Forex, Stocks & Financial Glossary
Stock Trading and
pages to get a better idea of how the money markets and online trading work.
professions and interest groups have a sub-language, slang or jargon that evolves
Terminology, definitions, abbreviations, acronyms,
technical words and expressions are usually made up
or taken from similarly related disciplines.
Daytraders try to make money by buying and selling stocks or
currency pairs which have significant price changes during the day.
The forex market is mainly day trading too, although positions can be held
overnight. No Delivery of currency actually takes place.
See Forex Income Engine below.
While a broker is technically an intermediary representing both buyer
and seller, a dealer risks capital to
take one side of a position in order to make a profit (spread) by 'closing
out' that position in a subsequent trade with another party. There are
different types of broker and not all are suitable for beginner traders.
Retail Market Makers are probably the best type to deal with.
- A forex trade where each side either makes or receives actual delivery of the
A weakening or reduction of a currency, caused by lower market demand.
A contract that changes its value in relation to price movements of
a related security, future or other financial instrument.
Options are the most common form of derivative.
is an intentional downward adjustment of a currency's value against
others, normally announced by a government spokesman or the head of the
country's central bank.
Diversification refers to a stocks
and shares portfolio. It's considered wise practice to invest in
a range of instruments or areas of business, commodities etc. as a way
of reducing risk. However, in today's markets this may not provide the
safety a trader expects. Free report.
Drawdown is the amount of the
decline in value of a forex trading account, expressed either in dollars
or as a percentage, between its highest and lowest points.
If, for example, the account was opened with $10,000 which first built
up $20,000, then dropped to $15,000, then increased again to $25,000,
the maximum drawdown was $5,000 (when it fell from $20,000 to $15,000)
even though the account was never actually below its starting value.
The European Central Bank is the managing body for the 'euro area'
which now includes 15 countries. The twelve original member
states who began using the Euro as currency in 2002 are Austria,
Belgium, Finland, France, Greece, Ireland, Italy, Luxembourg, Germany, the
Netherlands (Holland), Portugal and Spain. More recently Cyprus, Malta and
Slovenia have joined, but so far not the United Kingdom which retains
its Pound (GBP).
The ECB's primary objective is to maintain currency stability, aiming
at inflation rates of around or less than 2% over the medium term. The 'Euro
area' in terms of population is actually greater than the United States
which is the world's largest economy. Europe is next, then Japan. Based in Frankfurt, Germany
the ECB controls European interest
rates and monetary policy. Jean-Claude Trichet a former Banque de
France governor has headed the ECB since 2003. The first was
Duisenberg, previously head of the Dutch Central Bank.
ECN Forex Broker
ECN stands for Electronic
Communication Network, one that provides forex traders with direct
access to other market participants, both retail and institutional.
Advantages can be lower or no price spread (commission is charged instead),
without broker manipulation or interference in quoted prices which come from
the interbank market; no "stop-loss hunting" and anti-scalping policy. Buy
and sell orders are matched automatically at specified prices instead of
going through (and possibly manipulated by) a broker or market-maker.
Account size minima usually apply. ECN brokerage accounts are preferred by
more experienced forex traders. A popular ECN broker is FXOpen but US
residents cannot open an account.
Regularly issued government-issued statistics indicating current economic growth
and stability. Common indicators include Gross Domestic Product (GDP), employment rates, inflation, retail sales, etc.
If they are not in accordance with expectations, they can have a sudden
effect on market prices for shares, currencies and commodities and many
traders rely on these.
ETF Portfolio Profit is a step-by-step exchange-traded
funds training course released in 2011 by Bill Poulos (Profits
Run Inc.). Essential
education for buy and sell traders or IRA fund builders.
eToro – probably the easiest way to
start trading the forex market.
Exchange Rate Risk
The exposure/potential loss a company faces from a movement in exchange
An ETF (Exchange-Traded Fund) is a fund which tracks a
selection or 'basket' of related securities within a stock market index such
as the S&P 500, NASDAQ or FTSE and which can be traded on an exchange like a
stock or share. Learn how to
trade ETFs profitably.
ETFs can be used to boost an IRA too.
Apart from the 'Majors' (the most traded currency pairs), there other
currency pairs like the Danish Krone, Mexican Peso and Russian Rouble which
are known as 'exotic' currencies. As these pairs are traded in lower
volumes by fewer buyers and sellers, they usually have a wider Pip Spread
than the Majors.
Insurance Corporation (FDIC) is the regulatory agency
responsible for the administration of bank depository insurance in the United
States. Most bank accounts in the US are FDIC-insured to $250,000.
