tixee Glossary
Learn about trading terms and definitions with our helpful guide.
Algorithmic trading is the utilisation of predefined algorithms developed as programs or scripts to run a trading strategy automatically. Algorithmic trading is also known as automated trading, black-box trading or algo-trading. While trading algorithms are designed and developed by traders, they are run on high-performance computers or dedicated servers without any manual intervention. Algorithmic trading was widely used in the 1980s by professional trading firms, such as hedge funds, market makers and investment banks, to give them an edge over manual traders. Today, algorithmic trading is a common feature found on most retail trading platforms, such as MetaTrader 4.
Related terms:
- Arbitrage
- Back-Testing
- Expert Advisors
- Front Running
Arbitrage trading is a controversial strategy that exploits the price difference of an asset trading on different exchanges or brokers. For example, suppose the current gold market price was $1,800, and you discovered a bullion dealer whose internet stopped working last night and is selling gold based on yesterday's price of $1,700 per ounce. If you bought an ounce of gold from the dealer with the broken internet connection and went directly to another dealer and sold for the current price of $1,800, you’ve effectively performed an arbitrage trade. Of course, this is less likely to occur on modern trading platforms and much harder to exploit in the financial markets.
Related terms:
- Front Running
- Hedge
- Position Trader
- Carry Trade
The Asian session is a name given to the period when the Asian markets are open. The Asian may also be known as the Tokyo session, as the city dominates trading volumes in the region; however other countries with major financial centres are active during the Asian session, such as Auckland, Sydney, Singapore and Shanghai. The Asian session is the first session of the trading day, opening at 22:00 and closing at 08:00 UTC. The first markets to open in the Asian session are Auckland and Sydney at 22:00 UTC, followed by Tokyo at 23:00 UTC and Singapore at 01:00 UTC.
Related terms:
- European Session
- North American Session
- Day Trading
Every trading instrument is quoted with two prices; the ask price and the bid price, which are commonly shown on trading platforms as buy and sell prices. The ask price is the price the broker asks you to pay for an asset whenever you open a long position or close a short position. Typically, the ask price is higher than the bid price as many brokers or liquidity providers aim to sell for more than they buy. For example, if the price of EUR/USD is 1.05250/1.05265, it means you’ll pay $105,265 to buy €100,000. Although it’s rare, it’s possible for the bid and ask prices to be equal.
Related terms:
- Bid Price
- Spread
- Currency Pair
- Long Position
Aussie is a nickname given by the forex trading community for the Australian dollar but may also refer to the AUD/USD currency pair.
Related terms:
- Cable
- Currency Pair
- Loonie
- Swissy
A bond is a debt security that can be traded on exchanges or via brokers. Bonds are also known as fixed-income products because they pay interest, i.e., a fixed income to the bondholder. A bond is essentially a loan from the investor holding the bond to the bond issuer. Bonds are issued by governments, such as US Treasury Notes from the United States Government; corporations also issue them as an efficient way to secure financing. Upon maturity of the bond, the principal is repaid to the bondholder.
Related terms:
- CFDs (Contracts for Difference)
- Commodity
- Derivative
- Swap
A breakout is a term used by technical analysis traders to describe the situation where the price of an asset breaks through a confirmed support or resistance level that has been tested several times.
Related terms:
- Rally
- Trend
- Volatility
- Bull Market
A broker is an authorised person or company acting as an intermediary between traders and other traders or exchanges. Brokers provide traders access to markets or counterparties in exchange for a commission or markup.
Related terms:
- Foreign Exchange Market
- Electronic Communication Network (ECN)
- Dealing Desk
- Market Maker (MM)
A bucket shop is a term used to describe a broker following poor execution practices and potentially interfering with customers’ orders to cause slippage, requotes and even trigger stop losses and stop-outs. Essentially, bucket shops rig transactions to increase costs and cause losses.
Related terms:
- Foreign Exchange Market
- Boiler Room
- Dealing Desk
- Market Maker (MM)
A bull market occurs when the prices of an asset or an entire market increase for an extended period and are expected to continue increasing for the foreseeable future. Bull markets tend to be perpetuated as more traders or investors seek to exploit the upward trend.
Related terms:
- Bear Market
- Bullish Sentiment
- Bearish Sentiment
- Economic Indicator
A bullish reversal is a technical analysis term used to describe a bearish market with a downward trend that starts losing momentum and moves in the opposite direction.
Related terms:
- Bull Market
- Trend
- Support Level
- Bearish Reversal
Bullish sentiment refers to an overall positive outlook regarding the value and prospects of a given asset or market. Bearish sentiment typically precedes a bear market and encourages investors to sell, thus pushing prices down.
Related terms:
- Bullish Reversal
- Bull Market
- Rally
- Bearish Sentiment
A contract for difference (CFD) is a type of financial instrument known as a derivative. A CFD is an agreement between the CFD seller or issuer (the broker) and the CFD buyer (a trader). When a CFD is bought, the parties agree to pay each other the difference between the opening price and the closing price of the contract. The CFD concerns a financial asset, which could be a currency pair, individual stock, an index, gold, oil or even another derivative, such as a futures market. When trading CFDs, neither party owns the underlying asset; they simply make a contract based on the market price, which is how traders can go long (buy) or short (sell) various financial instruments on CFD trading platforms. Unlike other derivatives such as futures and options, CFDs can be easily opened and closed and do not expire.
Related terms:
- Derivative
- Spot
- Foreign Exchange Market
- Futures
The consumer price index (CPI) is an economic indicator tracking changes in the costs of consumer goods and services, such as housing, transportation, food, education, clothing and more. Most countries publish a CPI monthly or quarterly. While CPI may be calculated differently by country, the purpose of the index is to measure inflation, which is the most common cause of rising prices. As policymakers and central bankers follow CPI, when the index value increases rapidly, it could be an early sign of coming monetary policy changes, such as increasing interest rates. Conversely, when the CPI decreases, it could result from an efficient economy getting goods and services to consumers for cheaper.
Related terms:
- Gross Domestic Product (GDP)
- Purchasing Managers’ Index (PMI)
- Industrial Production
- Producer Price Index (PPI)
The cable is a nickname given by the forex trading community for the GBP/USD currency pair (the Great British pound traded against the United States dollar). The term cable refers to the telegraph cable laid under the Atlantic Ocean used to communicate GBP/USD exchange rates between London and New York in the 19th Century.
Related terms:
- Aussie
- Currency Pair
- Loonie
- Swissy
Candlestick charts are one of the most common chart types used by traders. As the name suggests, each point on the chart looks like a little candlestick; it has a candle-shaped body and a wick coming from the top or bottom. Candlestick charts show a lot of information and many traders learn to read them intuitively, especially for price action trading strategies. Like most charts, each candlestick plotted represents a period. The shape of the candle is determined by the open, high, low and closing price of the period based on chart settings. To make it easier to interpret candlestick charts, they are coloured differently. Typically, bullish candles, where the closing price is greater than the opening price, are coloured green and bearish candles, where the closing price is lower than the opening price, are coloured red. Candlestick charts were created by Japanese rice traders in the 19th Century, long before electronic trading platforms. Back then, candlestick charts were published in newspapers or even hand-drawn. Traditionally, bullish candles had a black outline, whereas bearish ones had a black filling.
Related terms:
- Bullish Sentiment
- Bearish Sentiment
- Currency Pair
- Chart Pattern
A carry trade is a trading strategy that seeks to take advantage of interest rate differences between a low-interest yielding currency and a high interest-yielding currency. Carry trades generate profit from earning interest from positive swaps rather than exchange rate movements.
