a premium to LIBOR i.e. LIBOR plus x basis points. It is also the most common interest rate that the largest international banks lend to each other at.
- Limited Liquidity – Limited number of shares available for trading by a brokerage (it’s difficult to buy into a stock that is LL)
- Low of Day
- Lagging Indicator
- A measure of economic activity, which tends to change after change has occurred in the overall economy e.g. PPI & CPI.
- Lame duck
- A speculator who cannot discharge his or her liabilities
- Law of Vibration
- W.D. Gann attributed market movements to some undefined “law of vibration.” It is believed he is talking about the principles underlying the Square of Nine. “Just as the pendulum returns again in its swing, just as the moon returns in its orbit, just as the advancing year over brings the rose of spring, so do the properties of the elements periodically recur as the weight of the atoms rises.”
- Left-hand Side
- Taking the left hand side of a two way quote i.e. selling the quoted currency or security, hitting the bid.
- Level 1
- Shows the inside or best bid and ask prices (Not the market depth like Level 2)
- Level 2
- Real-time access to the NASDAQ and OTC order book showing depth of bid prices and sizes and ask prices and sizes on either side. Note many ECNs offer the ability for traders to post reserve orders and hidden orders.
- Limit Order
- An order to buy at or below a specified price or to sell at or above a specified price.
- Limited Convertibility
- When residents of a country are prohibited from buying other currencies even though non-residents may be completely free to buy or sell the national currency.
- These refers to credit and trading lines or limits. This is an arrangement where a bank or financial institution agrees to lend or provide to the client for a specified period any amount up to the full amount of the line or limit.
- A market is described as liquid if the spread between the bid and the offer is tight or small. Another measure of liquidity is the market’s depth of buyers and seller, the more buyers and sellers the tighter the spreads. Illiquid markets have few players , hence, wider dealing spreads.
- A position to purchase more of an instrument than is sold, an appreciation in value if market prices increase. To cover a long you must sell the asset.
- USDCAD The Canadian Dollar’s nickname is rooted in the word “loon”, an aquatic bird native to Canada, inscribed on the backside of the one-dollar coin.
- M Squared
- To completely mess a good trade up, turn a profit into a loss. To make something that would be otherwise good, bad. “He went M Squared on that trade not taking profit at the close”
- Japanese ministry of International Trade & Industry.
- Market maker
- Managed Float
- This is when we have partially free floating markets, that is monetary authorities manage when they deem they need to. They may intervene regularly in the market to stabilize volatility or spasmodically around preset price bands for a currency.
- This is the amount a customer must deposit as collateral to trade or invest in markets. It is to cover any potential losses from adverse movements in market prices.
- Margin Call
- A requirement from a broker or dealer for additional funds or other collateral to bring the margin up to a required level to guarantee performance on a position that has moved against the customer. This limits are set by both regulatory authorities and the financial institution may enhance them or determine them in unregulated markets.
- Market Order
- An order to buy/sell at the best price available when the order is placed in the market, that is it is not at a limited or predetermined price.
- Market Risk
- This is the risk relating to the market itself. Whilst it can be reduced it cannot be diversified away by hedging or holding a variety of securities.
- A stock that spreads from person to person within a culture; an amusing or interesting stock or genre of stocks that is spread widely online especially through social media.
- Mid-price or Middle Rate
- Often used for revaluation it is the price half-way between the two prices, or the average of both buying and selling prices quoted by the market makers.
- Mine and Yours
- To announce that a trader wants to buy he/she may say “Mine at …” when taking or paying the offer. To sell he/she will say “yours at … as he or she is “hitting the bid”
- A school of economics, which believes that strict control of money supply is the principal tool for implementing monetary policy. It’s prime author is Milton Friedman, the primary focus is on inflation. The most common tools are government spending and interest rates.
- Monetary Policy
- A central bank’s management of a country’s money supply. Economic theory underlying monetary policy suggests that controlling the growth of the amount of money in the economy is the key to controlling prices and therefore inflation. The interest moves will affect exchange rates as it determine the pay back to the purchaser or seller as reflected in the forward rates.
- Morning Star
- Candlesticks (Hoshi) “Morning Star” is a three-period pattern formed when the middle period has a window between the real bodies of the first and third candles in the formation. This is analogous to an “island bottom” in conventional charting. If the middle candle is a Doji, the pattern is called a “Morning Southern Cross”.
