Welcome to Online Direct Trading

B

Balance/Account Balance : The net value of an account.

Balance of Payments : A record of all transactions made by one particular country with others during a certain time period. It compares the amount of economic transactions between a country and all other countries. This includes trade balance, foreign investments, and investments by foreigners.

Balance of Trade : Net flow of goods (exports minus its imports) between two countries.

Bank for International Settlements : The BIS is an international organization fostering the cooperation of central banks and international financial institutions. Essentially, the BIS, located in Basel, Switzerland, is a central bank for central banks. It monitors and collects data on international banking activity and promulgates rules concerning international bank regulation.

Back Office : Refers to the administrative arm of financial service companies, who carry out and confirm financial transactions. Duties include, accounting, settlements, clearances, regulatory compliance and record maintenance.

Balance of Payments : Record of all transactions, such as trade balances and capital flows, carried out by a county with the rest of the world within a certain period.

Bar Chart : On a daily bar chart each bar represents one day's activity. The vertical bar is drawn from the day's highest price to the day's lowest price. Closing price and opening price are represented by ticks on the bar.

Base Currency : In general terms, the base currency is the currency in which an investor or issuer maintains its book of accounts. In the FX markets, the US Dollar is normally considered the 'base' currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.

Basis : The difference between the cash price and the futures price.

Basis Point : Measure of a bond's yield equal to 1/100th. A 1% change in yield is equal to 100 basis points and 0.01% is equal to one basis point.

Bear : Investor acting on the belief that prices or the market will decline.

Bear Market : Any market that exhibits a declining trend. In the long run they have a down turn of 20% or more.

Bear trap : A bear trap occurs when prices break below a significant level and generate a sell signal, but then reverses direction and hence invalidate the sell signal. Bear traps serve as opportunities for reversal traders, whereas trend/momentum traders will suffer losses due to the change in direction.

Bid : The price an investor is willing to pay for an asset.

Bid/Ask Spread : The difference between the bid and the ask price.

Big Figure : Refers to the first number to the left of the decimal point in an exchange rate quote, which changes so infrequently that dealers often omit them in quotes.

Bollinger Bands : An indicator that allows users to compare volatility and relative price levels over a period time. This indicator consists of three bands designed to encompass the majority of a security's price action: a simple moving average in the middle; an upper band 2 standard deviations away from the simple moving average (usually set to a time frame of 20); and a corresponding lower band that is also 2 standard deviations away from the moving average. Since the band width is a function of standard deviation, assets with greater volatility will have wider bands.

Bonds : Bonds are debt instruments used to raise capital, which are issued for periods greater than one year. Bondholders are loaning money (investing in debt) to companies and governments, at the end of which they will be paid a specified interest rate. Bond prices are inversely related to interest rates, as interest rates rise, bond prices fall. There are numerous types of bonds, including treasury bonds, notes, and bills; municipal bonds and corporate bonds.

Book : Recording of the total positions held by a trader or desk.

Bretton Woods Accord (1944) : This accord established a fixed exchange rate regime, whose aim was to provide stability in the world economy after the Great Depression and the WWII. This accord fixed the exchange rates of major currencies to the US dollar and set the price of gold to $35. The accord required central bank intervention to maintain the fixed exchange rates. The US Central Bank was required to exchange dollars for gold, which eventually let to the demise of this system, when the demand for the dollar declined, as well as the gold reserves, forcing Nixon to stop the exchange of dollars for gold, effectively ending the system in 1971.

Broker : Individual or firm acting as an intermediary to bring together buyers and sellers typically for a commission or fee.

Bull : Investor who expects markets or prices to rise.

Bull Market : A market where prices are rising or are expected to rise.

Bull Trap : The opposite of a bear trend; occurs when indicators suggest for an uptrend, but the market reverses its momentum and begins to fall again.

Bundesbank : Germany's Central Bank.

Buy a bounce : A recommendation to instigate a long trade if the price bounces from a certain level.

Buy break : A recommendation to buy the currency pair if it breaks the current level specified.

Buy stops above : A recommendation to enter the market when the exchange rate breaks through a specific level. The client placing a stop entry order believes that when the market's momentum breaks through a specified level, the rate will continue in that direction.