For example, a currency like the euro has historically low interest rates, while a currency like the Czech koruna, Polish Zloty or Hungarian forint may have interest rates in the region of 5%. Suppose you go short EUR/HUF, you’re borrowing and selling euros and buying Hungarian forints. In this case, you could earn a profit from the positive interest rate differential between HUF and EUR.
Related terms:
- Rollover
- Spread
- Swap
- Pip
Identifying chart patterns, typically on candlestick charts, is a popular technical analysis technique to identify potential price movements based on historical behaviour.
Related terms:
- Technical Analysis
- Bearish Sentiment
- Currency Pair
- Candlestick Chart
Opening a position in any financial market involves an opening order and a subsequent closing order. If you open a long position, the opening order is a buy order, and the closing order is a sell order. Conversely, if you open a short position, the opening order is a sell order, and the closing order is a buy order. Various circumstances can trigger closing orders, the most common being securing profits or minimising losses.
Related terms:
- Entry Order
- Contracts for Difference (CFDs)
- Currency Pair
- Hedge
Coincident indicators are economic indicators that provide information about an economy's current or very recent performance. Well-known coincident indicators are Gross Domestic Product, Non-Farm Payroll and other employment statistics.
Related terms:
- Lagging Indicator
- Leading Indicator
- Retail Sales
- Economic Indicator
Coincident indicators are economic indicators that provide information about an economy's current or very recent performance. Well-known coincident indicators are Gross Domestic Product, Non-Farm Payroll and other employment statistics.
Related terms:
- Lagging Indicator
- Leading Indicator
- Retail Sales
- Economic Indicator
A commission is a fee charged by brokers for executing your orders. At Tixee trading, we do not charge commissions for most of our trading accounts; we only charge a commission on our VIP accounts.
Related terms:
- Spread
- Pip
- Long Position
- Short Position
Commodities are raw materials that are essential to the production of finished products. For example, coffee beans are a raw material used to produce coffee-based drinks, and copper is a raw material used to manufacture electrical wires. Commodities are categorised as either hard or soft commodities. Hard commodities are typically extracted from the earth, such as oil, gold, silver and platinum. Soft commodities are grown and harvested, such as cotton, soybeans, wheat, corn, coffee and sugar. Commodities are traded in financial markets using instruments such as futures, options and CFDs. To ensure fungibility, commodities traded on exchanges are standardised to ensure consistent standards.
Related terms:
- Futures
- Forward
- Derivative
- Option
Currency calculators are a helpful tool for traders to quickly make different calculations such as spreads, lot size, pip value, swaps, commissions, position sizes, margin requirements and exchange rates.
Related terms:
- Margin Calculator
- Pip Value
- Margin
- Spread
Every financial instrument is quoted in pairs. There is a base asset and a quote currency. Consider the trading pair XAU/USD; it reflects the gold price quoted in USD dollars. Gold is the base currency you buy or sell, and USD is the quote currency you use to buy or sell. Gold on its own has no value until you introduce the quote currency, USD. Like commodities, currencies are also quoted against each other. As one or both currencies fluctuate in value, the exchange rate goes up or down.
Related terms:
- Spread
- Pip Value
- Pip
- Reserve Currency
Day trading is a short term trading technique where traders hold short term positions for less than a day. Day traders typically hold their positions for several minutes or hours. Day traders are primarily attracted to the forex and stock markets because the volatility and wide range of products offer plenty of opportunities. While day traders only seek short term gains from the market, they play an essential role in maintaining liquidity and overall market efficiency.
Related terms:
- Scalping
- European Session
- Carry Trade
- Position Trader
A dealing desk is a department in a brokerage that manages customer order flow and the company's exposure and ensures access to liquidity. Dealing desks are associated with market making brokers, which are known for controversial practices in the online trading community, such as requotes and order rejections.
Related terms:
- Foreign Exchange Market
- Electronic Communication Network (ECN)
- Market Maker (MM)
- Contract for Difference (CFD)
Derivatives are financial instruments that derive value from other assets. Unlike gold, currency or shares in a company, derivatives are merely contracts with no intrinsic value. However, a derivative can be created based on the value of assets such as gold, currency exchange rates or stocks. Common derivatives are CFDs, futures and options. Derivatives are considered complex financial instruments because traders aren't just exposed to depreciation risks but also the mechanics of the contract.
Related terms:
- Contract for Difference (CFD)
- Futures
- Forward
- Option
Dove is a term used to describe a central banker or economic policy maker advocating for policies prescribing low interest rates. Low interest rates imply that inflation is not a forthcoming threat to an economy. Policymakers and central bankers publishing such statements are described as being dovish.
Related terms:
- Hawk
- Bear Market
- Bull Market
- Rally
An electronic communication network (ECN), also known as an alternative trading system in the US or a multilateral trading facility in Europe, functions just like a stock exchange by hosting markets and allowing buyers and sellers to give and take liquidity. An ECN can support various instruments, such as stocks, currency pairs or cryptocurrencies. ECNs are typically associated with low spreads because the market stimulates competition. Because of the low spreads, ECN is a marketing term adopted by brokers and is often confused with NDD execution. However, ECN is merely a form of NDD execution; another type of NDD execution is straight-though-processing.
Related terms:
- Foreign Exchange Market
- Market Maker (MM)
- Straight-Through Processing (STP)
- Liquidity
An economic calendar is a list of upcoming events that may impact the market by potentially changing sentiment or triggering volatility. Traders use economic calendars to follow all the economic events released in each country and region. Economic calendars usually rank events according to their previous impact on the markets.
Related terms:
- Economic Indicator
- Purchasing Managers' Index (PMI)
- Producer Price Index (PPI)
- Lagging Indicator
An economic indicator is a report or statistics published by countries and economic unions, such as the European Union. Analysts, economists and traders use economic indicators to gauge the overall economic health of countries and regions. Well-known examples of economic indicators are unemployment statistics, gross domestic product and building permits. While dozens of economic indicators are published daily, only the most significant ones increase market volatility leading up to and following the release.
Related terms:
- Economic Calendar
- Purchasing Managers' Index (PMI)
- Producer Price Index (PPI)
- Lagging Indicator
An entry order is an instruction to open a position automatically when the price of a trading instrument hits the price target defined in the order. An entry order could be either a limit order or a stop order.
Related terms:
- Market Order
- Order
- Short Position
- Long Position
In finance, equity means the value of an asset, such as a company, minus any debts or liabilities. Essentially, equity reflects the true value of an asset. In a trading account, equity means something similar; it's the value of your account, i.e., balance, plus or minus any unrealised profit or loss from open positions.
Related terms:
- Balance
- Margin Level
- Free Margin
- Commission
The European session, also known as the London session, is the second of three trading sessions of each business day and is typically the most active session. The European sessions occur between 7 am and 4 pm GMT.
Related terms:
- North American Session
- Day Trading
- Asian Session
- Foreign Exchange Market
Expert advisors, commonly known as EAs and the MetaTrader community, are scripts that can partially or entirely automate your trading strategy on the MT4 or MT5 platform. While Expert Advisor is a term native to the MetaTrader platform, it's used synonymously with similar terms like trading robots, bots or algos. Once installed and enabled in your MetaTrader terminal, they follow instructions they are programmed to do based on historical and current prices and automatically open and close positions accordingly.
Related terms:
- MetaTrader 4 / 5
- Algorithmic Trading
- Virtual Private Server (VPS)
- Back-Testing
The exponential moving average (EMA) is one of many variations of the simple moving average indicator. Moving averages are lagging indicators that indicate an asset price over a number of periods. The EMA puts more weight on recent price data causing it to react faster than other moving averages. The EMA is typically used over 12 or 26 periods.