- Murrey Math
- Murrey math was developed by T. Henning Murrey in 1995 based on observations made by WD Gann in the first half of the 20th century. The grid is marked in 1/8 increments to square the price.
- Naked Intervention
- This refers to central bank intervention in the foreign exchange market without direct interest rate assistance. This type of intervention has a monetary effect on the money supply and a long term effect on foreign exchange.
- Nearby Contracts
- The closest active futures contracts, i.e. those that expire the soonest.
- Negative Sloping Yield Curve
- A yield curve where interest rates in the shorter dates are above those in the longer dates. For example 90 day rates may be at 10%, 2 year at 8%, 10 year at 7% etc.
- Nostro Account
- A foreign currency current account maintained with another bank. The account is used to receive and pay currency assets and liabilities denominated in the currency of the country in which the bank is resident
- O.C.O. Order
- ’One Cancels Other Order’ is a a contingent order where the execution of one part of the order automatically cancels the other part. A variation of the ’if done’ order type.
- Organization of Economic Co-operation and Development.
- Out of The Money An option strike out of the money of the current market price of the underlying
- Odd Lot
- A non-standard amount for a transaction.
- Off balance sheet
- Whilst Enron brought this to the forefront, there is a legitimacy with products such as Interest Rate Swaps and Forward rate Agreements are examples of ’off balance sheet’ products. Finacing from sources other than equity and debt are other examples.
- The price or rate that a seller is prepared to sell at.
- Offsetting Transaction
- A trade that serves to cancel or offset some or all of the market risk of an open position.
- Open Interest
- The total number of outstanding option or futures contracts that are open, not offset or fulfilled by delivery.
- Open Position
- When a trade or position is still open to the vagaries of the market. That is not yet closed out or settled. That is the position is still subject to market risk.
- An order is an instruction, from a client to a broker or specialist to place a trade. Please see the many types of orders that exist.
- Over The Counter (OTC)
- Used to describe any transaction that is not conducted over an exchange.
- A position that is open after the close of the market or in forex a trade that remains open until the next business day of the trader’s time zone.
- Overnight Limit
- Net long or short position in one or more currencies that a dealer can carry over into the next trading or dealing day. Unlike a static exchange traded instrument in forex the position book can be monitored in other geographical locations or the next trading time zone to reduce the need for dealers to actively maintain their unmonitored exposures. Through instruction they are effectively passively maintained.
- Pattern Day Trader
- Power Hour, the last hour of trading on an exchange into the market close.
- Price target
- Paper hands
- Weak hands selling and retrospectively after a larger gain was possible. ( Toilet paper and hands up emojis)
- Parity Grid
- A term originally coined and used in the context of the European Monetary System (EMS), which consists of the upper, central and lower intervention points between member currencies. It’s purpose these days refers to major currencies as monitored by their respective central banks. It’s relevance is for trading partners such as Japan and the USA, Australia and New Zealand (CER) or the Asian Tiger economies.
- A form of price stabilization; typically used to stabilize a country’s currency by making it fixed to the exchange rate with another country. Examples include the Hong Kong Dollar and Chinese Yuan which are both pegged to the US Dollar.
- Foreign exchange reserves of oil producing nations arising from oil sales.
- Pin risk
- Occurs when the price of the underlying stock or future of an option contract at expiration is very close to the option’s strike price. Leaving an unknown assignment
- Pip (or Points)
- The term used in currency markets to represent the smallest incremental move an exchange rate can make. Depending on the currency but examples of one basis point are 0.0001 in the case of EUR/USD, GBD/USD, USD/CHF and .01 in the case of USD/JPY.
- A position is the number of contracts or lots – long or short held by the trader or investor
- In the currency markets, it is the amount of points added to the spot price to determine a forward or futures price.
In the options market it refers to the price charged over the intrinsic or underlying price of the asset.
- Proxy Hedge
A term to describe when it is necessary to hedge against a currency where there is no market but it follows a major currency, the hedge is entered against the major currency.
- Psychological level for example round numbers like $1, $1.50, $2,$10 etc
- Pump and Dump
- Practice of buying shares, generating favorable publicity about them, especially on the internet or social media, then selling them when the price spikes higher.
- Pump and Dumper
- Artificially inflating the price of an owned stock through false and misleading positive statements, in order to sell the cheaply purchased stock at a higher price.
- Purchasing Power Parity
- Model of exchange rate determination stating that the price of a good in one country should equal the price of the same good in another country, exchanged at the current rate. Has been popularized with the Big Mac index in recent years. Here the price of a Big Mac is priced in the local currency and then converted back to US Dollars.