C

Cable : Term used to describe the exchange rate between the US dollar and the British Pound.

Candlestick Charts : Identical to a bar chart in the information conveyed, but presented in an entirely different visual context. The candlestick encapsulates the open, high, low and close of the trading period in a single candle.

Capital Markets : Markets in which capital (stocks, bonds, etc.) are traded. Usually for medium or long term investing.

Carry Trade : An investment position of buying a higher yielding currency with the capital of a lower yielding currency to gain an interest rate differential.

Central Bank : A banking organization, usually independent of government, responsible for implementing a country's monetary policy and for printing money.

Channel : An upwards or downwards trend whose boundaries are marked by two straight lines. A break above/below the channel lines signals a potential change in the trend.

Chartist : Refers to a technical analyst or one who analyses charts/graphs and data to uncover potential trends.

Clearing : Refers to the settlements/confirmations of trades.

Close a Position (Position Squaring) : Refers to getting rid of a position, either by buying back a short position or selling a long position.

Commission : A fee charged by broker or agent for carrying out transactions/orders.

Confirmation : A written document verifying the completion of a trade/transaction to include such things as date, fees or commissions, settlement terms and the price.

Confirmation on a chart : A subsequent indicator or chart pattern, following an initial alert to a trade opportunity, which serves to legitimize the initial alert.Confirmation of a trade is believed to reduce the risk associated with that trade.

Contagion : Term used to describe the spread of economic crises from one country's market to other countries within close geographic proximity. This term was first used following the Asian Financial Crisis in 1997, which began in Thailand and soon spread to other East Asian economies. It now is used to refer to the recent crisis in Argentina and its effects on other Latin American countries.

Continuation : Represents an extension of the trend. The trend continues to have momentum, and hence it moves onwards without reversal.

Contract (unit or lot) : The standard trading unit on certain exchanges. A standard lot in the forex market is $100,000.

Convertible Currency : Currencies that can be exchanged for other currencies or gold.

Correction : The term used for the rationale that a directional movement would have a partial reversal due to the fact that momentum tends to "overshoot" itself; hence there will be a "correction" of the trend to bring the asset back to a fairer market valuation.

Cost of Carry : When an investor borrows money to sustain a position. There is a cost for borrowing derived from the interest parity condition, which is used to determine the forward price.

Counterparty : A participant, either a person or an institution, involved in one side of a financial transaction. With such transaction there is an associated risk (counterparty risk) involved that the counterparty will not be able to meet the terms outlined in the contract. This risk is usually default risk.

Country Risk : The risk that a government might default on its financial commitments/contracts, which typically causes harms to other areas of the financial sector, as well as those in other countries.

Cover on a bounce : A recommendation to exit trades on a bounce out of a support level.

Cover on approach : A recommendation to exit trades for profit on approach to a support level.

Credit Checking : Before making a large financial transaction, it imperative to check whether the counterparty has enough available credit to carryout/honor the transaction. Credit checking refers to the process of verifying that counterparty has enough credit. The check is initiated after the price has been determined.

Credit Netting : Agreements that are made to avoid having to continually recheck credit, usually established between large banks and trading institutions.

Cross Rate : Refers to the exchange rate between two countries' currencies.Cross rates usually refer to pairs quoted that do not include the domestic currency. For example, in the US, the EUR/JPY rate would be called a cross rate.

Cup with Handle : Named after the resemblance the formation on the chart bears to a cup and handle, this pattern offers Explanation into where a bullish trend can begin. Once the pattern begins to curve upward and reaches the cup line, the asset is believed to be bullish and set for a rise.

Currency : Notes and coins issued by the central bank or government, serving as legal tender for trade.

Currency (Exchange Rate) Risk : Risk associated with drastic changes/fluctuations in exchange rates in which one could incur a major loss.

D

Daily Charts : Charts that encapsulate the daily price movement for the currency pair traded. Since the currency market operates 24 hours a day, the daily chart typically runs from 5 PM New York time to the same time on the following day.

Day Trading : Refers to the process of entering and closing out trades within the same day or trading session.