Related terms:
- Lagging Indicator
- Bollinger Bands
- Simple Moving Average (SMA)
- Technical Analysis
The Federal Reserve System, known as the FED, is the United State's Central Bank. The Federal Open Market Committee (FOMC) is a committee in the FED responsible for overseeing the Fed's buying and selling of United States Treasury securities and making decisions about interest rates and the money supply. Such decisions have a significant impact on the value of the US dollar. Hawkish decisions can positively impact the value of the US dollar, while dovish decisions can have a negative impact.
Related terms:
- Hawk
- Dove
- Economic Calendar
- Sentiment
The Fibonacci retracement is a popular technical analysis technique for determining support and resistance levels. The indicator, named after 13th-century mathematician Leonardo Fibonacci, is based on the Fibonacci sequence of numbers.
Fibonacci numbers are a sequence of numbers where each number is the sum of the previous two, for example:
0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144
Technical analysts use the Fibonacci retracement to identify areas of support and resistance. The lines are drawn on the chart according to the Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.
Related terms:
- Technical Analysis
- Technical Indicator
- Parabolic SAR
- Relative Strength Index (RSI)
Floating profit and loss, also known as unrealised profits or losses, are the potential profits or losses from the open positions in a trading account.
Related terms:
- Equity
- Margin
- Margin Level
- Leverage
The foreign exchange market, also known as the forex market or FX market, is a decentralised global marketplace for trading various currencies. The definition doesn't refer to any particular market or venue as currencies can be traded through over-the-counter transactions or ECNs. The forex market is the largest and most liquid market globally, with over $6 trillion daily turnover. The forex market is split into three trading sessions: Asian, European, and North American. As all financial centres worldwide participate in the forex market, it's operational 24 hours a day, five days a week.
Related terms:
- Currency Pair
- Contracts for Difference (CFDs)
- Commodity
- Day Trading
Forwards are a contract between buyers and sellers where they agree on a transaction in the future. For example, a trader might agree to buy 1,000 barrels of oil for $100 per barrel in six months. The seller must deliver the goods to the buyer when the contract expires.
Forwards are a derivative because the parties are executing contracts rather than physical assets. Businesses typically use forward contracts rather than market speculators because delivery is obligatory, and traders don't need physical commodities. Forwards are very useful for commodity producers to protect themselves from the depreciation of their commodity and buyers to protect themselves from appreciation.
Related terms:
- Options
- Futures
- Contracts for Difference (CFDs)
- Derivatives
Free margin refers to a trading account's margin not currently required to maintain positions. Essentially, free margin is what is available to open new positions or cover drawdown. Free margin is calculated as equity – used margin.
Related terms:
- Equity
- Margin
- Balance
- Floating Profit and Loss
Front running is when a broker or trader uses insider knowledge of an upcoming order of significant volume to buy or sell that product ahead of time; i.e. place their order in front of the large order. Some market participants, such as mutual funds with billions of dollars, buy stocks and other financial instruments in large block orders. Suppose someone working at the brokerage responsible for executing that order decides to buy the same stock knowing their clients' order will push the price up; that's front running. Front running is illegal in most countries, especially in countries with major market economies.
Related terms:
- Arbitrage
- Liquidity
- Market Depth
- Bucket Shop
Fundamental analysis is an approach to market analysis primarily focusing on data and information that can influence the value of a security. Influential fundamental information can be directly related to an asset. For example, a company's earnings report can influence its stock price, or the interest rate of a currency can influence its value.
In the forex market, fundamental analysts focus on economic, geopolitical, social and macroeconomic factors such as output, income, employment, trade, GDP and inflation statistics.
The aim of fundamental analysis is to identify whether a particular asset is overpriced or underpriced to take the appropriate position. Fundamental analysis assumes that assets are always overpriced or underpriced and, therefore, continuously correct themselves towards their real value.
Related terms:
- Trade Balance
- Trade Surplus
- Technical Analysis
- Gross Domestic Product (GDP)
Futures contracts are exchange-traded derivatives. Unlike a CFD, where the broker is the counterparty, futures are traded between participants on an exchange. Futures allow buyers and sellers to agree upon a price for an asset to be settled on the expiration date.
Futures are similar to forwards, except they offer much more flexibility and higher liquidity because they are traded on exchanges. However, futures contracts are traded with predefined expiration dates set by the exchange operating the market. In contrast, while highly complex, CFDs offer more flexibility as they can be opened and closed at a trader's discretion, proving the market is open. Futures are popular trading instruments in the United States because CFDs are prohibited.
Because futures can be settled in cash rather than physical delivery, traders use futures for speculation and hedging. When a contract expires, and the long trader is profitable, they are paid the difference from the seller. Conversely, if the seller is profitable, the buyer pays the difference.
Related terms:
- Options
- Forwards
- Contracts for Difference (CFDs)
- Derivative
Gross domestic product (GDP) is a lagging economic indicator tracking the value and changes in the total value of goods and services produced by a country, adjusted for inflation. Many economists consider GDP the gold standard for measuring and comparing economic activity. Most countries publish their GDP statistics quarterly. When GDP is higher than forecasted, it tends to create bullish sentiment for the country's currency.
Related terms:
- Lagging Indicator
- Fundamental Analysis
- Purchasing Managers' Index (PMI)
- Producer Price Index (PPI)
Good until cancelled orders are a pending order that is set to remain valid indefinitely or until they are cancelled or triggered.
Related terms:
- Good 'til Date (GTD) Orders
- Good for the Day Orders
- Entry Order
- Market Order
Good 'til date (GTD) orders are pending orders set to expire at a specified time and date unless they are triggered beforehand or manually cancelled by the trader.
Related terms:
- Good 'til Cancelled (GTC) Orders
- Good for the Day Orders
- Entry Order
- Market Order
Good for the day orders are pending orders that automatically expire at the end of the trading session, at which point they are automatically cancelled.
Related terms:
- Good 'til Cancelled (GTC) Orders
- Good for the Day Orders
- Entry Order
- Market Order
Hawk is a term used to describe a central banker or economic policymaker advocating for policies that aim to reduce inflation rather than economic stimulation. Hawkish policies typically prescribe higher interest rates and avoid expansions of the money supply. Higher interest rates reduce spending and encourage saving, decreasing liquidity in the market and slowing down the economy.
Related terms:
- Dove
- Bear Market
- Bull Market
- Rally
Hedging is a strategy used by investors to manage their risk by reducing exposure to the market by opening positions in opposite directions or inversely correlated instruments. When a trader is long 1 ounce of gold and short one ounce of gold, it doesn't matter how much the price goes up or down; they won't gain or lose anything because the positions are hedged.
Related terms:
- Reversal
- Short Position
- Long Position
- Derivative
Hot money describes an influx of capital from one financial market to another to take advantage of emerging opportunities. It's referred to as hot money because it can move in and out of markets quickly. For example, if the Reserve Bank of Australia decides to increase interest rates to 10%, you'd see hot money flock to Australian fixed income products.
Related terms:
- Carry Trade
- Swap
- Arbitrage
- Day Trading
Ichimoku Kinkō Hyō, often called the Ichimoku cloud because of its cloud-like appearance, is a technical indicator developed in the 1930s by Japanese journalist Goichi Hosoda. This indicator packs a lot of information; it shows momentum, support and resistance levels and trend direction. The Ichimoku cloud is widely used by traders and is a standard indicator featured in most trading platforms, including MT4 and MT5.
Related terms:
- Technical Analysis
- Parabolic SAR
- Relative Strength Index (RSI)
- Simple Moving Average (SMA)
Indices are widely used to benchmark the value, performance or relative health of a given market or sector or economy. An index usually aggregates data from various sources to provide a simple and easy to track metric over time.