- Put/Call Ratio
- Simply the number of put options contracts traded in a given day divided by the number of call options contracts traded that same day. The put volume divided by the call volume yields the Put/Call Ratio. The custodian of the Put/Call Ratio is the Chicago Board Options Exchange (CBOE). More options contracts are traded through the CBOE each day than on any other exchange.
- The use of profits on existing positions as margin to increase the size of the position, normally in successively smaller increments.
- A quick trade taking advantage of bad news. Acronym for quick and dirty.
- An indicative market price; shows the highest bid and/or lowest ask price available on a security at any given time.
- Red to Green move, from negative to positive on the day.
- Risk to Reward ratio
- ‘Reverse Split’ – a reduction in the number of a company’s traded shares (float) that results in an increase in the par value or earnings per share.
- RTH regular trading hours
- The price of one currency in terms of another.
- Realized and Unrealized Profit and Loss
- In an accrual type accounting system an “unrealized profitor loss ” exists until the securities are sold or when a short is covered. When the securities are sold or covered the profit or loss becomes “realized.”
- Reciprocal Currency
- A currency that is normally quoted as dollars per unit of currency rather than the normal or standard quote method of units of currency per dollar. The British Pound is the most common example.
- A term used in technical analysis that delineates a specific price level or price cluster at which a security or currency will will find difficulty in surpassing.
- Reval Rates
- The revaluation rates are the market rates used when a trader runs an end-of-day report to establish profit and loss for the day on his/her open position.
- Right-hand Side
- To do a deal on the right hand side of a two way quote, normally to buy the currency and sell dollars.
- Exposure to uncertain change – the unknown variables that can significantly affect returns or the underlying asset or liability.
- Risk Capital
- The amount of money that an individual can afford to invest, which, if lost would not affect their lifestyle.
- Risk Management
- The identification and acceptance or offsetting of the risks threatening the profitability or the very existence of an organization. With respect to foreign exchange involves among others consideration of market, sovereign, country, transfer, delivery, credit, and Counterparty risk.
- Risk Premium
- Additional sum payable or return to compensate a party for adopting a particular risk.
- The settlement of a deal is rolled forward to another value date with the cost of this process based on the interest rate differential of the two currencies.
- Round Trip
- Both sides of a trade. Buying and selling of a security, future or options contract.
- A stock that drastically gains in value over a short period of time “We got ourselves a runner here”
- Running Flat
- In Elliott Wave Theory this pattern is a kind of Flat, with an elongated B wave and a very small C wave. This pattern also resembles an extension in an impulsive wave, where the wave has subdivided in two (or more) 1,2 combinations. These patterns have become very prevalent in Manic corrections.
- Running a Position
- Keeping open positions in the hope of a speculative gain, protecting yourself with a trailing stop loss order.
- Ryan Leaf
- A stock that is extremely overhyped or over rated. “That IPO is a Ryan Leaf.”
- Special Drawing Right. A standard basket of five major currencies in fixed amounts as defined by the IMF.
- Simple Moving Average – a type of moving average indicator frequently used in technical analysis
- Short sale restriction
- Sell To Close
- Sell To Open
- Candlesticks “Sanpei” is a three-period pattern in which all the candles are the same color.
This pattern indicates that the current market direction will continue.
- Scale in / Scale out
- To sell or buy a portion of your shares or futures
- A strategy of buying at the bid and selling at the offer as soon as possible.
- A secondary offering is an offering that is given after the Initial Public Offering (IPO). Even if a company performs multiple secondary offerings, they are always called secondary. A secondary offering will raise money for the company by selling more shares. This increases the supply of shares on the market and usually decreases the value of those shares.
- Senkou Span A
- Ichimoku element Senkou Span A is a moving average of two other elements; the Tenkan Sen and Kijun Sen, projected 26 days ahead. Also called the first leading line, Senkou Span A is used with Senkou Span B to formulate the Ichimoku Cloud or “Kumo”.
- Senkou Span B
- Ichimoku element (Second leading line) averages the highest high and lowest low for the last 52 days, plotted 26 days ahead. As the longest term represented in the Ichimoku trend analysis, time-shifting Senkou Span B forward provides a visual of how the price on a certain date acts in relation to support and resistance from the 52 trading days before. Used with Senkou Span A, the two lines form the outline of the Ichimoku Cloud (Kumo).