Dealer : One who places the order to buy or sell. A dealer differs from an agent in that it takes ownership of the asset, and thereby is exposed to some risk.

Deficit : An excess of liabilities over assets, of losses over profits, or of expenditure over income.

Delivery : Term used to describe the exchange by both parties (buyer and seller) of the traded currency.

Deposit : Refers to the process of borrowing and lending money. The deposit rate is the rate at which money can be borrowed or lent.

Depreciation : The decline in the value of an asset or currency.

Derivative : A security derived from another and whose value is dependent the underlying security from which it is derived. Examples of derivatives are future contracts, forward contracts and options. Underlying securities can include stocks, bonds or currencies. Derivatives can be traded and are usually used to hedge portfolio risk.

Descending Triangles : A bearish continuation pattern indicating distribution consisting of two or more comparable lows forming a horizontal line at the bottom.Descending triangles are bearish patterns that indicate distribution. The definitive bearish signal of a descending triangle is when support on the lower rung of the triangle is broken.

Devaluation : When the value of a currency is lowered against the other, i.e. it takes more units of the domestic currency to purchase a foreign currency. This differs from depreciation in that depreciation occurs through changes in demand in the foreign exchange market, whereas devaluation typically arises from government policy. A currency is usually devalued to improve the balance of trade, as exports become cheaper for the rest of the world and imports more expensive to domestic consumers.

Dirty Float (Managed Float) : An exchange rate system in which the currency is not pegged, but is "managed" by the central bank to prevent extreme fluctuations in the exchange rate. The exchange rate is managed through changes in the interest rate to attract/detract capital flows or through the buying and selling of the currency. This system is contrasted with a Pure Float in which there is no central bank intervention and the exchange rate is entirely determined by the market and speculation.

Double Top and Bottom : A double top and bottom implies an upper limit - the top - and and lower limit - the bottom - which the currency pair has touched twice but has failed to penetrate. Accordingly, the asset can be expected to trade within this range, or, if there is a breakout, the movement is expected to be substantial.

Dow Theory : One of the first ideas that formed the beginnings of technical analysis, the Dow Theory holds that all major trends can be sub-divided into three phases: entrance, whereby savvy market participants enter the market; acceleration, whereby a slew of additional participants see the trend and enter the market, thereby accelerating the trend; and consolidation, a period characterized by the initial participants exiting their trade.

E

Economic Indicator : An economic statistic used to indicate the overall health of an economy, such as GDP, unemployment rates, and trade balances. Used in fundamental analysis of foreign exchange markets to speculate against the direction of an exchange rate.

Economic Exposure : When the cash flow of a country is vulnerable to changes in the exchange rate.

Efficient Markets : Markets where assets are traded in which the price is indicative of all current and relevant information and thus it is impossible to have undervalued assets.

The Efficient Market Theory : The theory that the current market price reflects all information and expectations regarding the currency pair in question. The theory also assumes that the market cannot overprice or underprice an asset, and hence the current price is the correct valuation at the time.

Elliot Wave Theory : A theory based on the notion that the market moves in waves, which consist of trends followed by partial corrections. The Elliot Wave Theory stated that there are 5 waves within an overall trend. In the Dollar/Yen chart above, the Elliot wave begins near the 118 level and tops out near the 126 level. Waves 1, 3, and 5 are called impulse waves; they direct the primary movement of the currency pair. Waves 2 and 4 are called corrective waves; they travel in the opposite direction of the primary movement. Waves a, b, and c correct the main trend made by waves 1 through 5. The main trend is established by waves 1 through 5 and can be either up or down. Waves a, b, and c always move in the opposite direction of waves 1 through 5.

Envelopes : While Bollinger Bands place boundary lines based on standard deviation, envelopes place lines at fixed percentage points above and below a moving average line. The upper and lower limits specify entry and exit points for traders.

End of the Day (Mark to Market) : Accounting measure, referring to the way traders record their positions. There are two ways that a trader can record his positions: the accrual system in which only cash flows are recorded and the mark to market method, in which the value of an asset is recorded at the end of each trading day at the closing rate or value.

Equilibrium : A price region that suggests a balance between demand and supply for an currency pair in the marketplace.