For example, the S&P500 index, which is a widely referenced indicator for gauging the health of the US stock market, follows the value of the 500 or so most valuable companies listed in the United States.
Traders and economists use a variety of indices to conduct fundamental analysis, such as the consumer price index, corruption index, house price index and more.
Related terms:
- Leading Indicator
- Fundamental Analysis
- Purchasing Managers' Index (PMI)
- Producer Price Index (PPI)
Industrial production is an economic indicator published by most countries and economic communities to report on the total value of the industrial output., adjusted for inflation. The data covers various sectors, such as manufacturing, utilities, mining and gas.
Industrial output is a coincident indicator that can provide valuable fundamentals for traders as it's closely correlated with other areas of an economy, such as employment, consumer spending and exports. High output levels imply greater demand for the currency, especially if the country is a notorious exporter.
Related terms:
- Leading Indicator
- Fundamental Analysis
- Purchasing Managers' Index (PMI)
- Producer Price Index (PPI)
Jawboning, also known as moral suasion, is when a government or authority appeals to other institutions or businesses to persuade them to change their conduct without forcing them to do so by implementing regulations. Speeches by presidents, prime ministers and central bankers tend to be considered jawboning as they seek to influence market sentiment and exchange rates without direct intervention.
Related terms:
- Sentiment
- Non-Farm Payroll (NFP)
- Petrodollar
- Federal Open Market Committee (FOMC)
Kiwi is a nickname given for the New Zealand dollar.
Related terms:
- Aussie
- Cable
- Currency Pair
- Yuppy
Lagging indicators are a category of indicators that trail a particular trend and are used for confirmation rather than prediction. Lagging economic indicators are generally output-orientated, such as employment statistics, gross domestic product or consumer price index. Lagging technical indicators are used by technical analysts to confirm trends rather than predict them. The best known lagging indicator is the moving average.
Related terms:
- Simple Moving Average
- Consumer Price Index (CPI)
- Leading Indicator
- Fundamental Analysis
Lagging indicators are a category of indicators that trail a particular trend and are used for confirmation rather than prediction. Lagging economic indicators are generally output-orientated, such as employment statistics, gross domestic product or consumer price index. Lagging technical indicators are used by technical analysts to confirm trends rather than predict them. The best known lagging indicator is the moving average.
Related terms:
- Federal Open Market Committee (FOMC)
- Foreign Exchange Market
- Economic Calendar
- Black Swan Event
Latency is the delay between when information is sent and received. In the context of trading, latency is the time interval between submitting an order from your trading terminal and the order being executed by your broker. Traders desire low latency as it reduces the chances of experiencing slippage, partial fills or rejections. Some traders try to reduce latency by renting a virtual private server.
Related terms:
- STP (Straight-Through Processing)
- Slippage
- Requote
- Scalping
Leading indicators are a category of indicators that can predict a particular trend or breakout. Because leading indicators are forward-looking, they can be unreliable, so traders typically combine multiple leading indicators or use leading and lagging indicators. Leading economic indicators are generally input-orientated, such as money supply, yield curves, building permits and industrial production. Technical analysts use leading technical indicators to predict trends based on price action. The best known leading indicator is the Fibonacci retracement.
Related terms:
- Lagging Indicators
- Index
- Economic Calendar
- Economic Indicator
Leverage is essentially a loan from a broker to a trader to help the trader get greater exposure to a particular asset, as opposed to buying it outright. For example, with 1:10 leverage, a trader can open positions ten times greater than their deposit would allow. Leverage doesn’t just mean traders can open larger positions, which means greater risks; it also allows them to utilise their capital more efficiently.
Related terms:
- Margin Call
- Contracts for Difference (CFDs)
- Hedge
- Futures
Liquidity is the degree of ease with which an asset can easily be bought or sold in a given market. Sometimes, illiquid assets must be sold at a discount to motivate buyers. Conversely, they may need to be bought for a premium to motivate sellers. A common example of an illiquid market is fine-art; there are typically just one or two pieces of each artwork, meaning the supply is low. Since fine art is a very niche market, the number of investors is low, meaning the demand is also low; low supply or low demand are factors that cause an asset to be illiquid. A liquid asset, such as gold, oil, major currencies and shares of major publicly listed companies, can be easily bought or sold without discounts or paying any premiums. Forex is the most liquid market in the world, but not all currencies are as liquid as others.
Related terms:
- Day Trading
- Foreign Exchange Market)
- Margin
- Spread
The term long position refers to when a trader has bought an asset, typically using a derivative such as CFDs, expecting the price to appreciate in the short term. Sometimes, traders use the phrase ‘go long’ to describe buying an asset. In general, traders that are ‘long’ expect prices to appreciate.
Related terms:
- Contracts for Difference (CFDs)
- Leverage
- Short Position
- Currency Pair
Loonie is a nickname given to describe the Canadian dollar. The term comes from the Common Loon, the provincial bird of Ontario and appears on the face of the Canadian one-dollar coin.
Related terms:
- Yuppy
- Kiwi
- Aussie
- Cable
The term lost decades is used to describe the decades-long severe after-effects that follow a burst economic bubble caused by aggressive economic growth fuelled by substantial borrowing rather than real prosperity. When a bubble bursts, highly leveraged investors have positions liquidated, and property developers default on their loans and mortgages. Banks recover assets that are no longer valuable enough to cover the debts putting them at risk of default. The consequence of a burst economic bubble is sluggish economic growth, high unemployment, declining living standards, and falling real-estate prices.
Some of the most notable lost decades are:
● The 1980s are considered Latin America’s lost decade after debt levels spiralled out of control in the region.
● The 1990s are considered Japan’s lost decade due to a massive asset bubble burst. The Nikkei index has never recovered to the all-time highs of January 1990.
● The 2000s are considered the United States’ lost decade due to the dot-com bubble burst in the late 1990s, followed by the sub-prime mortgage crisis in 2008.
Related terms:
- Economic Indicator
- Laissez-Faire
- Trade Deficit
- Black Swan Event
In the forex market, a lot refers to the contract size of a particular trading instrument. For currency pairs, one lot is 100,000 units of the base currency. For example, when trading EUR/USD, one lot means 100,000 euros. The lot size varies for different asset classes; for example, the lot size for silver is 5,000 ounces, whereas the lot size for gold is 100 ounces.
Related terms:
- Pip
- Pip Value
- Currency Pair
- Foreign Exchange Market
MACD stands for moving average convergence divergence and is a widely used technical analysis indicator for understanding the short-term momentum of a particular currency pair or financial market. While many technical indicators are overlaid on the price chart, the MACD is a standalone indicator.
As the name suggests, moving averages plan an important role in the MACD formula. The indicator consists of three elements; the MACD line, the signal line and a histogram.
The MACD line is calculated by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA. The signal line is a 9-period EMA of the MACD line. The distance between the two lines is shown as a histogram.
Traders use MACD to generate buy and sell signals by looking for when the lines cross over and under each other or when the two lines cross over the centre line.
Related terms:
- Momentum
- Technical Analysis
- Technical Indicator
- Leading Indicator
Margin is the amount of funds a trader has to finance positions opened using leverage. To trade forex or CFDs, traders need to maintain sufficient margin to maintain their positions. The margin in your trading account is calculated by subtracting the used margin from equity:
Margin = Equity - Used Margin
Related terms:
- Margin Call
- Margin Level
- Leverage
- Contracts for Difference (CFDs)
When a trader’s margin level falls below a certain threshold, their broker will prevent them from opening new positions. When a margin call occurs, traders are encouraged to close positions to increase their balance to increase the available margin and lower the risk of being liquidated.