- The finalizing of a transaction, the trade and the counterparts are entered into the books.
- Shooting Star
- Candlesticks (Hoshi) A three-period pattern formed when middle candle is a small inverted Hammer, the pattern is called a “Shooting Star”.
- To ’short’ is to sell an instrument without actually owning it – effectively you’re are borrowing the asset you have sold. You are shorting with the expectation that you will buy the instrument at a lower level so as to profit from the short sale.
- Short Covering
- Buying to unwind a shortage of a particular currency or asset.
- Short Float
- The ratio of tradable shares being shorted to shares in the market.
- Short Position
- An investment position that results from short selling. Benefits from a continuing decline in market price whilst position is not covered.
- To hit the asking price with either a market buy or bid on the asking price
- Small Bodies
#1 Red (White) Spinning Top – Unsure of Which Direction to Move
#2 Black Spinning Top – Unsure of Which Direction to Move
#3 Red (White) Hammer – If it is Higher at a Top, Sell;
Hanging Man – If it is Lower at a Bottom, Buy
#4 Black Hammer – If it is Higher at a Top, Sell;
Hanging Man – If it is Lower at a Bottom, Buy
Red (White) Inverted Hammer If it is Higher at a Top, Sell;
Shooting Star – If it is Lower at a Bottom, Buy
Black Inverted Hammer – If it is Higher at a Top, Sell;
Shooting Star – If it is Lower at a Bottom, Buy
- Sovereign Risk
- Risk of default on a sovereign loan
Risk of appropriation of assets held in a foreign country.
- S&P 500 futures
- A transaction that occurs immediately, but the funds will usually change hands within two days after deal is struck.
- Another term for the Great British Pound.
- Stop Order
- An order to buy/sell at an agreed price. One could also have a pre-arranged stop order, whereby an open position is automatically liquidated when a specified price is reached or passed.
- Supply Side Economics
- The inverse of theories espoused by Maynard Keynes (Keynesian) of demand side theories. The concept is that tax cuts will boost investment leading to an increase in the supply of goods in the economy.
- A term used in technical analysis indicating a specific price level or cluster at which a security or currency should have difficulty to fall below.
- A swap occurs when one currency is temporarily exchanged for another, then the currency is held and exchanged later after a fixed period of time. To calculate the swap take the interest rate differential between the two underlying currencies, thus it may be used for speculative purposes to exploit anticipated movement in the interest rates.
- Market jargon used in the foreign exchange market for the Swiss franc against the US dollar. CHF is the abbreviation for the Swiss franc, the official legal tender of Switzerland and Liechtenstein. CHF stands for Confoederatio Helvetica franc, where Confoederatio Helvetica is the Latin name for the Swiss Confederation. Switzerland is one of the few European countries that has not adopted the euro. The Swiss Franc is mainly traded against the US dollar (USDCHF), also known as dollar swiss and against the Euro (EURCHF) and is known as EuroSwiss
- When an instrument moves in sympathy to another instrument due to an event or relationship. A stock or future gains or loses value due to another stock or future that is associated with it also gaining or losing value. Sympathy can be from being in similar sectors, having very similar equity curves, being based out of the same country, similar legal effects of new laws/restrictions/regulations, etc.
- Technical Analysis
- Studies and theories to forecast future market activity by analyzing market data such as charts, price trends, and volume
- Options likely to deliver
- Tenkan Sen
- Ichimoku element – (Turning line) moving average measures the highest high and lowest low for the last nine days. This Ichimoku element is normally used alongside Kijun Sen to determine the probability of future momentum.
- Theory of Elasticity
- A model of exchange rate determination stating that the exchange rate is simply the price of the foreign exchange, which maintains the BOP in equilibrium. It then determines the degree to which the exchange rate responds to a change in price.
- Thin Market
- A market in which trading volume is low and in which consequently bid and ask quotes are wide and the liquidity of the instrument traded is low.
- Three Red Soldiers
- Candlesticks “Sanpei” If three red (white) candles occur, the pattern is called “Three Red Soldiers”
(Candles # 1-3).
- Minimum price move.
- Shows current and/or recent price or news history of the currency or security in the format of a scrolling, cascading or moving table.
- To the moon
- When a stonk rockets up in price. (Rocket and moon emoji)
- A trade when you get revenge on the market for misdeeds from others. “I shorted this overpriced stock, this ones for Becky”
- Tomorrow Next (Tom/Next)
- The simultaneous swap from spot of a currency by buying and selling of a currency for delivery the following day.