Commonly referred to as 'the Fed', this is the Central Bank which controls the USA's
monetary policy. Formerly headed by Alan Greenspan, Ben Bernanke has
been Chairman of the Board of Governors of the US Federal Reserve since
The Federal Open Market Committee. The monetary policy making and tactical
arm of the Federal Reserve. This is the committee which sets US interest
Footsie - see FTSE
A contraction or abbreviation of 'foreign exchange' – foreign currency trading.
are people (including market traders) who earn extra income
and/or reduce their trading losses by affiliating or partnering with forex and stock market
product publishers to sell on commission with virtually no outlay or risk of
loss. Learn more
Forex Income Engine is a forex
day trading course from Bill Poulos first released in 2008 with several
revisions since. June 2011 sees a new version,
Forex Income Engine Trade Alert Software. FIE caters for $500
and upwards account traders looking for a single-strategy, streamlined way to profiting
from forex. It contains several methods of trading.
Forex Profit Multiplier
The latest comprehensive forex training course released in 2010 from Greg and Bill Poulos of Profits
Run Inc. It is a comprehensive training
course with videos, reference manual, DVDs, blueprints
and full support by a dedicated team.
Free training videos available.
Robots, Autotraders, Autopilots
These are programs that work on a trading platform such as MetaTrader 4 to
place trades automatically when certain criteria are met.
Robots cost from under $100
to several thousand.
The pre-specified exchange rate for a foreign exchange contract settling at
some agreed future date, based upon the interest rate differential between
the two currencies involved.
Forwards are considered Over-The-Counter
(OTC) contracts which include any contract NOT traded on an exchange.
The pips added to or subtracted from the
current exchange rate to calculate the forward price.
Different countries have differing interest rates. When buying one currency
against another for delivery at a future date, the bank or broker will
adjust the spot (immediate delivery) price to take this variation into
account. The sale of a low yielding currency (in a low interest-rate
economy) and the purchase of a high yielding one will be reflected in a
higher net price than the spot rate. This is described as 'points on' for
the forward adjustment and 'points off' for a reversal.
FTSE or Footsie
A British company (not part of a stock
exchange) owned by the Financial Times newspaper and the
London Stock Exchange that specialises in a constantly updated
index calculation e.g. the FTSE 100, created in 1984 with a base of
1,000 and containing the 100 largest UK companies by market capitalisation.
Analysis or forecasting of currencies, stocks or economies based on economic and
political factors and events.
A standardised, transferable,
exchange-traded contract that requires delivery of a commodity, bond,
currency lot or stock index, at a specified price, at a specified future date.
Learn more about
futures day trading.
W.D. Gann is considered by
some to be the greatest trader of all time. There's little
doubt his analysis of market cycles and price
behaviour is without equal. Gann is believed to have
profited by over 50 million dollars trading all the
GOmega Xray and GOmega Trader FX
were fully-automated forex trading robots
released by Quantum Research (also Forex Profit Pro AutoTrader). No
longer available, there
are numerous other
on the market, the latest of which can be
Cancelled Order (GTC) is
an order to buy or sell at a specified
price. The order remains open until filled or until the client cancels.
Hedging and Forward Contracts
A hedging transaction is one that protects an asset or liability against
fluctuation in the foreign exchange rates. For commercial forex deals the
most popular hedging tool is a Forward Contract. A forward contract allows a
company to lock in a rate of exchange based on today's spot price (with an
adjustment for the 'forward points')
for a future date when they need to buy or sell a foreign currency.
Collection(s) of stocks whose
value is a benchmark for the overall movement of a particular type of stock
or other financial instrument. Although 'indexes' is also used today, the
plural of index is indices, pronounced 'inda-sees', and
examples are S&P (International), Dow Jones (New York), FTSE (London), Hang
Seng (Hong Kong), Nikkei (Tokyo) and CAC 40 (Paris).
is a national economic condition in which prices for consumer goods rise,
making currency have less purchasing power than previously.
is the initial deposit of collateral required to enter into a
trade position as
a guarantee on future performance.
The rates banks and brokers quote other banks and brokers for trades between
banks (interbank). In reality the true market price. The prices quoted for
transactions in excess of GBP500,000 or equivalent.
ISO is the short
name (not acronym) for the International Organization for Standardization.
K or kilo is
from the Greek khilioi meaning thousand. M or mega
from megos (great) is now used to describe a million. Apart from currencies,
K, M, G and T are also used for 'bytes' of computer data or hard drive
capacity; G (giga)
is from the Latin gigas (huge) and now means a thousand million.
T stands for tera (Greek teras 'monster') and is one
million million (1,000,000,000,000) in case you're getting confused!
Learn To Trade Markets is an 800 page best-selling ebook that
is almost essential to have in your forex trading 'library'. $97
includes two months free subscription to the Technical Trader Hot
Sheet which is published twice a month.
