RESOURCES

GLOSSARY

A

Appreciation – growth, a currency is said to 'appreciate' when it strengthens in price in response to market demand.

Arbitrage – a purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.

Ask price – the rate at which a client carries out a trading operation of buying. It is shown on the right side of the quotation.

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B

Balance – the amount in the trader’s account after the last complete transaction.

Bar chart – a type of chart which consists of four significant points: the maximum and minimum prices which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line to the right of the bar.

Base currency – the first currency in a currency pair.

Bear – a market participant, who thinks that prices will go down.

Bear market – a market distinguished by declining prices.

Bid price – the rate at which a client carries out a trading operation of sale. It is shown on the left side of the quotation.

Big figure– A change in the financial instrument price by the base value of 100 points (jargon).

Bookmaker’s working time – the time during which the Bookmaker accepts bets, opens and closes positions.

Breakout – the price’s crossing of support or resistance levels.

Broker – an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.

Bull – a market participant, who thinks that prices will go up.

Bull market – a market distinguished by rising prices.

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C

Clearing – the process of settling a trade.

Close position – to sell or buy a certain amount of currency to offset an equal amount of the open position. This will 'square' the position.

Commission – a fee the broker charges for a transaction.

Confirmation – is seen when one or more indicators confirm the data of another one.

Consolidation – the same as deadlock field. Consolidation, however, assumes continuation of the preceding tendency.

Contract – the standard unit of trading on certain exchanges.

Contract for difference, CFD – is over-the-counter market trading instrument that allows to trade on the stock without a real asset delivery.

Counter currency – the second currency in a currency pair.

Cross currency pairs, Cross rate – a rate between two foreign currencies with the exception of USD. For example: EUR/GBP.

Currency – any official form of money.

Currency pair – the two currencies that make up a foreign exchange rate. For example, EUR/USD is a currency pair.

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D

Day trading – opening and closing the same position or positions within the same trading session.

Divergence – a discrepancy, when two or more index charts show discrepancy with the price chart.

Double Bottom – a figure of technical analysis of the market situation: the rate lowers to a certain level twice and then increases again.

Double Top – a figure of technical market situation when the rate increases to a certain level twice and then lowers again.

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E

Elliott Wave theory – a method of technical analysis and price forecasting based on R. N. Elliott’s theory. The main point of it is that price movement has 5 waves in one trend direction followed by 3 correction waves.

Equity - value that reflects the Client’s current account status taking into consideration the operations carried out at the given moment.

Euro – European Union currency.

European Central Bank, ECB – the Central Bank for the new European Monetary Union.

European Monetary Union – EMU – the principal goal of the EMU is to establish and maintain a single European currency called the Euro.

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F

False breakout – short term price movement (financial asset rate) through a certain hypothetical boundary (previous top or bottom, consolidation level) and then return to the initial level and price movement in the opposite direction.

Fed, FRS, Federal reserve system – the central bank of the USA.

Forecast – attempt to predict a future tendency via examination and analysis of the available data.

Forex, Foreign Exchange Market – the international exchange market, the market for conversion exchange operations of specified amounts of one country’s currency into the currency of another country according to an agreed rate for a given date.

Fundamental analysis – analysis of economic and political information with the objective of forecasting future financial market movements.

Futures – a way of trading financial instruments, currencies or commodities for a specific price on a specific date in the future.

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G

Gap – a situation when the price of an instrument at opening of the trading session varies form the price at closure of the preceding one with formation of an unfilled price range.

Going long – buying shares, commodity or currency for investment or speculation purposes.

Going short – sale of shares, commodity or currency in anticipation of its price reduction and being able to buy it back in the future.

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H

Hedging – a policy of risk neutralization by means of opening a position in the opposite direction for the same financial asset type and with the same lot amount to the given one.

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I

Indicator, custom/technical indicator – mathematical conversion of the price and/or financial instrument amount for prediction of future price changes. On the basis of technical indicator signals, decisions when and how to open positions are made.

Inflation – economic condition where there is an increase in the price of consumer goods, thereby eroding purchasing power.

Interbank rates – the Foreign Exchange rates which large international banks quote for other large international banks.

Intervention – action by a central bank to effect the value of a particular currency by entering the market.

Intra-day – any period of time shorter than a single day.

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L

Leverage – ratio of the transaction to the required security deposit.

Long position – a position to purchase more of an instrument than is sold, hence, an appreciation in value if market prices increase.