Estimated Annual Income : The expected yearly earnings.

Euro : The new monetary unit of the European Monetary Union used by twelve countries in the European Union. It is now the legal tender of those countries as of January 2002. Those countries include Germany, France, Belgium, The Netherlands, Luxembourg, Spain, Portugal, Italy, Austria, Ireland, Finland and Greece.

European Central Bank : The central bank of the EMU, responsible for the monetary policy of all member countries.

European Monetary Union : An institution of the EU, whose primary goal is to establish a single currency (the euro) for the entire EU.

Exponentially Weighted Moving Average (EMA) : While the simple moving average distributes weight equally across the data series, exponentially weighted moving averages place greater weight to more recent data.As a result, they are more recent asset movement, as opposed to assuming an unbiased view.

F

Federal Deposit Insurance Corporation : A regulatory agency of the US created to oversee that bank deposits are insured against bank failures. It was created in 1933 to restore confidence in the banking system. It insures up to US $100,000 per banking institution.

Federal Reserve/Fed : The central bank of the United States, responsible for monetary policy.

Fibonacci Numbers : Derived from a sequence of numbers in which each successive number is the sum of the two previous numbers, Fibonacci numbers are used frequently in hypothesizing which rates assets will gravitate towards. Namely, there are four popular Fibonacci studies: arcs, fans, retracements, and time zones. The use of Fibonacci numbers is widespread in the currency market. The red lines may be used as short-term support and resistance levels, while the blue lines represent long- term levels.

Fixed Exchange Rate : When the exchange rate of a currency is not allowed to fluctuate against another, i.e. the exchange rate remains constant. Typically, under fixed exchange rate regimes, currencies are allowed to fluctuate within a small margin. Fixed exchange rate regimes require central bank intervention to maintain the fixed rate.

Fixed Interest Rate : An interest rate used for loans, mortgages and bonds that remain at the same rate throughout the period.

Flag and Pennant : Shaped like a flagpole with a penant, this formation is characterized by an upward movement with a large slope followed by a period of consolidation. It is considered a bullish pattern overall, as the pattern is expected to continue rising. In the above example the British Pound rallied from $1.53 to $1.57 then declined to $1.54 level while fluctuating in a very tight range (the flag formation) and then broke out to the $1.58 level.

Flat/Square : To either have no positions or positions that cancel each other out.

Flat on a failure : A recommendation to take profits on a long trade if the rate tests but fails to break the specified level.

Floating Rate Interest : An interest rate that is allowed to adjust with the market. The opposite of a fixed interest rate.

Foreign Exchange (Forex) : The buying and selling of currencies.

Foreign Currency Effect : Refers to how changes in the exchange rate affect the return on foreign investment.

Forward Contract : A deal in which the price for the future delivery of a commodity is set in advance of the delivery. The Forward rate is obtained by adding the margin to the spot rate. It is used to hedge against adverse fluctuations in the exchange rate that can affect amount of profit or loss at that future date.

Forward Points : Refers to the pips that were added to or subtracted from the current exchange rate to obtain the forward price/rate.

Future Rate Agreements (FRAs) : FRAs are agreements that are made that allow for borrowing and lending at a constant interest rate for a specified period in the future.

Front Office : Refers to the sales personnel (trading and other business personnel) in a financial company.

Fundamental Analysis : The analysis of economic indicators and political and current events that could effect the future direction of financial markets. In the foreign exchange market, fundamental analysis is based primarily on macroeconomic events.

Futures (Financial Futures) : Future contracts that commit both sides to an exchange/transaction of financial instruments, currencies or commodities at a future date and a predetermined price. Future contracts are similar to forward contacts, but future contracts can be traded in the futures markets. Can be used to hedge or speculate against the value of the asset at the expiry date.

GTC (Good-till-Cancelled) : Refers to an order given by an investor to a dealer to buy or sell a security at a fixed price that is considered "good" until the investor cancels it.

H

Head and Shoulders Pattern : A pattern resembling two peaks (the shoulders) with a higher peak between the two shoulders (the head). The neckline, or the bottom boundary that both shoulders reach, is regarded as a key point traders can use to enter/exit positions.