Related terms:
- Margin Level
- Margin
- Leverage
- Contracts for Difference (CFDs)
The margin level of a trading account is the free margin that is available to open further positions. Margin level is the ratio of account equity to used margin and is expressed as a percentage. When the margin level drops to 100%, all available margin is in use, and traders are restricted from opening new positions. Typically, when the trading account margin level falls below 100%, this is when the margin call happens.
Margin level is calculated as follows: Margin Level = Equity / Free Margin * 100
Related terms:
- Margin
- Margin Call
- Leverage
- Free Margin
Market depth refers to the volume of liquidity available on both sides of a given market. The more depth a market has, the easier it is to fill large orders without affecting the price of execution of other traders’ orders.
Related terms:
- Liquidity
- Electronic Communication Network (ECN)
- Foreign Exchange Market
- Lot
A market maker is a type of broker that operates as a dealer, determining the bid and ask quotes for each trading pair and deciding whether to accept and fill clients' orders. Market maker brokers are always the counterparty to their clients' orders and typically profit from the spread, but may also profit from client losses, depending on their portfolio of customers.
Related terms:
- Spread
- Ask Price
- Bid Price
- Spot
Orders are instructions to open and close positions. A market order is an instruction to buy or sell a trading instrument at the market price. Market orders are executed the instant a trader confirms.
Related terms:
- Slippage
- Spot
- Ask Price
- Bid Price
Maximum deviation is a setting offered in some trading platforms, such as MetaTrader 4. Using maximum deviation allows traders to control the risk of slippage on their market orders, which can be incredibly useful during times of high volatility. For example, traders can set the maximum deviation of 2 pips on their orders, preventing market orders from being filled at a price worse than two pips from the spot price.
Related terms:
- Slippage
- Volatility
- Spot
- Market Order
A micro lot is a common measurement used by forex traders. One lot is 100,000 units of the base currency; a micro-lot is one-hundredth of a lot and therefore represents 1,000 units of the base currency in a pair. Micro-lots can also be used for other trading pairs; for example, one lot of gold is 100 ounces; a micro-lot of gold is 1 ounce.
Related terms:
- Lot
- Mini Lot
- Foreign Exchange Market
- Order
A mini-lot is a common measurement used by forex traders. One lot is 100,000 units of the base currency; a mini-lot is one-tenth of a lot and therefore represents 10,000 units of the base currency in a pair. Mini-lots can also be used for other trading pairs; for example, one lot of gold is 100 ounces; a mini-lot of gold is 10 ounces.
Related terms:
- Lot
- Micro Lot
- Order
- Foreign Exchange Market
The minimum bid rate is the minimum refinancing rate set by European Central Bank (ECB); it is important to forex traders because interest rates are significant drivers of the demand for certain currencies, impacting their value. Therefore, minimum bid rate announcements from the ECB tend to be highly anticipated by the market which historically generates a great deal of market volatility just before and after the press releases.
Related terms:
- Federal Open Market Committee (FOMC)
- Producer Price Index (PPI)
- Consumer Price Index (CPI)
- Non-Farm Payroll (NFP)
decreasing in value. Once an asset gains momentum, it is considered increasingly probable to continue moving in the same direction, i.e., a trend will emerge. In technical analysis, momentum indicators are called oscillators and indicate developing trends.
Related terms:
- Trend
- Oscillator
- Velocity
- Volatility
The non-farm payroll (NFP), which is published on the first Friday of every month, is one of the most anticipated events in every forex trader’s calendar. The NFP tracks changes in the number of people employed in the United States. The statistics cover most sectors except farm workers, government, non-profit organisations and private household employees. UD dollar trading pairs typically experience an uptick in volatility during the announcements, regardless of the sentiment. If the number of people employed increases, it’s considered bullish, whereas if it falls, it’s considered bearish.
Related terms:
- Coincident Indicator
- Gross Domestic Product (GDP)
- Consumer Price Index (CPI)
- Economic Calendar
A non-dealing desk (NDD) broker is simply a broker that does not operate a dealing desk. Brokers that do not operate a dealing desk typically operate a straight-though-processing (STP) execution model. However, it’s possible for brokers to be the counterparty to your transaction without acting as a market maker or using a dealing desk. For example, brokers can operate an internal order book (known as warehousing) or match their clients' orders (known as an ECN).
Related terms:
- Electronic Communication Network (ECN)
- Market Maker (MM)
- Dealing Desk
- Foreign Exchange Market
The North American session is the last session of each trading day, opening between 12 pm and 8 pm GMT. The North American trading session is one of three major sessions that make up the 24-hour forex market trading schedule.
Related terms:
- Asian Session
- European Session
- Foreign Exchange Market
- Trading Session Timetable
An order is an instruction from a trader to a broker to buy or sell a particular instrument. When submitting orders, traders need to specify the volume and direction. Traders use many types of orders; the most common is a market order. Other types of orders are stop orders, limit orders and take profit and stop-loss orders.
Related terms:
- Good ‘til Cancelled (GTC)
- Good ‘til Date (GTD)
- Stop-Loss Order
- Take Profit Order
Oscillators are a category of technical analysis indicators that move up and down (oscillate) between two high and low ranges. Traders use oscillators to identify overbought and oversold conditions. A trading instrument is considered overbought when the oscillating line moves into the high range. Conversely, it's considered oversold when the oscillating line moves into the lower range. Knowing when a financial asset is overbought or oversold can help identify the end or reversal of a trend. Popular oscillator indicators are RSI and MACD.
Related terms:
- Relative Strength Index (RSI)
- Moving Average Convergence Divergence (MACD)
- Technical Analysis
- Lagging Indicator
The purchasing managers’ index (PMI) is a leading economic indicator tracking the manufacturing, construction and service sectors. Unlike most economic statistics, which are published by government departments, the PMI is published by private financial analyst firms, such as S&P Global. The PMI is calculated by surveying purchasing managers at hundreds of private firms to evaluate business conditions, including employment, production, prices, new orders, deliveries and inventories. A PMI figure above 50.0 indicates that the economy is expanding, while a figure below 50.0 suggests the economy is contracting. Many traders focus on the US PMI, but there is an equivalent index for several major economies, such as China and Singapore.
Related terms:
- Producer Price Index (PPI)
- Consumer Price Index (CPI)
- Leading Indicator
- Economic Calendar
The producer price index (PPI) is a leading economic indicator tracking the monthly change of prices for goods and services sold by producers. The PPI focuses on the wholesale cost of goods and can signal signs of inflation earlier than the consumer price index (CPI), which measures the cost of goods at the retail level. The price of primary products, such as commodities, plays an important role in pushing and pulling the PPI and CPI indices up and down. Since most commodities are priced in US dollars, changes to PPI can impact the value of the US dollar and other commodity currencies, such as the Canadian dollar or Australian dollar.
Related terms:
- Purchasing Managers’ Index (PMI)
- Consumer Price Index (CPI)
- Leading Indicator
- Economic Calendar
The parabolic stop and reverse indicator, better known as the parabolic SAR, is a popular technical analysis indicator. New traders widely use the parabolic SAR due to the ease of following the signals generated by the indicator. The indicator plots a series of dots, i.e., a parabola, above or below each period on the price chart. The easiest way to follow the signals from this indicator is to enter a sell order when the dots are below the price; buy when the dots are above, and exit your positions when the dots stop and reverse.
While following the parabolic SAR indicator sounds easy, the underlying calculations are complex. The formula even varies depending on whether the parabola is rising or falling. The indicator was developed by J. Wells Wilder, who also created the well-known Average True Range (ATR), the Relative Strength Index (RSI) and Average Directional Index (ADX) indicators.