Lot – a unit to measure the amount of the deal. The value of the deal always corresponds to a decimal fraction of the lot.

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M

Margin – the required equity that an investor must deposit to collateralize a position.

Margin call – the state of a trading account when the Client loses an opportunity to manage it. ln case of a margin call all the positions would be closed by the Bookmaker on any immediate quotation. Margin call comes, when a Margin level reaches 30% and lower.

Margin trade — operations of buying/selling securities or currencies carried out by a client by means of a special margin account opened at a broker’s. The principle of Margin trade is that the client pays only a part of the transaction, the rest of the amount is provided by the broker as credit.

Market maker – a dealer who supplies prices and is prepared to buy or sell at those stated bid and ask prices. A market maker runs a trading book.

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O

Open position – to open a deal/transaction, i.e. to buy or sell a currency.

Order – an order is an instruction, from a client to a broker to trade. An order can be placed at a specific price or at the market price.

Oscillator – a curve of temp, which fluctuates around the zero line (or between 0 and 100%), a technical indicator that shows the overbought or oversold market state.

Overbought – a market condition after an abrupt price rise. In this situation a corrective recession is possible.

Oversold – a market condition after an abrupt recession. In this situation a corrective price rise is possible.

Over the counter market – OTC – used to describe any transaction that is not conducted over an exchange.

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P

Pip, point, tick – the term used in currency market to represent the smallest incremental move an exchange rate can make. Usually it is the second or fourth decimal point, 0,01 or 0,0001 respectively.

Position – the netted total holdings of a given currency.

Profit – gains exceeding over losses.

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Q

Quote, Quotation – an indicative market price; shows the highest bid and/or lowest ask price available on a security at any given time.

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R

Rally – recovery of the rates after a fall.

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

Rate – the price of one currency expressed in units of another currency.

Reaction – movement of the prices against the prevailing trend.

Rebound – a change of direction of market price movements after a long-term tendency of their growth or reduction led to the situation that the market participants consider the given levels too high or too low.

Resistance – a term used in technical analysis indicating a specific price level at which a currency will have the inability to cross above. Recurring failure for the price to move above that point produces a pattern that can usually be shaped by a straight line.

Resistance level – a term used in technical analysis indicating a specific price level at which a currency will have the inability to cross above. Recurring failure for the price to move above that point produces a pattern that can usually be shaped by a straight line.

Retracement, Correction – a reverse movement of the price or its rollback from the previous maximum or minimum expressed in percentages, the most popular are 38%, 50% and 62% retracements.

Risk – exposure to uncertain change, the likelihood of significantly less-than-expected returns.

Roll-over – process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies.

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S

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

Spot – a transaction that occurs immediately, but the funds will usually change hands within two days after the transaction took place.

Spot price – the current market price. Settlement of spot transactions usually occurs within two business days.

Spread – the difference between the bid and ask prices.

Square – purchase and sales are in balance and thus the dealer has no open position.

Stop Out – condition when the Client is no longer able to manage their account and one or several of its open positions are compulsorily closed at any nearest available price for preserving a positive account balance. Stop Out takes place when the account balance percentage indicator (Margin Level) drops to 20% of the initial deposit or lower.

Support level – a term used in technical analysis indicating a specific price level at which a currency will have the inability to cross below. Recurring failure for the price to move below that point produces a pattern that can usually be shaped by a straight line.

Swap – the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate. It usually takes place during transmission of the position to the following day.

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T

Technical analysis – an effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.

Trader – natural or legal person who sells and buys securities or currencies in the market.

Trading – buying and selling securities, goods or currencies on a short-term basis for obtaining profit.

Trading dollar – a unit of trading operations by which the profit or loss is calculated.

Trading range – a situation when the prices balance between horizontal support and resistance levels.

Trading session – a continuous period of time during which trading operations are run.

Trend – a prevailing price movement direction. Ascending tops and bottoms form an uptrend, descending – a downtrend.

Trendline – a line on the price chart connecting a number of descending and ascending maximums. For building up a trendline at least two points are necessary.

Turnover – the volume traded, or level of trading, over a specified period, usually daily or yearly.

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U

Uptrend – prices increase accompanied by a number of ascending maximums and minimums.

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V

Value date – the date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward.

Volatility – a statistical measure of a market or a security’s price movements over time and is calculated by using standard deviation. Associated with high volatility is a high degree of risk.

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W

Weighted moving average – a sliding average, during calculation of which every price value is given a certain weight. Usually the last indicator is allocated the bigger weight.

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