Hedge/Hedging : Strategy to reduce the risk of adverse price movements on one's portfolio and to protect against the volatility of the market. Hedging typically involves selling or buying at the forward price or taking a position in a related security. Hedging becomes more prevalent with increased uncertainty about current market conditions.

High/Low : Refers to the daily traded high and low price.

Historical Volatility : A measure of the change in price over a specified time frame. Higher volatility suggests that the asset is more likely to trade within a wider range, while reduced volatility suggests the asset will trade in a tighter range.

I

Inflation : Refers to the increase in prices (price level) and wages over time that decrease purchasing power. It is calculated from changes in the price index, usually a consumer price index or a GDP deflator.

Initial Margin : The percentage of the price of a security that is required for the initial deposit to enter into a position. The Federal Reserve Board requires a minimum of 50% initial margin. For futures contracts, the market determines the initial margin.

Interbank Rate : The rate at which the major banks (Deutsche, Citibank, Bank of Tokyo) trade in foreign exchange.

Interest Parity : Theory that says that the difference in interest rates across countries should be equal to the difference between the forward and spot rate.

Interest-Rate Swaps : The process of changing the form of debts held by banks or companies, in which they trade debts/loans fixed rates for floating rates (or vice versa) in another country.

Interest-Rate Swap Points : The interest rate can be determined through the difference in the bid and offer price of an exchange rate. If you are looking at the EUR/USD exchange rate and the offer price is higher than the bid price, than Europe's interest rates are higher than US interest rates.

Intermarket Analysis : An analysis of an underlying asset that incorporates examinations of various markets. Namely, four markets are examined: currencies, commodities, stocks, and bonds. Intermarket analysis is centered on the idea that the four markets are correlated.

ISDA (International Swaps and Derivatives Association) : Organization defining the terms and conditions for trade in derivatives.

L

Leading Indicators : Such statistics as unemployment rates, CPI, Federal Funds Rate, retail sales, personal income, discount rate and the prime rate that are used to predict economic activity.

LIBO : Stands for the London Interbank Offer Rate, and is the rate at which major international banks lend to one another. It is widely used as the benchmark for short-term interest rates.

LIFFE : London International Financial Futures Exchange, made up of the three largest future exchanges in the UK.

Limit order : An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 102.00/05, then a limit order to buy USD would be at a price below 102. (i.e. 101.50)

Liquid and Illiquid Markets : A liquid market is one in which changes in supply and demand have little impact on the asset's price. It is characterized by many bids, offers and players/traders, low volatility and tight spreads. Illiquid markets have less players and larger spreads.

Liquidation : The process of closing out long or short positions by offsetting transactions. Also refers to the process of selling all assets of a bankrupt company to pay off first creditors and then shareholders.

Liquid Assets : Those assets, usually short dated assets like Treasury Bills that can easily be turned into money.

Liquidity : The ability of a market to accept large transaction with minimal to no impact on price stability Long (Position): Refers to the ownership of securities, commodities or currencies, in which there is no intent to sell due to speculation that the price will rise.

M

MACD (Moving Averages Difference Oscillator) : The MACD indicator relies primarily on plotting two moving average lines - typically 12 and 26 day EMAs - and plots the rate of change between the two. If the signal line - the line used to denote the rate of change - is rising upward; this suggests that momentum is bullish; if downward, the indication is that momentum is bearish.

Margin : A percentage of the total value of a transaction that a trader is required to deposit as collateral. Buying on margin refers to investing with borrowed funds, and the margin requirement insures against heavy losses.

Margin Call : This is a call by a broker or dealer to raise the margin requirement of an account. The call is typically made after the value of a security (securities) has significantly declined in value.

Market Maker : A broker-dealer firm that owns shares of a security and is willing to buy and sell at the quoted bid and ask prices. The firm lists buy and sell prices to attract customers.

Market Order : An order to buy or sell a stock at the best available price.

Market Risk : The risk associated with investing in the market and cannot be hedged or avoided.

Maturity : The date that the security is due to be redeemed or repaid.

Mine and Yours : Terms used to signal when a trader wants to buy (mine) and sell (yours).

