Arbitrage describes the practice of buying and selling an asset in order to profit from a difference in the asset's price between markets. It is a trade that profits by exploiting the price differences of identical or similar financial instruments in different markets.
The ask price, ask, or offer price is the price a seller will accept for a security.. An ask quote often stipulates the amount of the asset available at the stated price. The ask price is the opposite of the bid price, which is what a buyer will pay for a security – the ask is always higher than the bid.
The base rate, or base interest rate, is the interest rate that a central bank – like the Bank of England or Federal Reserve – will charge to lend money to commercial banks. Adjusting the base rate helps a central bank regulate the economy by encouraging or discouraging spending as required.
A bear market is any market that experiences a fall of around 20% or more from its recent high. Most commonly applied to stock markets, the term can also be used for anything that is traded, including currencies and commodities. A bear market is the opposite of a bull market.
Bid price, or simply bid, describes what a buyer is willing to pay for a security. It is contrasted with the ask price, the amount a seller is willing to sell a security for. The difference between the two is known as the ‘spread’, which is the cost traders pay to open and close positions.
A tool used by technical analysts that consists of a band plotted two standard deviations on either side of a simple moving average. It is used to find support and resistance levels.
An individual or firm that acts as an intermediary, bringing buyers and sellers together for a fee or commission. In contrast, a dealer commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
Favoring a strengthening market and rising prices. For example, "We are bullish EUR/USD” means that we think the euro will strengthen against the dollar.
A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
A government or quasi-governmental organization that manages a country's monetary policy. For example, the US central bank is the Federal Reserve, the German central bank is the Bundesbank, UK Central Bank is Bank of England BOE and Japanese Central bank is Bank of Japan BOJ.
Exposure to a financial contract, such as currency, that no longer exists. A position is closed by placing an equal and opposite deal to offset the open position. Once closed, a position is considered squared. You can close your positions by yourself or by automatic orders.
The two currencies that make up a foreign exchange rate. For example EUR/USD (Euro/U.S. Dollar). IN FX Markets we see Major, Minor and Exotic Currencies as category. Most traded currencies are called as Major Currencies.
Speculators who take positions in commodities and then liquidate those positions prior to the close of the same trading day. Making an open and close trade in the same product in one day.
A financial contract whose value is based on the value of an underlying asset. Some of the most common underlying assets for derivative contracts are indices, equities, commodities and currencies.
The amount of a company’s earning distributed to its shareholders – usually described as a value per share. Companies announce the dividend payments at the end of quarters on Earnings Calls. If company makes more profit the figure gets higher.
A government-issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
The time zone of New York City, which stands for United States Eastern Standard Time/Eastern Daylight time.
The euro area, commonly called the eurozone (EZ), is a currency union of 20 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender.
The Federal Reserve Bank, the central bank of the United States, or the FOMC (Federal Open Market Committee), the policy-setting committee of the Federal Reserve. Monetary decisions of FED affect all global markets. FED Committee gathers in every 45 days.
The simultaneous buying of one currency and selling of another. The global market for such transactions is referred to as the forex or FX market. Investors earn money from the differences of Buy and Sell rates.
The assessment of all information available on a product to determine its future outlook and predict where the price is heading. Often non-measurable and subjective assessments, as well as quantifiable measurements, are made in fundamental analysis.
Group of 7 Nations - United States, Japan, Germany, United Kingdom, France, Italy and Canada. These countries meet on regular basis and decide how to cooperate with each other.
The purchase of a stock, commodity or currency for investment or speculation – with the expectation of the price increasing.
The selling of a currency or product not owned by the seller – with the expectation of the price decreasing.
A country's monetary policymakers are referred to as hawkish when they believe that higher interest rates are needed, usually to combat inflation or restrain rapid economic growth or both.
A position or combination of positions that reduces the risk of your primary position.
Measures the total value of output produced by manufacturers, mines and utilities. This data tends to react quickly to the expansions and contractions of the business cycle and can act as a leading indicator of employmentç
An economic condition whereby prices for consumer goods rise, eroding purchasing power. In many major economies %2 is considered as Ideal Inflation. Lower than %0 Inflation is called as Deflation.
An index that assesses the state of the US manufacturing sector by surveying executives on expectations for future production, new orders, inventories, employment and deliveries. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
An index that surveys service sector firms for their outlook, representing the other 80% of the US economy not covered by the ISM Manufacturing Report. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
An order that seeks to buy at lower levels than the current market or sell at higher levels than the current market. A limit order sets restrictions on the maximum price to be paid or the minimum price to be received. A Limit Order that is attached to a currently existing open position with the purpose of closing that position may also be referred to as a “Take Profit” order.
A request from a broker or dealer for additional funds or other collateral on a position that has moved against the customer.
An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal. As long as it is kept open the profits and losses are not reflected to your balance. You may need extra funds or pay swap to keep positions open.
Measures an individual’s total annual gross earnings from wages, business enterprises and various investments. Personal income is the key to personal spending, which accounts for 2/3 of GDP in the major economies.
The smallest unit of price for any foreign currency, pips refer to digits added to or subtracted from the fourth decimal place, i.e. 0.0001.
The tendency of a trending market to retrace a portion of the gains before continuing in the same direction.
When a central bank injects money into an economy with the aim of stimulating growth.
An indicative market price, normally used for information purposes only.
A recovery in price after a period of decline. It may happen fast or slow depending on conditions.
A price that may act as a ceiling. The opposite of support. The prices struggle on rising at the levels.
Measures the monthly retail sales of all goods and services sold by retailers based on a sampling of different types and sizes. This data provides a look into consumer spending behavior, which is a key determinant of growth in all major economies.
The employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.
The process by which a trade is entered into the books, recording the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.
The difference between the price that was requested and the price obtained typically due to changing market conditions.
The difference between the bid and offer prices. In Liquid markets we see tight spreads and see higher spreads in illiquid markets.
The combined price of a group of stocks - expressed against a base number - to allow assessment of how the group of companies is performing relative to the past.
Stop loss orders are an important risk management tool. By setting stop loss orders against open positions you can limit your potential downside should the market move against you. A stop order is triggered once the stop level is reached.
A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.
A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.
The process by which charts of past price patterns are studied for clues as to the direction of future price movements.
Take Profit TP
Stands for “take profit.” Refers to limit orders that look to sell above the level that was bought, or buy back below the level that was sold.
Price movement that produces a net change in value. An uptrend is identified by higher highs and higher lows. A downtrend is identified by lower highs and lower lows.
Measures the total workforce that is unemployed and actively seeking employment, measured as a percentage of the labor force.
Referring to active markets that often present trade opportunities.