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Account Balance
The net
The net dollar amount of an account.
Autotrading
A computer automatically issues pre-defined buy and
sell signals directly to the dealer.
Back
Testing
The
process of testing a trading idea or strategy using
historical price data. Then to apply the strategy
to the new data to see if the results are
consistent.
Balance of Payments
The
record of all transactions carried out by a country
with the rest of the world within a certain time
frame, including trade balances and capital flows.
Bar
Chart
Used to
plot price movements using vertical bars indicating
price ranges.
Base
Currency
The first
currency in a pair is called the BASE CURRENCY.
Bear
Market
A market
characterized by declining prices.
Bid
and Ask
Highest
price and lowest price that an investor will pay for
a currency.
Black
Box
A
proprietary, computerized trading system whose rules
are not disclosed or readily accessible.
Bull
Market
A market
characterized by rising prices.
Candlestick Charts
A
charting method originally developed in Japan, where
the highs and lows are plotted as a single line and
are referred to as shadows. The price range between
the open and the close is plotted as a narrow
rectangle and is referred to as the body. (If the
close is above the open, the body is white. If the
close is below the open, the body is black).
Capital Flows
Capital
Flows measure the net amount of a currency that is
being purchased or sold due to capital investments.
The Commodity Futures Trading Commission, the US
Federal regulatory agency for futures traded on
commodity markets.
Charts
A display
or picture of a currency pair that plots price data.
The chart is the foundation of technical analysis,
and over the years, many different types of charts
have been developed.
Congestion Area or Pattern
A series
of trading days or periods in which there is no
major change in price. Typically a trend-less area
of price data.
Consolidation
Also
known as a congestion period. A pause that allows
participants in a market to re-evaluate the market
and sets the stage for the next price move.
Cross
Currency
The
second currency in a pair is called the CROSS
CURRENCY.
An exchange rate between two currencies.
The type of money that a country uses. It can be
traded against other currencies on the foreign
exchange market, so each currency has a value
relative to another.
Curve-Fitting
Developing complicated rules that map known
conditions while back-testing a strategy.
Doji
A
candlestick formation in which the open and close
are the same (or almost the same). Different
varieties of doji lines (such as a gravestone or
long-legged doji) depend on where the opening and
close are in relation to the entire range. Doji
lines are among the most important individual
candlestick lines. They are also components of
important candlestick patterns.
Entry
The point
at which a trader gets into a position in the
market.
Exit
The point
at which a trader closes out of a trade.
The purchase or sale of a currency against another.
An abbreviation of foreign exchange.
Fundamental Analysis
Fundamental Analysis focuses on the economic, social
and political forces that drive supply and demand.
The seven
leading industrial countries, being US , Germany,
Japan, France, UK, Canada, Italy.
G7 plus Belgium, Netherlands and Sweden, a group
associated with IMF discussions. Switzerland is
sometimes peripherally involved.
The original system for supporting the value of
currency issued. This system was active before 1973
when the fixed exchange rates were prevalent.
Margin
This is a percentage of
the total value of a transaction that a trader is
required to deposit as collateral.
Market Makers
Organizations that maintain a firm bid and offer
price in a given currency pair by standing ready to
buy or sell at these executable prices (called
making a market).
Moving
Average (simple)
A
mathematical procedure to smooth or eliminate the
fluctuations in data and to assist in determining
when to buy and sell. Moving averages emphasize the
direction of a trend, confirm trend reversals and
smooth out price and volume fluctuations or "noise"
that can confuse interpretation of the market; the
sum of a value plus a selected number of previous
values divided by the total number of values.
Moving
Average Crossovers
The point
where the various moving average lines intersect
each other or the price line on a moving average
price bar chart. Technicians use crossovers to
signal price-based buy and sell opportunities.
PIP
Price
Interest Point. The smallest decimal point in an
exchange rate.
Resistance
A price
level at which rising prices have stopped rising and
either moved sideways or reversed direction.
Resistance can become a support area. It is an
important area because it is where selling is
expected to take place.
Where the settlement of a deal is carried forward to
another value date based on the interest rate
differential of the two currencies.
Roll-Over Interest
Traders
that hold a position overnight pay interest on the
currency they borrow and earn interest on the
currency they purchase. Typically roll-over interest
is applied at 5PM EST (NY Time).
Skimming Pips
This can happen if the
Broker/ IB varies what quotes are shown to specific
clients or adds a pip or two to the quote screen to
make an extra buck. At Forex.ca we charge no
commissions and skim no pips.* We are
forthright and disclose that we make our profit on
the forex spread on all trades. As do most reputable
market makers.
SMA
Simple
Moving Average.
Spot
Forex Prices
Same as
cash price. The price at which a currency is selling
at a particular time and place.
Spread
In cash
forex trading it is the difference between the bid
price and ask price.
Stops
Buy stops
are orders that are placed at a predetermined price
over the current price of the market. The order
becomes a "buy at the market" order if the market is
at or above the price of the stop order. Sell stops
are orders that are placed with a predetermined
price below the current price. Sell-stop orders
become "Sell at the market" orders if the market
trades at or below the price of the stop order.
Support
A
historical price level at which falling prices have
stopped falling and either moved sideways or
reversed direction. Support can become a resistance
area later in the chart. It is an important level
because it is where the buying is expected to take
place.
Technical Analysis
Technical
traders focus on price movements and use historical
data to forecast the direction of future prices.
Technicians also attempt to identify price trends in
a market using charts and modeling techniques.
An adjustment to price not based on market sentiment
but technical factors such as volume and charting.
Tick
The
minimum fluctuation of a currency.
Trade
Flows
Trade
Flows represent a country’s net trade balance of
exported goods minus imported goods.
Trading Range
The
difference between the high and low prices traded
during a period of time.
Trailing Stop
A
stop-loss order that follows the prevailing price
trend.
Trend
The
general drift or tendency of a currency to move in a
specific direction. An upward trend is categorized
as having higher highs and higher lows. A downward
trend is categorized as having lower highs and lower
lows.
Trend
Channel
A
parallel price range centered about the most likely
price line. An area between the base trend line and
the reaction trend line defined by price moves
against the prevailing trend.
Trend
Day
A day in
which the price of a currency moves consistently
away from the opening range and does not return to
the opening range prior to the close.
Trend-following
Moving in
the direction of the prevailing price movement.
Trending Market
Price
moves in a single direction.
Trend
less
Price
movement that changes but a clear trend cannot be
identified.
Trend
line
A line
drawn that connects either a series of highs or lows
in a trend. The trend line can represent either
support as in an up trend line or resistance as in a
down trend line. Consolidations are marked by
horizontal or converging trend lines.
A measure of the amount by which an asset price is
expected to fluctuate over a given period. Normally
measured by the annual standard deviation of daily
price changes (historic).
Weighing Quotes
This can happen if the
Broker/IB takes the opposite trade in a transaction
and in effect is competing with their own client.
In this case, there could be situations where the
quotes could favour the Broker at the back-end.
Forex.ca will not be associated with any
market maker that practices this. We succeed
if you succeed! It's that simple.
A bank made up of members of the IMF whose aim is to
assist in the development of member states by making
loans where private capital is not available.
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