Momentum : The term has two meanings: (1) a trading style by which traders go with the direction of the current trend; and (2) a technical indicator which measures the rate of change of an asset over a given time frame. The formula for the momentum indicator is as follows:

Money Market : Highly liquid markets for short-term investing in monetary instruments and debts, typically maturing in less than one year. Because of large transaction cost relative to potential interest, transactions occur in large amounts and thus participants are mainly banks and other large financial institutions.

Moving Averages : An average of a number of specified historical time periods from the point on the chart. Moving averages offer an indication of the clear direction and slope of the trend in the market. Since moving averages measure historical data, they are a lagging indicator; in other words, the information they reveal is not predictive, but rather can be used to gauge momentum in the marketplace. Exponential moving averages (EMAs) work to reduce the lag of the overall moving average by placing a greater premium on more recent data when calculating the average.

N

Negative or bearish divergence : Occurs when two or more indicators or chart patterns do not yield the same analysis. In the above chart the RSI is rising indicating an overbought (bearish) condition, whereas the currency continues to rise.

Net Worth : The difference between the values of assets and liabilities. For public companies this is referred to as shareholder equity.

O

Off-Balance Sheet : Financing or the raising of money by a company that does not appear on the company's balance sheet, such as Interest Rate Swaps and Forward Rate Agreements.

Offer : The price (or rate) at which a seller is willing to sell at.

Offsetting Transaction : When a trader enters an equivalent but opposite position to an already existing position, thereby balancing his positions. An offsetting transaction to an initial purchase would be a sale.

One Cancels Other Order (O.C.O. Order) : An order that through its execution cancels the other part of the same order.

Open/Open Position : An order that has yet to be executed and is still valid. An open position puts a trader at risk if the market prices rise or fall, i.e. the trader is vulnerable to movements in the exchange rate.

Open Order : An order to buy or sell that remains valid until it is executed or canceled by the customer. An order that is executed when the price of a share or currency reaches a predetermined price.

Options : These are tradable contracts giving the right, but not obligation, to buy or sell commodities, securities or currencies at a future date and at a prearranged price. Options are used to hedge against adverse price movements or to speculate against price rises or falls. Holding options is riskier than holding shares, but offer potentially higher returns.

Order : An instruction by a customer to a broker/trader to buy or sell at certain price or market price. The order remains valid until executed or cancelled by the customer.

Overbought : A term used to characterize a market in which asset prices have risen at a pace that is above typical market acceleration, and hence is due for a retracement. The EUR/USD chart above is a good example of an overbought condition.

Overnight : A position that remains open until the start of the next business day.

Oversold : The opposite of oversold; exists when the price of a market decelerates at an abnormally fast rate, and hence is due for an upwards reversal.

Over-the-counter Market : A market not regulated by a stock exchange, such as the United States' NASDAQ. Over-the-counter refers to a stock not traded on an exchange, typically resulting from the company's inability to meet the requirements. Over-the-counter security transactions are made directly between brokers.

P

Parabolic SAR (Stop and Reversal) : Functioning best in trending markets, Parabolic SAR specifies where traders should place their stops. If Parabolic SAR is above the market rate, the recommendation is to short; if it is below, the recommendation is to go long. The specific point on the chart where the Parabolic SAR lies is and indication of where the stop should be.

Pegging : When a country fixes the exchange rate to another country's currency, usually to achieve price stability. Most countries that peg their currencies do so against the US dollar or the Euro.

Pip (Points) : The smallest amount an exchange rate can move, typically .0001.

Point & Figure ("P&F") : Unlike conventional bar, candlestick, and line charts, Point & Figure charts completely disregard the passage of time, opting only to display changes in prices. The chart instead emphasizes on illustrating (1) reversals in trends and (2) solid support and resistance lines.

Put/Call Ratio : Calculated by dividing the number of put options traded by the number of call options traded for a particular asset, the put/call ratio offers Explanation into expectations of the options market. For currency put/call ratio look at the IMM data which comes out every week at the CME website. http://www.cme.com/prices/monthly_volume_action.cfm

Political Business Cycle : A theory that explains changes in the economy as a result of political tactics before and after elections. To gain voter support politicians will often expand the economy prior to elections and implement reforms just after the elections to avoid punishment by the polity.