Related terms:
- Trend
- Relative Strength Index (RSI)
- Technical Analysis
- Technical Indicator
A pending order is a type of order with a condition attached, which is not triggered until a certain price, time or event occurs. Unlike market orders, which are processed instantly, pending orders rest and wait to be triggered by the attached condition. Pending orders can be essential for certain trading and risk management strategies.
While there are many types of pending orders, they broadly fit into two categories: limit orders and stop orders. Both orders can be triggered when a certain price is reached, but they can also have additional conditions, such as being cancelled at a certain time or when another order is triggered.
Related terms:
- Order
- Market Order
- Take Profit Order
- Stop-Loss Order
In trading platforms and charting applications, a period is the time interval of each piece of data plotted on the chart, whether it’s a candlestick, bar, or dot. If a candlestick chart is set to 1-hour intervals, it means each candlestick is one period, and each period is 1-hour. Traders look at different timeframes for analysing the markets. For example, scalpers may look at 1-minute or 5-minute charts; day traders may use 15-minute charts; position traders may use daily charts.
When using technical analysis indicators, traders can customise the number of periods used in calculations. For example, when a moving average is calculated, the period data used will vary according to the time frame being charted. Therefore, a 26-period simple moving average of a 1-hour chart will calculate the closing prices from 26 hours of price history added together and divided by 26 (the number of periods). A 26-period simple moving average of a 1-minute chart will sum the closing prices from 26 minutes of price history and divide by 26.
Related terms:
- Candlestick Chart
- Simple Moving Average (SMA)
- Spot
- Day Trading
Petrodollars are US dollars earned through the sale of oil by oil-exporting nations, such as OPEC members, Russia and Norway. The term petrodollar is also used to describe the United States' favourable position of its currency, having a continually high demand as it used to settle hundreds of billions of dollars of oil-related transactions.
Related terms:
- Trade Balance
- Trade Deficit
- Cable
- Laissez-Faire
A pip, which stands for percentage in point, is the second-to-last digit of a financial asset’s ticker price. For example, in the case of the EUR/USD, which is quoted with five decimals, the pip is the fourth digit or 1/10,000th of the quote. Most currency pairs are calculated to five decimal places. However, some currencies like the Japanese yen are only quoted with three digits, meaning the pip position for USD/JPY is the second digit after the decimal or 1/100th of the quote currency.
The reason traders focus on such precise price changes of currency pairs is because they profit from small price movements; just a dozen pips are enough to profit $100 with a position size of one lot.
Related terms:
- Pip Value
- Micro lot
- Lot
- Order
Pip calculators are a helpful tool for traders to quickly determine the pipe value based on lot size in their trading account’s home currency. These calculators are helpful for managing risk effectively.
Related terms:
- Pip
- Pip Value
- Lot
- Order
The pip value refers to the monetary value of one pip. Many traders use pips to measure the distance between two levels, such as the distance between their entry price and take profit target. Pip value varies depending on position size and currency pair. Larger positions have greater pip values. The pip value is calculated in the quote currency; for example, the pip value of one lot of USD/JPY is ¥1,000, and the pip value for one lot of USD/CHF is ₣10.
The pip value of a currency pair is calculated by multiplying the pip position by the position size. The pip position for EUR/GBP is 0.0001. Therefore, the pip value for different lot sizes will be as follows:
Micro lot: 0.0001 * 1,000 = £0.10
Mini lot: 0.0001 * 10,000 = £1.00
Lot: 0.0001 * 100,000 = £10.00
Related terms:
- Pip
- Lot
- Mini Lot
- Micro Lot
A pivot point is a price level identified by technical analysts where they predict the market may pivot. Essentially, pivot points are minor support and resistance levels where the price is likely to retrace. Predicting where a market might retrace, especially in a well-defined trend, can be very useful for scalpers and day traders. Pivot points are calculated using a technical analysis tool. They are calculated by taking the average of the asset’s open, high, low and close prices over a given time frame. When the price breaches a resistance pivot point, it is considered a bullish signal. Conversely, it is considered a bearish signal when the price breaks a support pivot point.
Related terms:
- Resistance Level
- Support Level
- Fibonacci Retracements
- Technical Analysis
A portfolio is a collection of various financial assets owned by an investor. A portfolio can consist of a combination of different asset classes, such as stocks, exchange-traded funds, bonds, precious metals, commodities and various alternative investments, such as real estate, mutual funds, private equity, loans and more. Investors are typically encouraged to have diverse investment portfolios to hedge the risk against a single investment product.
Related terms:
- Stock
- Commodity
- Option
- Derivative
A position trader is someone who tends to hold their position for longer than one day but may typically maintain positions for weeks and even months at a time. Position traders are looking to profit from long-term trends and exploit large price movements, often hundreds of pips. Position traders are less common in the forex market than in the stock market. The forex market is quite attractive to scalpers and day traders.
Related terms:
- Day Trading
- Scalping
- Hedge
- Futures
A price channel is a technique used by technical analysts to predict the range of a financial asset’s future price. A price channel is created by drawing a pair of parallel trend lines plotted on a chart. The space between the two lines is considered the price channel, which is expected to contain the price until it eventually breaks out. The upper line is drawn by connecting at least three highs and is considered the resistance level. The lower line is drawn by connecting at least three lows and is considered the support level.
Related terms:
- Trend Line
- Resistance Level
- Support Level
- Technical Analysis
The profit and loss ratio is a simple calculation that traders can use to understand their profitability quickly and easily. A trading strategy with a profit-to-loss ratio of 1:1 has broken even; a trading strategy with a profit-to-loss ratio of 2:1 means it has doubled the risked capital. The profit and loss ratio is calculated by taking the average net profit from all profitable trades and dividing it by the average net loss from losing trades. The result is the number on the left of the ratio, which can be interpreted as the amount profited for each dollar risked. If the number is below one, for example, 0.9:1, it means the strategy is so far unprofitable.
Related terms:
- Take Profit Order
- Stop-Loss Order
- Margin Call
- Risk Capital
No Results
The relative strength index (RSI) is a popular momentum oscillator used by technical analysts to determine if an asset is potentially overbought or oversold. The RSI value oscillates between 0 and 100; if this figure reaches or passes 70, the underlying asset is regarded as overbought. If it reaches or drops below 30, it is viewed as oversold. In both cases, a reversal is considered likely; overbought conditions tend to trigger selling activity and bearish movements, while oversold conditions tend to trigger buying activity and bullish movements. By default, the RSI is calculated using the previous 14 periods of historical data; however, some traders may optimise this setting.
Related terms:
- Oscillator
- Momentum
- Technical Indicator
- Moving Average Convergence Divergence (MACD)
A rally, or more specifically a price rally, is a notable and steady bullish price movement. Rallies occur in market conditions where demand is greater than supply. A rally should not be confused with a spike since rallies are continuous upward price movements rather than short-term anomalies. Rallies will persist until the market sentiment changes and sellers not only introduce more supply but start to control the market.
Related terms:
- Trend
- Bull Market
- Bullish Sentiment
- Bear Market
A re-quote is when a broker decides to offer a trader a different price. Only market maker brokers that operate a dealing desk will offer re-quotes to traders. A re-quote will occur when a broker cannot execute a trade at the requested price; this happens because, during the time between when the trader sends the order and the broker receives it, the market has moved. Re-quotes typically occur when a market experiences volatility, particularly when a high-impact economic event happens. Re-quotes sound similar to slippage, and the impact on the trader is comparable, but how they happen is quite different.