'Let Your Profits Run'
saying often quoted. Traders and investors often tend to sell their winning positions
too early. They cash in, fearing the market will change direction and
they will lose what they have already gained. Conversely they also tend to
hold on to losing positions for too long, in the hope that they will
turn around. The key is to not panic in times when volatility increases.
Stick to your plan and maintain your convictions about why you entered into
that trade. However, cutting losses before they become substantial
is a key part of implementing this strategy. Successful investors can
lose over half the time as long as losses are not allowed to compound.
Giving profitable trades room to continue their upward climb takes a
tremendous amount of courage but will likely pay off in the future. Learn
about this and much more
The amount by which the
amount to be traded exceeds the margin required to trade. It can be
expressed as a ratio or a multiple. For example, if the
notional amount traded (also referred to as 'lot size' or 'contract value')
is US$100,000 and the required margin is $2,000, the trader can trade with 50
times leverage ($100,000/$2,000) or 50:1, up to 400:1.
See Margin, Overleverage.
The London Inter-Bank Offered Rate. British
banks use LIBOR when borrowing from
An order to buy or sell one currency against another when a predetermined
price is reached. It is lodged with a broker and floats 24 hours a day until
either cancelled or reached. It is used to try and achieve a very favourable
price at the very top or bottom of a range. It is free of charge to use and
provides an excellent vehicle for companies to attempt to buy or sell their
currencies at the best point in a range (without having to constantly
monitor the prices and keep calling the broker for prices).
A function of volume and activity in a market. It is the efficiency and cost
effectiveness with which positions can be traded and orders executed. A more
liquid market will provide more frequent price quotes at a smaller bid/ask
- a trade position that appreciates in value if the market price increases.
Currencies are traded in 'lots'. A standard lot is
100,000 units of the base currency. e.g. with USD as the base
(first-named) currency, a lot is worth $100,000. For the GBP/USD pair a lot
is £100,000 (currently about $150,000). 'Mini' account trade lots are
typically one tenth of standard: 10,000
units. Even smaller trades can now be placed with some brokers at a tiny
fraction of the standard lot size. Using leverage a trader
can enter positions with a relatively small amount of capital. A minimum of
$5,000 is usually recommended for opening a standard forex trading account.
or 'Micro' account can be opened with as little as $50, but
$500 will give a lot more flexibility. Trading
values are obviously much lower, as will be profits or losses – a good
way for forex beginners to begin live trading!
These are the most popular currency pairs available for trading and include
EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD and AUD/USD. Less traded pairs
are known as 'Exotics'.
The minimum amount of funds required in a trader's brokerage account in order to open
a position (enter a trade) or to maintain an open position. See Leverage.
A warning by the broker of the impending (or automatic) closing of a position
if the margin falls below the required minimum during a trade. More funds
will need to be transferred to your trading account to keep a position open
or being able to enter further trades.
MarketClub is a highly successful stock picking
and forex advisory service, with many resources including phone and
email support. You can learn more
is a dealer who regularly quotes both bid and ask prices, and is willing to
make a two-sided market for any financial instrument.
An order to a broker to buy a currency lot or stock at the current Ask price.
is exposure to changes in market prices.
is the process of re-evaluating all open positions with the current market
prices. The new values determine revised margin requirements.
Martingale System is basically
doubling the stake on a losing bet. Now used in forex, especially
automated trading with robots,
where variations may be employed. Martingale dates back to a gambling
practice in the 18th century where a gambler would use the original
stake while winning, but double it if he lost, and do this several times
if there was a run of losses. The odds are that a win will wipe out
previous losses and he would bet the original stake again. However, it
is considered as extremely risky to trade forex this way, especially on
a small account which could be wiped out before losses are recovered.
- The date for settlement or expiry of a financial instrument.
MetaTrader (MT4) – the most popular
trading platform for forex robots (EAs - expert advisors). Available
free from the publisher or various customised versions supplied by
brokers. Many features, best learned from a video course called
Master Metatrader in 90 Minutes.
Mobile Forex Trading
At last it's possible to trade forex from your mobile phone, wherever you
can connect to the internet. Open a free account with
Finexo, then use their web-based PC or
mobile trading platforms
(no download required).
You can trade live with a $25 credit card deposit.
Generally associated with the setting of interest rate levels in an economy
to try and stimulate or stifle borrowing and thus control consumer
demand/spending. Conventional wisdom states that if interest rates move in
an upward direction in one nation (under normal economic circumstances) then
the currency in that nation should move up in value against foreign
currencies. The rational is that the rate of return on interest bearing
deposits become more attractive and the foreign demand for that currency
The Monetary Policy Committee of the Bank of England (the UK's Central Bank) is
responsible for setting interest rates in the United Kingdom.
1: A to C
3: N to Z
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