Political Risk : Risk that changes in government policies will negatively impact an investor. Political Risk is especially prevalent in third world countries.

Position : The amount of currency or security owned or owed by an investor.

Premium : The amount added to the spot price of a currency to get the forward or future price.

Price Transparency : Refers to the degree of access to information regarding bids and offers and respective prices. Ideally, every investor/trader would have equal access to all information.

Q

Quote : The offer price of a security.

R

Rate : The price of one currency in terms of another (exchange rate).

Realized and Unrealized Profit : Unrealized profit is a gain from an increase in the price of an asset that has not been cashed in. Realized profits are made from the cashing in of the unrealized gain.

Rectangle : Similar to the consolidation portion of a flag pattern, a rectangle is a continuation pattern denoting a trading range characterized by strong support and resistance lines. Unsurprisingly, rectangles are often known as trading ranges; consolidation zones; or congestion areas.

Repurchase (REPO) : Repos are short-term money market instruments. The trader sells a security (government security) and buys it back only after a short period of time, typically only overnight. Repos are primarily used raise short-term capital.

Resistance : A price level at which a currency pair has had trouble breaking, and hence consolidation is expected. If the resistance line holds and the currency pair retraces, the sellers have outnumbered the buyers; on the other hand, buyers have outnumbered sellers if the resistance level is broken, and momentum may allow for a strong continuation of the trend.

Retracements : Synonymous with the term correction; used to denote a temporary reversal in the overall trend of the market to accommodate for excessive acceleration or deceleration of asset price movement.

Revaluation : An increase in the exchange rate for a currency as a result of central bank intervention.

Opposite of Devaluation Revaluation Rates : The market rates that are used by traders in the evaluation of the gains and losses in their accounts each day.

Reversal : A pattern that suggests a potential shift or deceleration of the current trend. A reversal of an up move will be reflected in a downward price movement.

Risks : Uncertainty in the possible outcomes of an action, i.e. possible returns on an investment. Risk is most commonly measured from the variance of possible outcomes. Higher risks are associated with higher rates of returns, typically in order to induce investment in riskier ventures.

Risk Capital : The capital that an investor does not need to maintain his/her living standard.

Risk Management : Term to describe when a trader will use analysis and other trading techniques to avoid substantial risks to his portfolio.

Rollover : Refers to a process of reinvesting in which at the expiry the settlement is postponed until a later date. The cost of the process is measured by the interest rate differential between the two currencies.

Rounding Top and Bottom : Similar to a Cup and Handle pattern, a rounding top signifies a rounded resistance line and a bearish overall trend. Alternatively, a rounding bottom is a bullish for which the bottom curve can serve as a support line. Both patterns are best-suited to longer-term analyses.

RSI (Relative Strength Index) : An oscillator that measures the size of recent upward trends against the size of downward trends within the specified time frame. High RSI scores - above 70 or perhaps 80 - indicate that the currency is overbought, and hence due for a reversal. Alternatively, low RSI scores indicate that the currency is oversold, and hence due for a fall in price.

S

Settlement : The actual finalization of a contract in which the goods, securities or currencies are paid for or delivered and the transaction is entered in the books.

Short : The selling of a borrowed security, commodity or currency. Traders sell when prices are expected to fall.

Short Position : A contract to sell securities, commodities or currencies at a future date and at a prearranged price. At the expiry date, if the spot price is below the contract price, the holder of the contract will make a profit and if the spot price is above the contract price, then there is the potential to make a huge loss.

Spike (high or low) : A significantly lower low or higher high within a data series. Points where an currency spikes often signify a potential reversal in the direction of the trend, and hence can be valuable tools in analyzing a chart.

Spot Market : A market in which commodities, securities or currencies are immediately delivered.

Spot Price : The current market price.

Spread : The difference between the bid and offer price that is offered by a market maker.

Sterling : Refers to the UK currency, the Pound.