Related terms:
- Slippage
- Market Maker
- VWAP Execution
- Dealing Desk
The real body is a term used to describe the main bar of a candlestick on a candlestick chart; it is formed from the opening and closing price of the period. The real body does not include the wicks, which are found above and below the real body and represent the high and low prices of the period.
Related terms:
- Candlestick Chart
- Chart Pattern
- Tick
- Technical Analysis
A reserve currency is a foreign currency that central and commercial banks hold to protect the institution from exchange rate risks. Banks and many other financial institutions are required to meet capital adequacy ratios and use reserves to ensure they meet the requirement. If a bank only held its national currency, it could be exposed to foreign exchange risks; they hold multiple reserve currencies to limit those risks. The US dollar and euro are the world’s major reserve currencies. Other reserve currencies are the British pound, Japanese yen, Swiss franc and Canadian dollar.
Related terms:
- Black Swan Event
- Federal Open Market Committee (FOMC)
- Minimum Bid Rate
- Cable
Resistance levels, which go hand in hand with support levels, are a widely used concept in technical analysis. Resistance levels, or resistance zones as they are sometimes known, are price levels that the market has struggled to pass on multiple occasions and rebounded to lower price levels. Resistance levels are drawn using horizontal lines and rest on top of recent highs. Unlike a price channel, resistance lines are horizontal. Resistance levels occur when buyers feel the price has reached its maximum value and buying pressure decreases; therefore, a typical outcome when the price approaches a resistance level is a retracement or rebound. If the price breaks through the resistance level, a breakout will likely occur.
Related terms:
- Support Level
- Leading Indicator
- Breakout
- Retracement
Retail sales figures are a high-impact economic indicator tracking the monthly change in the demand for consumer goods. Most countries publish retail sales statistics, but traders pay the most attention to reports related to major economies, such as the United States. Retail sales are based on sales figures from brick-and-mortar stores, online stores and catalogues. While the methodology varies by country, retail sales generally include product categories such as food & beverage, electronics & appliances, furniture, clothing and accessories, pharmaceuticals & drug stores, petrol & diesel and sometimes new cars. As consumer spending is a primary driver of most economies, increases or decreases in retail sales can change the market sentiment.
Related terms:
- Producer Price Index (PPI)
- Purchasing Managers’ Index (PMI)
- Non-Farm Payroll (NFP)
- Consumer Price Index (CPI)
A retracement is when the price of a trading instrument temporarily moves in the opposite direction of the prevailing trend, although the trend is maintained. Retracement is a natural characteristic of a trending market as prices of financial assets don’t just go up or down. Even in a trending market, they will zig-zag up or down. Retracements should not be confused with reversals, which are a complete change in trend direction.
Related terms:
- Reversal
- Breakout
- Trend
- Fibonacci Retracements
A reversal is when a trend stops, and a new trend in the opposite direction emerges, i.e., the market experiences a reversal. For example, if a currency pair is in a bullish trend, then a reversal marks the beginning of a bearish trend. Reversals tend to happen when the price reaches a support or resistance level.
Related terms:
- Retracement
- Bullish Reversal
- Bearish Reversal
- Breakout
Risk appetite or risk tolerance is the amount of risk a trader or financial institution is prepared to accept in their investment portfolio or trading strategy. Every trader should consider their risk appetite before they start trading or investing.
Related terms:
- Risk Aversion
- Risk Capital
- Leverage
- Margin
Risk aversion is a psychological trait that afflicts some traders; it is characterised by a reluctance, or reluctance, to take risks in the pursuit of profit. Instead, risk verse traders seek opportunities with high probability rewards or even just to break even. Risk-averse traders do not fare well in speculative markets and would do better investing in fixed-income products, such as bonds.
Related terms:
- Risk Appetite
- Risk Capital
- Leverage
- Margin
Risk capital is the amount of capital a trader is at liberty to invest or use as margin without being significantly affected if the money is lost.
Related terms:
- Risk Appetite
- Risk Aversion
- Leverage
- Margin
A rollover is when a position is held overnight, as the position is rolled over from one day to the next. Rollovers occur at 22:00 UTC, which is at the end of the New York trading session. Positions rolled over to the next trading day incur swaps, which are fees related to the interest rate differential of the two currencies in the currency pair.
Related terms:
- Swap
- Forward
- North American Session
- Trading Session Timetable
Straight-through processing (STP) is an execution method where brokers route traders’ orders directly to the market or a liquidity provider, such as a Prime Broker. Brokers operating an STP model act as an intermediary and just process transactions via third parties. Many traders glorify brokers' offering and STP execution model; however, it exposes them to many market inefficiencies, such as slippage, partial fills and rejections.
Related terms:
- Electronic Communication Network (ECN)
- Dealing Desk
- Market Maker
- VWAP Execution
Scalping is a trading technique where traders seek to exploit extremely small price movements to generate profits over short periods, often holding positions for a few seconds or minutes. To generate meaningful profits from such small price movements, scalpers will need to open many positions every day. Scalping is an efficient way to utilise capital, but it can be expensive due to paying commissions and spreads on many transactions. Manual scalping can be demanding due to the prolonged attention and precision required to open and close many positions quickly. Therefore, many scalpers use expert advisors to automate their high-frequency trading strategy.
Related terms:
- Expert Advisors
- Algorithmic Trading
- Day Trading
- Position Trading
Sentiment or market sentiment is a general outlook towards a given financial market or trading instrument. Market sentiment is essentially the aggregated feelings of all the investors participating in a given market. The phrase bullish sentiment describes a circumstance when the market has a positive expectation. When the market sentiment is bullish, traders or investors expect the price to appreciate and start buying, investing or opening long positions. Conversely, when there is a bearish sentiment, the market has a negative expectation. When the market sentiment is bearish, traders or investors expect the price to depreciate and start selling or opening short positions.
Related terms:
- Bearish Sentiment
- Bullish Sentiment
- Leading Indicator
- Momentum
A sentiment indicator is an economic indicator created using surveys rather than statistics. Sentiment indicators gauge the feeling of the market rather than the facts. Sentiment indicators can be useful since the feelings and decisions of participants ultimately drive the market. A good example of a high-impact indicator based entirely on sentiment is the University of Michigan’s Consumer Sentiment survey.
Related terms:
- Economic Indicator
- Leading Indicator
- Hawk
- Coincident Indicator
The term long position refers to when a trader has sold an asset using a derivative such as CFDs, expecting the price to decline in the short term. Sometimes, traders use the phrase ‘go short’ to describe short selling an asset. In general, traders that are ‘short’ expect prices to depreciate.
Related terms:
- Contracts for Difference (CFDs)
- Leverage
- Long Position
- Currency Pair
A signal line is a specific feature of some technical analysis indicators or a group of indicators used to determine when to enter or exit a position. Essentially, signal lines signal a trader to take action. Signal lines can generate buy or sell signals. A buy signal could suggest opening a long position or closing a short position, whereas a sell signal could suggest opening a short position or closing a long position.
Related terms:
- Technical Indicator
- Trend Line
- Technical Analysis
- Simple Moving Average (SMA)
The simple moving average (SMA) is one of the most used technical analysis indicators and is featured in many other indicators. There are dozens of iterations of the SMA, such as the exponential moving average (EMA). The SMA represents an asset’s average price over a given number of periods. The SMA is calculated by adding the closing price for the determined number of periods and then dividing by the number of periods. The SMA is widely used for confirming trend direction.
Related terms:
- Trend
- Exponential Moving Average (EMA)
- Trend Line
- Technical Analysis
A spike is a dramatic price movement that is inconsistent with the market behaviour. A spike is an anomaly that usually only lasts for one or a few ticks, after which the price will settle in the previous region. Spikes are undesirable because they can trigger pending orders, take profits and stop losses.