- Trade-weighted Exchange Rate
- The changes in the exchange rate against a trade weighted basket including the currencies of the county’s principal trading partners. Examples are the US Dollar Index in the US and the Trade Weighted Index (TWI) in Australia.
- A triangle is a corrective pattern, which can contract or expand. Furthermore it can ascend or descend. It is composed of five waves, each of them has a corrective nature.
- The world economy is characterized by a tripolarism based on the Dollar, Euro and Yen. They are the most heavily traded currency and most favored for international trade and finance. The dollar is the most favored vehicle for currency exchange worldwide, in 87 percent of all transactions in 1998 – in 1989 it was 90 percent. Prior to the Euro the Deutschemark was in 30 percent of transactions and the yen in 21 percent. In international Trade the dollar has been estimated to account for nearly half of all world exports (Hartmann 1998)
- The volume traded, or level of trading, over a specified period, usually daily or yearly
- Institutional investors
- Two Way Price
- Both the bid and offer rate is quoted for a Bond, Forex, Stock or Futures transaction.
- US Dollar Index
- U.S. Dollar Index® Futures Contract (USDX) was developed as a Trade Weighted Index, a geometrically weighted average of ten different currencies, with each currency representing a country that was a major trading partner with the United States.
- US Prime Rate
- The interest rate at which US banks will lend to their prime corporate customers.
- A new price quote that is higher than the preceding quote for the same currency or issue.
- Volume Weighted Average Price – calculated by taking the price multiplied by number of shares traded then divided by the total shares traded for the day. This is an indicator used in technical analysis
- Value Date
- The date that both parties of a transaction agree to exchange payments.
- Variation Margin
An additional margin requirement that a broker will need from a client due to market fluctuation.
- A statistical measure of a market or a security’s price movements over time and is calculated by using standard deviations. Associated with high volatility is a high degree of risk.
- Watch list
- Worth watching
- WXY or Combination
- In Elliott Wave Theory a Combination combines several types of corrections. A so-called double or triple three is also a Combination, but this pattern combines Flats separated by X waves. These corrections are labeled as WXY and WXYXZ if it is even more complex.
- A term used to describe a condition in a highly volatile market where a sharp price movement is quickly followed by a sharp reversal. Whipsawing the trader around like in a car accident it
- In candlestick terminology a “gap” is called a “window”. When the market opens higher or lower than the previous CLOSE, a gap is formed. A window often serves as a support/resistance area. The market will often retrace its steps in order to close a window. Moving through a window is usually a strong continuation signal. In the diagram, a “window” occurs at the opening of day #5.
- Where financial institutions or companies raise funds for specific reporting dates such as year ends to give the appearance of high liquidity. Also refers to the manipulation of stock and bond prices by mutual funds and companies and reporting periods – to improve results for revaluation.
- Wood Duck
- A trader or investor with no idea, the wood duck got slammed on the trade
- World Bank
- World Bank – A bank made up of members of the IMF whose aim is to assist in the development of member states by making loans where private capital is not available.
- Acronym meaning you only live once. To Yolo a stock is to say screw it, I’m just going to buy it and hope it goes up despite any catalyst or lack thereof. This is not a sound investment strategy and should only be attempted for fun with relatively small positions if at all.
- The yen is the basic monetary unit of Japan. The symbol for the Japanese yen (JPY) is ¥. The value of the USD/JPY pair is quoted as one U.S. dollar per a certain amount of Japanese yen and is known as dollar yen. It is also heavily traded against the Australian dollar AUD/JPY and is known as Aussie Yen, the Euro EUR/JPY known as Euro Yen.
- Yield Curve
- The graph showing changes in yield on instruments depending on time to maturity. A system originally developed in the bond markets is now broadly applied to various financial futures.
A positive sloping curve has lower interest rates at the shorter maturities and higher at the longer maturities.
A negative sloping curve has higher interest rates at the shorter maturities.
A flattening Yield curve refers to yields coming down in the long end.
- A Zigzag is the most common corrective structure, which starts a sharp reversal. Often it looks like an impulsive wave, because of the acceleration it shows. We show you where a zigzag can extend itself into a double or triple zigzag. Whilst this is not very common, because it lacks alternation (the same two patterns follow each other).
This has been a feature of many markets in a mania, in particular the S&P 500. Furthermore the zigzag can only be the first part of a corrective structure. For this reason it is very important to be able to recognize and differentiate from an impulse wave.