Stochastics : Like RSI, stochastics is a momentum indicator that indicates overbought/oversold levels. High levels (above 70 or 80) are indications to enter short orders; low levels (below 30 or 20) are indications to buy. Like all oscillators, stochastics work best A momentum indicator that measures the price of a security relative to its high/low range over a set period of time. The indicator fluctuates between 0 and 100, with readings below 20 considered overbought (bearish) and readings above 80 considered oversold (bullish).

Stop Order (Stop-Loss Order) : An order used to hedge against excessive loss in which a position is liquidated at a specific, prearranged price.

Support : The opposite of support; a point in a chart where a currency pair has repeatedly had trouble falling beneath. When a currency pair "tests" support but does not break it, buyers have outnumbered sellers; alternatively, sellers have gained control of momentum if support is broken and the currency pair continues to plunge downward.

Swap : When a trader exchanges one currency for another, holding it for only a short period. Swaps are typically used to speculate on interest rate movements. It is calculated using the interest differentials between the two currencies.

Swap Spread : The difference between the negotiated and fixed price of the swap. The size of the spread depends on market supply and participating parties' credit.

Symmetrical triangle : Also referred to as a coil, usually forms during a trend as a continuation pattern. It contains at least two lower highs and two higher lows. At the time these points are conjoined, the lines converge as they are extended and the symmetrical triangle takes shape. One can also think of it as a contracting wedge, wide at the beginning and narrowing over time.

T

Technical Analysis : A technique used to try and predict future movements of a security, commodity or currency, based solely on past price movements and volume levels. It examines charts and historical performance.

Tick : A minimum price movement. (see also: PIP)

Ticker : Depicts current or recent history of a currency, usually in the form of a graph or chart.

Tomorrow Next (Tom/Next) : When a trade buys and sells a currency today for delivery tomorrow.

Trade Price Response : This term advises that price reaction to a certain level is critical. If this level breaks then the recommendation would be to run with the market direction (i.e. Buy a break above resistance level; sell a break below a support level). However, if a price stalls at this level and is rejected then the recommendation is to go with this also (i.e. Sell at a resistance level that is tested and holds, buy at a support level).

Transaction Costs : The costs that are incurred by a trader when buying or selling currencies, commodities, or currencies. These cost include broker commissions or spreads.

Transaction Date : The date a trade occurs.

Trend Lines : A straight line drawn across a chart that indicates the overall trend for the currency pair. In an upward trend, the line is drawn below, and acts as a support line; the opposite holds true for a downward trend. Once the currency breaks the trend line, the trend is considered to be invalid.

Triple Top : A pattern in which a currency has reached a price three times previously, yet has been unable to sustain movements beyond those three peaks. A triple top signifies a strong resistance level.

Turnover : The number or volume of shares traded over a specific time period. The larger the turnover, the more commissions a broker will be making.

Two Way Price : A price that includes both the bid and offer price. The NASD requires that market makers have both bid and ask prices for any security, currency or commodity in which they make a market. This is called a two-sided market.

U

Uptick : A price quote that is higher than the preceding quote for the same currency.

Uptick Rule : A regulation requiring that if a security is to be traded short, the price in the trade prior to the short trade has to be lower than the price of the present short trade.

U.S. Prime Rate : The interest rate that the major US banks lend to major clients.

V

Variation Margin : A call by a broker to increase the margin requirement of an account during a period of extreme market volatility.

Variance : Measures the volatility of a data set/data points from the mean. It is calculated by adding the squares of the standard deviations from the mean and dividing by the number of data points, i.e. taking the average of the standard deviations.

V Formation : See Spike.

Volatility : Refers to the tendency of prices/variables to fluctuate over time. It is most commonly measured using the coefficient of variation (the standard deviation divided by the mean). The higher the volatility, the higher the risk involved.

Volume : The number of shares or contracts traded for a certain security or an exchange during a period.

W

Warrant : It is a right but not obligation to buy shares in a company at a future date and at a prearranged price. Warrants are tradable options.

Weekly charts : Charts for which each candlestick or bar encapsulates data for the currency pair for the past week.

Whipsaw : Term used to describe sharp price movements and reversals in the market. A whipsaw would be if shortly after you bought a stock the price plummeted.

Y

Yard : Term for a billion JPY.