Related terms:
- Spread
- Foreign Exchange Market
- Spot Rate
- Breakout
A spot market is a financial market where assets or contracts are traded for immediate delivery or settlement. A spot market contrasts the futures, options and forwards markets, where transactions are settled in the future. Spot markets can be operated through an exchange or OTC (over-the-counter).
Related terms:
- Spot Rate
- Spread
- Foreign Exchange Market
- Electronic Communication Network (ECN)
The spot rate or spot price is the current price at which a given currency pair or financial instrument can be bought or sold in a spot market. A market order will be filled using the spot rate.
Related terms:
- Spot Market
- Bid Price
- Ask Price
- Spread
The spread is the difference between the bid and ask prices. Suppose the EUR/USD price is 1.05150 (bid) /1.05160 (ask); the spread is one pip. Now suppose a trader buys one lot of EUR/USD; they buy at the ask price and sell at the bid price; before the trader can be profitable, the market needs to move one pip in their favour. Many traders view the spread as a cost.
Related terms:
- Bid Price
- Ask Price
- Spot Rate
- Foreign Exchange Market
The stochastic oscillator is a well-known momentum indicator that incorporates support and resistance levels, which are also widely used by traders. Technical analysts use this indicator to detect oversold and overbought conditions and track bullish and bearish divergences.
Related terms:
- Oscillator
- Moving Average Convergence Divergence (MACD)
- Relative Strength Index (RSI)
- Simple Moving Average (SMA)
Related terms:
- Derivative
- Futures
- CFDs (Contracts for Difference)
- Options
A stop-loss order is a stop order connected to a position. When triggered, the stop-loss order will automatically close the position at a predefined price to minimise losses incurred by a trader should the market move in an unfavourable direction.
Related terms:
- Take Profit Order
- Trailing Stop
- Order
- Stop Order
Support levels, which go hand in hand with resistance levels, are a widely used concept in technical analysis. Support levels, or support zones as they are sometimes known, are price levels the market has struggled to pass on multiple occasions and rebounded to higher price levels. Support levels are drawn using horizontal lines and sit below recent lows. Unlike a price channel, support lines are horizontal. Support levels occur when sellers feel the price has reached its minimum value and selling pressure decreases; therefore, a typical outcome when the price approaches a support level is a retracement or rebound. If the price breaks through the resistance level, a breakout will likely occur, and the bearish trend will continue.
Related terms:
- Resistance Level
- Leading Indicator
- Breakout
- Retracement
Swaps are interest charged or paid to traders when rolling a position from one day to the next. All forex and CFD positions are derivatives, meaning traders are essentially holding one currency and borrowing another for as long as the position is open. The notion of borrowing has nothing to do with trading using leverage; swap rates are the same regardless of how much leverage is used.
Suppose a trader is long EUR/USD; they are theoretically holding euros and borrowing dollars. If a trader is short EUR/USD, they are theoretically borrowing euros and holding dollars. Therefore, when the trader is long, they earn interest on the euros and pay interest for the dollars. Conversely, when the trader is short, they pay interest on the euros and earn interest from the dollars; this is why swap rates vary whether a trader is long or short.
Swaps are not only applied to currency pairs but apply to most trading instruments.
Related terms:
- Rollover
- Forwards
- Carry Trade
- Foreign Exchange Market
Swing trading is a relatively short-term trading technique that aims to profit from short-term trends that may last for several hours up to several days. Swing traders use technical analysis to identify trading pairs experiencing increased momentum; positions are then closed once momentum starts to decline. Unlike day traders, swing traders may maintain their positions for multiple days, and unlike position traders, swing traders are looking to take advantage of short-term trends.
Related terms:
- Day Trading
- Carry Trade
- Scalping
- Position Trading
The Swissy is the nickname given by traders for the Swiss franc.
Related terms:
- Yuppy
- Cable
- Loonie
- Aussie
A take-profit order is a limit order connected to a position. When triggered, the take profit order will automatically close the position at a predefined price to secure profits. Take-profit orders play an integral role in following an effective trading system without constantly monitoring a trading account.
Related terms:
- Stop Loss Order
- Trailing Stop
- Order
- Limit Order
Technical analysis is a widespread technique that traders use to predict the prices and behaviour of financial markets based on historical information. Almost every trader or investor uses technical analysis to some degree. Most trading platforms have dozens of technical analysis indicators pre-installed.
Related terms:
- Technical Indicator
- MetaTrader 4
- Simple Moving Average
- Pivot Point
A technical indicator is a mathematical formula that uses historical price, volume and trade data to generate visual models for traders and statistical information for algorithms to support trading decisions. There are several types of technical indicators, and they are used to analyse different things, such as trends, volume, volatility and momentum. Technical analysis indicators help predict future price movements of various financial markets.
Related terms:
- Technical Analysis
- Trend Line
- Oscillator
- Signal Line
The foreign exchange market is open 24 hours a day, five and a half days a week. The fact the forex market is open almost constantly is one of the most appealing characteristics. Traders from anywhere on earth can participate in the forex market, regardless of their time zone, unlike the New York Stock Exchange, which is only open for six hours a day. The forex trading day is split into three main trading sessions:
● The Asian session (also known as the Tokyo session);
● The European session (also known as the London session);
● the North American session (also known as the New York session).
Here is a timetable of each trading session's opening and closing hours.
| Session | Primary Market | Time (UTC) |
| Asian | Tokyo | 11 pm – 8am |
| European | London | 7am - 4pm |
| North American | New York | 12pm – 8pm |
Related terms:
- Asian Session
- European Session
- North American Session
- Foreign Exchange Market
A trailing stop loss is a dynamic stop-loss order that trails the market price while staying fixed distance away. The trailing stop loss will reposition each time the market moves in favour of the position but does not move backwards if the price retraces. Trailing stop losses can be used to maximise profits without compromising risk management.
Related terms:
- Stop-Loss Order
- Take Profit Order
- Pending Order
- Stop Order
A trend is a prevailing direction that a particular currency pair or financial market is heading towards. For example, if the value of oil has been steadily increasing for several weeks, it’s in a bullish trend. Trends are confirmed using several technical analysis techniques; the simplest and most commonly used is a simple moving average.
Related terms:
- Trend Line
- Support Level
- Resistance Level
- Reversal
A trend line is a straight-line tool that traders can draw on charts at any angle. Trend lines are usually drawn under the higher lows of bullish trends or above the lower highs of bearish trends to forecast the trajectory of a trend. Trend lines are also used as support and resistance lines. When two trend lines are drawn above and below the historical prices, it will create a price channel.
Related terms:
- Trend
- Price Channel
- Support Level
- Resistance Level
No Results
Velocity is a measurement used to understand the rate at which a financial instrument has changed in price. In other words, velocity is momentum. Traders observe changes in velocity to identify potential reversals.
Related terms:
- Volatility
- Oscillator
- Stochastic Oscillator
- Relative Strength Index (RSI)
Volatility is a measurement used to understand the tendency of a financial instrument to oscillate between highs and lows. Volatility can be good for scalpers and day traders but can be detrimental to positions traders and investors.
Related terms:
- Volatility
- Oscillator
- Stochastic Oscillator
- Relative Strength Index (RSI)
No Results
No Results
The Yuppy is a nickname given by bankers to describe the EUR/JPY currency pair.
Related terms:
- Aussie
- Cable
- Loonie
- Swissy
No Results
Trade with Simply One of
the Best
Download our mobile trading app and open a world of trading at your fingertips.
